Lichfield and Birmingham are forecast to be the fastest-growing local economies in the Midlands over the next three years, according to the EY Regional Economic Forecast.
The Midlands is projected to achieve an average annual Gross Value Added (GVA) growth rate of 1.5% between 2025 and 2028, slightly slower than the projected UK average of 1.6%.
Lichfield is set to record average annual GVA growth of 2% between 2025 and 2028, which would make it the fastest growing of the UK’s smaller locations and authorities. Birmingham is expected to be the joint-fifth fastest growing major location in the UK with average annual GVA growth of 1.6% over the next three years.
Lichfield and Birmingham are expected to record average annual employment growth of 1.1% and 0.9% respectively between 2025 and 2028, with both above the forecast national average for jobs growth of 0.7%.
Despite the level rate of economic momentum expected across the Midlands over the next three years, growth is set to diverge in 2025. The West Midlands is forecast to see GVA rise by 1.5% over the next 12 months, with a 0.6% increase in employment opportunities. Lichfield, 2.0%, Birmingham, Redditch, and Rugby (all 1.6%) are expected to be leading locations for GVA in the region, with each benefiting from a diverse range of high-value sectors.
The East Midlands is forecast to match the GVA growth of the West Midlands over the next year, with employment growth marginally lower at 0.5%. Cities like Nottingham (1.6% GVA growth) and Leicester (1.3% GVA growth) are projected to play key roles in the region’s economic landscape.
While growth for the regions is aligned over the next year, the East Midlands’ overall economy is currently estimated to be around a fifth (21%) smaller than the West Midlands’ when measured in GVA, meaning that overall levels of economic growth will be smaller.
Sectors set to drive disproportionate economic contributions across East and West Midlands
The Midlands economy showcases varied performance across sectors, with both the West and East Midlands highlighting distinct strengths and challenges.
Information and communication (which involves technology-led activity) and professional, scientific and technical activities (which includes R&D as well as business-to-business services) are expected to be among the West Midlands’ fastest growing sectors over the next three years with average annual GVA growth of 2.5% and 2% respectively. By 2028, the two sectors are expected to contribute a combined £1.5bn more to the West Midlands economy than they did in 2024.
Information and communication and professional, scientific and technical activities are also expected to expand in the East Midlands over the next three years, with average annual GVA growth of 2.7% and 2% respectively. However, the contribution of these sectors will be significantly smaller, generating 24% less in GVA value for the East Midlands than for the West Midlands by 2028.
Construction is set to continue being a significant contributor to GVA across the region and is forecast to see average annual GVA growth of 2% across both the East and West Midlands over the next three years. This growth is expected to be supported in part by the Government’s ambition to increase housing delivery and investment in transport.
Both the East Midlands (1%) and West Midlands (1.3%) are expected to see their manufacturing sectors grow in average annual GVA over the next three years. The nationwide manufacturing sector will contend with elevated energy and labour costs in the coming years and this is expected to impact the sector’s job opportunities, with manufacturing employment declining by an average annual rate of 2% in the East Midlands and 1.5% in the West Midlands.
Manufacturing has been a longstanding key contributor to the Midlands’ economy, making up 13% of West Midlands GVA and 15% of East Midlands GVA in 2024.
Simon O’Neill, EY Managing Partner for the Midlands, said: “The Midlands is forecast to record solid, steady growth over the next three years, driven in large part by the high-value knowledge-based sectors that have built up across the region, as well as an expected uplift in construction.
“The West Midlands’ more established ecosystem of tech and professional services businesses will likely give it the edge over the East Midlands, delivering greater levels of prosperity.
“Manufacturing has traditionally played a key role in the Midlands’ economy, but many of these companies are facing elevated energy and labour costs, which is impacting margins and demand for staff.
“Nevertheless, manufacturing is expected to remain a major economic contributor to the region in the years ahead, particularly as the sector transitions towards advanced manufacturing.
“Policymakers and businesses should consider how to ensure the Midlands can capitalise on its traditional industrial and manufacturing strengths while also building skills to fuel emerging high-growth sectors such as tech and professional services.”
