Regional divides, falling incomes, booming jobs markets; and lower productivity. The current state of the UK

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No part of the UK has escaped the impact of a flatlining economy and falling productivity since 2010, according to new analysisNo part of the UK has escaped the impact of the flatlining of the UK economy since 2010, according to new analysis published by the Centre for Cities in its Cities Outlook 2024 report. At the national level, people have been left with £10,200 less to spend or save on average since 2010 than if the economy had grown at pre-2010 trends. The report also suggests that a marked rise in employment has happened in parallel with overall falling productivity.

In a year of a likely general election where growth will be central to the debate, the report sets out the scale of the challenge in boosting prosperity across the country, not just one region. A comparison of disposable incomes in the UK’s 63 largest cities and towns over time reveals that every place is out of pocket – both North and South, and from former industrial towns to innovation superstars.

Gross disposable income growth per head was £13,590 lower in London than it would have been if it had grown in line with 1998-2010 trends, while Middlesbrough and Sunderland in the North East experienced similar average shortfalls of £13,200 and £12,730 per head respectively, and people in Cardiff were £13,080 worse off on average.

The people of Burnley were especially out of pocket, where the average person was £28,090 worse off, as were people in Cambridge and Milton Keynes, where they would have been £21,000 richer on average if incomes had grown at pre-2010 trends.

In just seven places across the UK, disposable income growth has outperformed their pre-2010 trends, in almost all cases due to underwhelming growth in the 1998-2010 period.

This shortfall has happened because while the UK has experienced a jobs boom since 2010, this has not been accompanied by productivity growth:

  • All but two places saw jobs growth, which pulled more people into work in almost every city. London led in relative terms, with total jobs rising by almost 30 per cent, an additional 1.4 million roles. And 11 cities had jobs growth of more than 20 per cent.
  • But productivity growth – the key driver of higher wages – was poor across almost all cities. Productivity growth lagged pre-2010 performance in all but five cities. Eighteen cities were less productive in 2021 than 2010. And previously strong performers like Cambridge, Milton Keynes and London struggled, hitting local incomes and pulling down national productivity growth.

Other analysis in the report reveals:

  • Housing costs have increased in most places, eating into disposable incomes. Housing became less affordable in almost every place in the 2010s, with the steepest rises in housing costs in places in the Greater South East such as Cambridge, London and Brighton – that already had high housing costs in 2010.
  • Rates of children in relative poverty have risen in almost every city; and the proportion of children in relative poverty who live in working households has also risen. In 2021, there were six cities, all in the North and the Midlands, where over a third of children are from households in relative poverty – as recently as 2014, there were none. In Birmingham, there was an increase of 60,000 children living in relative poverty over that period.

Andrew Carter, Chief Executive of Centre for Cities, said: “Both the two main political parties have pledged to grow the economy and the general election debate will have growth at its heart. The challenge for the next Government is to go beyond the rhetoric and to do what’s needed to make this rhetoric a reality.

“The UK has had a torrid time since the Great Recession. Everywhere, up and down the country, including places that were doing relatively well before, has been levelled down because of the lack of growth. To get growth in every place, the next Government needs to act at a radically different pace and scale, and mark the beginning of a multi-decade policy programme.

“The first step in a realistic approach to grow the economy is to recognise that the British economy is an urban economy. Cities account for nine per cent of the land and over 60 per cent of the economy, as well as 72 per cent of high skilled jobs. Their slowdown is at the heart of why the national economy is struggling. There is no plausible way of achieving higher growth without increasing the innovation and dynamism of urban Britain.

“This means reforming the planning system to enable cities to grow, devolving more powers and financial freedoms to encourage our big cities to make decisions that support growth, and following the levelling up rhetoric with bold actions.”