Cities are still at the heart of Britain’s prosperity – but the north-south divide is getting even bigger
In the aftermath of the financial crisis much was written about Britain’s supposed need to “rebalance” its economy away from London and, specifically, the City.
Numerous commentators argued that new drivers of growth must be found in other parts of the UK, and called for policies aimed at reviving British manufacturing and reducing our reliance on the dominant service sector. Indeed, George Osborne made this rebalancing one of the early ambitions of his chancellorship.
Such efforts have failed. “The service sector has driven the economic recovery since the downturn in 2008,” according to official data from last year. Services grew by 11.2 per cent in the eight years following the start of the great recession, whereas output in the construction and production sectors failed to return to their pre-downturn peaks. Regionally, London’s economy has grown healthily, with the capital and the surrounding south east still accounting for nearly 40 per cent of the UK’s entire GVA (gross value added).
And now, today, new research confirms that “there has been little progress on geographical rebalancing of the UK’s economy in the last three years”. The work from accountancy giant EY adds: “Furthermore, the economic divide between the north and south of the UK will continue to expand over the next three years.” The picture is familiar.
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GVA growth in London and the south east will outpace all other parts of the country, EY forecasts. But this is not just a north-south story. The key finding is economic expansion in the UK’s big cities and continues to eclipse areas of lower population density. Thus, Manchester – not London – is expected to deliver the fastest growth in the coming years, alongside some particularly busy towns such as Reading.
The findings are a wake up call for anyone who believes government can simply reallocate investment and distribute growth to fit various political ambitions. A widening north-south gap is unhealthy, but can only be solved by playing to our strengths. This country excels in areas such as tech, finance, and related professional services. Our expertise clusters in hubs that allow for greater innovation.
The government cannot successfully reshape the economy. Rather, its job is simply to ensure fast-growing companies and sectors have the space to thrive in cities all over the country.
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