Economic recovery leaves North trailing in a two-tier economy

The UK is divided more than ever between north and south, with the gap set to widen as the economy slows over the next two years, according to the latest Regional Planning Service (RPS) report from Experian Business Strategies. Only a handful of UK cities outside the south east will deliver robust economic growth. These include Cardiff, Edinburgh, Newport, Bradford, Leeds, Northampton and Nottingham.

The north/south divide is more pronounced than ever, with growth increasingly concentrated in the Greater South East (GSE)*. This divide reflects important shifts in the national economy. In the past, the global cycle was heavily associated with manufacturing and the northern industrial heartlands. But as successive recessions shrank this sector, international finance and the City of London have become more and more essential to the UK’s economic growth. The recent recovery appears to have been strongly influenced by booming global demand in London’s financial and business services, which has then spilt out to the neighbouring regions. The north, by contrast, has been dependent mainly on public sector investment for its growth.

Andrew Burrell, Associate Director, Experian Business Strategies, comments: ‘New Labour came to power ten years ago, aiming to reduce regional differentials and improve the relative performance of the north. To some extent, this was achieved during the first half of the decade, but this was only relative to the effect of a global slump on the south and massive government public spending in the north. Overall, the north’s performance has remained remarkably flat and unspectacular, with the GSE providing much of the momentum to the recent recovery.

‘London has been particularly buoyant since 2005. This reflects a number of influences, including a less stretched housing market (until recently) and a vigorous City. This expansion is expected to last well into the next decade, when the capital is expected to suffer a post-Olympic hangover. The South East and the East of England fail to quite match London, but are also stronger than anywhere else in the UK.

‘One encouraging trend has been the performance of some of the larger urban centres – generally industrial cities that have successfully diversified, such as Leeds and Manchester – in the north over recent years. They have benefited both from the government spending boom and from their service sector bias at a time of buoyant consumer demand.

‘There are signs of a shift back towards the smaller towns in the south in our forecast rankings. Reading, Milton Keynes, Northampton and Peterborough all grow rapidly, as well as London. But there is still a strong northern presence, with centres in Scotland, the North West, the East Midlands and Yorkshire & the Humber well represented, including Cardiff, Edinburgh and Nottingham. In future, the challenge is spreading this urban prosperity into the surrounding regions, though, as yet, there is little evidence that this is happening.’

*London, the South East and the East of England form the Greater South East

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