Inside the Rust Belt: An Analysis of the Decline of the West Midlands Economy. 2: Corporate Strategies and Economic Change

The economy of the West Midlands Region of England is dominated by a small number of large manufacturing companies. The analysis of the economy in this paper focuses on the corporate strategies of the twenty-six largest manufacturing companies in the region. It is shown that there has been a transformation of the companies from producers of low value-added commodity-type products in the 1960s, is also shown to more diversified companies competing in higher value-added sectors. It also shows that these major companies have shifted their orientation from the old Empire markets towards Europe and North America. The companies have reduced their production costs by rationalising their manufacturing processes, and in some cases by establishing manufacturing plants in other countries. However, the main motive for shifting production from the United Kingdom has been to produce closer to the final markets, rather than cost reduction. The main method which companies have used to become more diversified has been acquisitions. Companies have bought all or parts of companies which were already established in the sectors into which they wanted to move. Since such companies were rarely located within the region, the regional impact of these changes has been largely negative: the plants which were engaged in the declining sectors have been in the West Midlands, whereas the growth sectors have been located elsewhere, either in other regions of the United Kingdom or abroad. The conclusion is that the West Midlands manufacturing companies have responded to the changing world economic conditions and the recent recession in a positive way, but that their reactions have produced a permanent reduction in manufacturing employment in the region. Even a strong national recovery from recession will not produce a significant increase in local employment in these companies.