London is where the money is right now, and Britain’s London-centric economy doesn’t look like changing any time soon, according to a new report from consultancy group EY.
The authors say that pace of economic growth in the capital has been higher than anywhere else for the last three years, and is going to keep outstripping every other region in the country for at least three more.
That may be good for the capital, but not for those in Northern England, as the gap between the north and south is going to keep getting bigger for the time being.
EY’s data predictions centre around Gross Value Added (GVA), a measure of how much individual areas, and sectors contribute to the economy. The data show that London’s economy has not only easily outstripped the rest of the UK in terms of growth for the last few years, but will also continue to do so until at least 2018.
Mark Gregory, EY’s chief economist in the UK said “It’s more of the same for dominant London over the next three years thanks to the city’s outstanding professional services, technology and communications sectors, the return to growth in financial services, and the boost from inward migration.”
The report is a pretty big blow to chancellor George Osborne and the government in general, who have been pushing hard to implement their plans for the so-called Northern Powerhouse, a series of measures to devolve power to cities in the north and help drive big economic growth.
The government has invested billions in infrastructure projects like HS2, as well as putting significant resources into devolving power to major northern cities like Manchester, Liverpool, and Sheffield.
“From our projections, it’s clear that we don’t expect the government’s Northern Powerhouse ambitions to have a radical economic impact during our forecast period through to 2018. At best the economic boost will be felt more in the next decade than this one,” the report’s findings reveal.
London’s economy is expected to grow by 3% in the coming three years, nearly twice the 1.6% expected in the north east of England.
What is striking about the graphs provided by EY is that they essentially represent a sliding scale of growth the further away from the capital you get. Scotland, Northern Ireland, Wales, and the north east — the four regions furthest from London are those expected to see the slowest growth in the next three years. Regions nearer to London like the south west, and midlands will see growth levels closer to those in the capital.
London’s rampant economy may be bad news for the north of the country, but the ripple effect of success in the capital will be felt in the cities and regions& closest to the capital in the next few years. Other than London, the two biggest growth regions in the coming years will be the south east, and east of England, which will see growth of 2.5% and 2.4% respectively, EY predicts.
Cities within commuting distance of the capital will also get a boost from London’s growth, with Gregory citing Reading, Luton and Cambridge as places that will “perform strongly to 2018 as investment continues.”
Thursday’s report is not the only indicator pointing to London’s economy easily outstripping the rest of Britain. It follows on from a big data dump by the Office for National Statistics on Wednesday which showed that London’s economy has grown by more than 2.5x the average of other major UK cities since 2009.
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