Why cities outside London are key to the UK’s economic growth
Plus, economic growth flatlines, rents on the up, mortgage arrears at seven year high and a reality check on the UK's gender gap
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The Office for National Statistics (ONS) has revealed today that the economy flatlined in April. There was no growth in the month, following an increase of 0.4 per cent in March, as wet weather hit output.
The figures are bad news for Rishi Sunak and the Conservative Party, with Sunak previously claiming the economy had “turned a corner”. And they come ahead of the second leaders’ debate between Sunak and Sir Keir Starmer on Sky this evening.
We’re all expecting a “you have no clear plan and are just going to raise taxes” and a “where were you during the D-Day commemorations?” slug-a-thon. But what we need is a focus on the economy and business.
A new report from the independent think tank Centre for Cities claims that poor investment in regional cities has affected economic growth. It calls out both leaders for their “fascination with short-term growth figures”.
The Climbing the Summit: Big cities in the UK and the G7 report has been published ahead of the 50th G7 summit, which kicks off in Italy tomorrow. It points to the Labour Party’s objective in its economic mission to “secure [for the UK] the highest sustained growth in the G7” over the next parliament and Sunak’s claims in his speech announcing the 2024 General Election that the UK is growing faster than France, Germany and the US.
The report says focusing on short-term changes misses the bigger picture:
There is a large prosperity gap between the UK and the leading economies of the G7. The average worker in France, Germany and the US produces 14 per cent, 13 per cent and 22 per cent more per hour respectively than the average UK worker.
The second is a problem because it misses a large part of the explanation as to why this prosperity gap exists. That is because some of the largest cities in the UK outside the capital, such as Birmingham, Manchester and Glasgow, do not make the contribution to the UK economy that their peer cities such as Los Angeles, Lyon and Frankfurt make to their national economies.
There are 112 cities in the G7 the size of Nottingham or larger, but of the bottom 20 for productivity, seven are British. They are in effect the sick men of the G7, with the recent stuttering of London adding to the UK’s woes.
It’s easy to point to the failings of the levelling-up agenda that was promised in 2019, but the report shows how the result of the underperformance of the UK’s secondary cities compares with other G7 nations.
Cities offer access to a deep pool of skilled workers and a network of high-skilled businesses. But the report says cities outside London punch below their weight “due to their low-density urban form, low concentration of knowledge jobs and poor transport accessibility”.
The think tank lays out clear recommendations for the next government to improve the UK’s standing. One is to reform the “uniquely unpredictable and restrictive” planning system, opting instead for a rules-based one that is more common in other G7 countries.
Another suggestion is the introduction of a UK version of the US CHIPS Act. The act was born out of post-pandemic global supply chain issues and included a $10bn investment in regional innovation and technology hubs across the country. This was designed to create tech centres beyond places such as Silicon Valley and Seattle.
The proposed UK version would focus on making cities outside the capital more attractive places to do business by boosting the availability of city centre office space, improving local transport and encouraging the commercialisation of ideas from the leading universities.
You can read the full report here.
As for those ONS figures? Heavy rainfall in April (155 per cent of the long-term average, according to the Met Office) heavily affected the country’s growth. When June and July’s figures make for prettier reading, let’s not be too quick to pat the incumbent government on the back.
We need to remember the context of a bump from the Euros and keep in mind that, in the words of the think tank’s report, short-term changes could allow us to miss a much bigger picture.
Business Question
Guess the year
- Astra AB and the Zeneca Group combine to form AstraZeneca
- The Angel of the North is erected
- Manchester United TV begins broadcasting, making it the first football team in the world to have its own television channel
- Checkatrade, lastminute.com and eastJet parent easyGroup were established
The answer can be found at the bottom of the page.
Business in Brief
Everything you need to know
1. The Conservative Party released its manifesto yesterday. Hoping to overcome the odds, the party’s pledges primarily focus on immigration, increased defence spending, scrapping ‘low-quality’ degrees in favour of apprenticeships and help for the self-employed You can read the BBC’s analysis here.
2. The World Economic Forum has released its Global Gender Gap Report 2024 and it doesn’t make for pretty reading for the UK. The country lies in 14th place behind the Nordic countries, New Zealand, Namibia and Ireland. You can see the full report more here.
3. Rents for new lets have increased by 6.6 per cent in the year to April, the slowest annual rise for two-and-a-half years, according to Zoopla. The property portal said the average rent on a new let had risen by £80 a month compared with a year earlier. You can read more here.
4. Bank of England figures show that mortgage arrears have reached their highest level in more than seven years. The total value of home loan balances with arrears climbed by 44.5 per cent year on year to £21.3bn in the three months to the end of March. You can read more here.
5. Starling Bank has reported its third full year of profitability ahead of a rumoured IPO. The digital lender reported a pre-tax profit of £301.1m for the year ending 31 March 2024, up 55 per cent from £194.6m the year before. You can read more here.
Business Quotes
Inspiration from leaders
“Champions keep playing until they get it right.”
– Billie Jean King
Business Thinker
Ideas on the future of business and leadership
1. Why Britain’s biggest economic problem is proving near-impossible to fix
2. Silent layoffs are rarely as quiet as bosses hope
And finally…
Nvidia has been a hot name in the business world for years now and is duking it out with Microsoft and Apple to take the crown as the world’s most valuable company.
Its CEO Jensen Huang recently appeared on 60 Minutes in the US and gave a fascinating insight into the company’s genesis and how it’s grown over time.
You can watch a shorter highlight here and the full video here.
The answer to today’s Business Question is 1998.
