Report says north-south divide set to widen as economy fails to rebalance

The economic divide between the north and south continues to widen and there has been little progress made in rebalancing the UK economically geographically over the last three years, according to a new report.

The latest regional forecast published by Ernst & Young highlights how London is set to continue booming and leave other parts of the country behind. The capital is predicated to see economic growth of 2.2% up to 2020. While Manchester is predicted to be the one bright spark in the north and the strongest performing city in the UK for the next three years with 2.4% growth, this won’t be enough to see any reduction in the north-south divide.

According to EY, London is set to see more jobs created between now and 2020 compared to any other region, as well as gross value added (a value of goods and services produced in an area) being faster in the capital as it slows down everywhere else in the UK. London’s GVA is set to grow by an average of 2.2% per year, the UK lies at 1.8%. The north east is the only UK region expected to endure a decline in employment while London’s will once again rise at an average of 0.8% per year.

Mark Gregory, EY’s chief economist, said: “The UK has made little progress on regional rebalancing over the past three years, and we expect more of the same over the next three years. 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."

EY say the UK economy has changed significantly since the forecast was published in 2015 with Brexit putting pressure on consumer and business spending, meaning a fall in the value of the pound. Across the country, the forecast says technology will be a key component of UK growth, with the ICT sector expected to achieve GVA growth of 3.5%. Manufacturing is also forecast grow by 1% over the same time period.

Debbie O'Hanlon, EY national markets leader, said: "The strong GVA performance - both historic and projected - for Manchester reflects the substantial investments made over more than a decade in revitalising the city centre and the surrounding business infrastructure. This has allowed the city to strengthen and diversify its local economy and ensure it can capture growth waves and avoid being overexposed to a slowdown in a single sector."