Birmingham is at the centre of the service sector boom
Rapid services expansion and industrial specialisation are driving growth, but structural challenges remain
The West Midlands Combined Authority has paired robust expansion in its services sector with significant increases in foreign direct investment to drive export-led economic growth. Buoyed by significant infrastructure investment across the region—much of it catalysed by HS2—the city-region is strengthening its position as a nationally significant growth hub.
The services economy has been at the centre of this recent economic growth, with professional, scientific and technical activities performing particularly well. Employment in this sector grew by an average 2.8% per year between 2020 and 2025, compared with just 1.4% in the UK. Given the massive investment into infrastructure and housing-led regeneration, the city is well positioned to strengthen its role as a key services hub over the coming years.
Industrial specialisation in manufacturing—particularly motor vehicle and defence—positions the city-region at the heart of the UK’s Industrial Strategy. This provides important opportunities, including in battery production and electric vehicle manufacturing.
Despite these positive trends, the region is more exposed than others to current and future global headwinds. The manufacturing base is particularly vulnerable, with the UK facing some of the highest energy costs in the world. Moreover, while there are noticeable signs of improvement, fundamentals remain challenging. Weak skills attainment, high rates of economic inactivity, and poor intracity transport connectivity continue to undermine the labour market.
