In our newest UK Financial Outlook report we take an in depth have a look at the efficiency of UK areas over the previous 5 a long time.
We discover that London has persistently outperformed different UK areas for many of the previous three a long time by way of financial progress, however this has not at all times been the case. London had comparatively slower output (GVA) progress within the 1970s and early 1980s as folks moved out of the capital to different elements of Southern England.
This solely started to reverse with the monetary deregulation of the mid-1980s, which boosted London’s place as a world monetary and enterprise companies centre and acted as a world magnet for expertise that has boosted London’s inhabitants and GVA progress to properly above the UK common for the reason that 1990s (see Determine 1 beneath).
Determine 1: London has grown persistently quicker than different UK areas for the reason that 1990s
On the identical time, a pointy decline in manufacturing exercise hit conventional industrial areas within the North, West Midlands and Wales comparatively arduous, significantly within the 1980s. For the reason that 1990s, nonetheless, there was much less of a normal North-South progress divide exterior London. Relative progress rankings of various areas exterior the capital have diversified throughout a long time with out a clear, constant sample.
All areas have additionally seen a lift to complete GVA progress from elevated web immigration for the reason that early 2000s, however this has additionally been mirrored in a normal decline in actual GVA per capita progress throughout UK areas relative to the common charges seen in earlier a long time.
Will London’s dominance proceed?
Extra not too long ago, there are some indicators from the newest housing and labour market information that London’s relative efficiency could have been much less robust in 2018 and we count on this to proceed in 2019-20, with London rising at solely a barely quicker charge than the UK common in these years (see Determine 2).
Determine 2: Projected regional financial progress assuming an orderly Brexit (% pa)
It stays to be seen if it is a short-term cyclical phenomenon or the beginning of a longer-term pattern. The case for the previous is that London retains benefits as a world monetary centre that no different UK area can match, and it additionally stays a number one European hub for fast-growing digital sectors.
Then again, London’s progress could possibly be held again by issues associated to move congestion and lack of inexpensive housing, as highlighted in our newest Good Development for Cities report. Whereas Brexit will have an effect on all elements of the UK, London could possibly be significantly uncovered if it reduces its points of interest as a vacation spot for world expertise in key sectors like finance and digital.
Extra typically, regional progress shouldn’t be seen as a zero sum sport the place robust London progress needs to be on the expense of different areas dropping out. Trying past Brexit, the problem for policymakers will probably be to put money into infrastructure, innovation and expertise throughout the areas, harnessing the advantages of London’s success for the great of the nation as an entire.
 GVA refers to Gross Worth Added, which is the closest regional equal to GDP at nationwide degree.