Bristol is set to be one of the UK’s fastest growing cities over the next three years with Gross Value Added (GVA) of 2.3%, as cities in Southern England are forecast to outperform those located across the rest of the country.
According to EY’s UK Regional Economic Forecast, Bristol is expected to grow faster than London’s 2.2% and the UK average of 1.8%. Bristol’s growth will also outpace the broader South West with forecasted growth of 1.7% until 2020. Exeter is also set to be a strong performing city, with 2.3% GVA growth until 2020.
EY’s forecast says there has been little progress on geographical rebalancing of the UK’s economy in the last three years and the economic divide between the North and South of the UK will continue to expand (albeit at a slower rate than previously) leading up to 2020. London and the South East will continue to outperform all other UK regions through to 2020 with GVA growth per year of 2.2% and 2.0% respectively.
Employment in the South West shows a strong increase, with 54,000 more jobs in June 2017 than in the previous year. Looking ahead to 2020, total employment in the South West is expected to increase by 0.3% per year – just behind the UK average of 0.4%.
Andrew Perkins, Senior Partner at EY in the South West, says:
“The South West is forecast to grow at a faster rate than the majority of UK regions, with only London, the South East and Midlands’ economies growing ahead. Previous forecasts have set the region’s growth at 1.3% so it’s positive to see the South West exceeding this – up to 1.7% GVA by 2020.
With Bristol forecast to grow by 2.3% a year until 2020, the city is finally punching above its weight and is expected to be one of the fastest growing UK cities over the next three years, behind Reading and Manchester both growing at 2.4% GVA. This is underpinned by professional and back office services and real estate driving growth across the South West.”
Economic rebalancing remains illusive
GVA growth in northern and devolved regions is expected to be relatively slower. The North East is forecast to experience the slowest rate of GVA growth between 2017 and 2020, growing at 1.2% per year. It is also the only region where employment is expected to decline, falling by 0.1% per year between 2017 and 2020, with the largest declines projected in the manufacturing and public administration sectors.
Andrew Perkins, continues:
“The UK has made little progress on regional rebalancing over the past three years, and we expect more of the same leading up to 2020. In fact, we expect that some of the fastest growing regions over the next three years will be the four most southerly ones, London, the South East, the South West and the East. This means that the economic gap between North and South could be larger in 2020 than it was in 2010.”
Manchester forecast to be UK’s strongest performing city, alongside Reading
Manchester is forecast to be the strongest performing city in terms of both GVA (alongside Reading) and employment growth. These will see annual increases of 2.4% and 1.2% per year respectively between 2017 and 2020. Strong performances in the professional, scientific and technical, administrative and support services and construction sectors will be key to driving Manchester’s economy.
Cities in Southern England (outside of London) are forecast to out-perform those located across the rest of the country in the period 2017 – 2020. Luton, Thames Valley, Bristol and Exeter are all forecast to experience GVA growth of 2.3% per year on average and 1.0%, 0.7%, 1.0%, 0.9% in employment growth respectively. In contrast, Stoke-on-Trent, Hull, Liverpool and Leeds are forecast to experience GVA growth of 1.2%, 1.4%, 1.5% and 1.7% and employment growth of -0.1%, 0.1%, 0.3% and 0.9% per year on average respectively. Stoke-on-Trent is the only city in England which is expected to experience a contraction in employment, as a result of falling employment in the manufacturing sector.
The report predicts a generally weaker pace of growth for cities outside of England with the majority growing slower than the overall rate of UK GVA growth between 2017 and 2020. Edinburgh is an exception to this trend, with GVA forecast to rise by 2.1% per year on average and total employment forecast to rise by 0.9%.
Key sectors are crucial to performance of UK cities
The performance of Reading, Cambridge and several other southern cities illustrates the importance of sectors in determining growth prospects in the short to medium-term. The report forecasts that the GVA of the information and communications sector and professional services sector will grow by 3.5% and 3.4% per year, respectively, over the next three years.
In contrast, manufacturing is only expected to grow by 1% over the same period. This translates into a strong performance for Reading, where the information & communications sector accounts for more than twice as large a share of GVA as the national average. Over 50% of Cambridge’s growth in the next three years is also forecast to come from Information and Communications Technology (ICT) and professional services.
Andrew Perkins, adds:
“The Government’s recently published proposals for the UK’s industrial strategy are a welcome development and demonstrate how sectors will be key drivers of both productivity and the economy as a whole. The focus on manufacturing will help support many regions and cities that are located outside of the South East, including the South West.
The UK has to view geographic rebalancing as a key component to the process of transforming the economy. However the scale of the challenge should not be underestimated. With the requirements to prepare for Brexit, position for technological change and maintain its competitiveness, the UK needs to invest more than it has done for some time – robots will not buy themselves.”