Focus on Manufacturing | Irwin Mitchell | UK Powerhouse Update

Economic growth within the UK’s key cities will continue to slow during 2016, according to a new report which also highlights that the Government’s flagship Northern Powerhouse initiative is still struggling to gain traction.

Our UK Powerhouse tracker, produced in conjunction with the Centre for Economics and Business Research (Cebr), reviews the economic growth and job creation in 38 of the UK’s largest cities and analyses how the government can support economic growth and bridge the prosperity gap between London and the rest of the UK.

Our latest report, published in April, reported UK-wide quarter-on-quarter economic growth (by measure of Gross Value Added1, or “GVA”) of 0.6% in Q4 2015 with respectable growth of 2.3% across the whole of 2015. The South East reported the highest levels of growth with Milton Keynes, Outer London and Cambridge the star performers (achieving year-on-year growth of 2.7%, 2.6% and 2.5% respectively during 2015). Birmingham, Manchester, Aberdeen and Nottingham joined the ranks of those cities which achieved year-on-year growth in excess of 2.0%.

Job creation figures were also encouraging with Stoke-on-Trent recording a 7.4% increase in employment as against Q4 2014. In fact, 20 cities recorded employment growth in excess of 2.0%. Only one city of the 38 reviewed recorded job contraction during the same period – Sheffield, a city particularly prone to challenges faced by the manufacturing sector, and one which reported economic growth of only 1.2% in 2015.

The picture across the UK was one of sluggish economic growth at a level not witnessed since 2013. Despite decelerated growth across the Yorkshire region, where Leeds posted a 1.7% increase in GVA and Sheffield a 1.3% increase, the region’s combined GVA did exceed £20 billion for the first time. Of those cities comprising the Northern Powerhouse region, only Manchester posted growth figures in excess of 2.0%, indicating the size of the challenge ahead for northern cities in trying to match London’s and the South East’s economic prosperity.

Indeed, our projections over the next 10 years predict that London’s rate of growth will continue to accelerate ahead of almost every other part of the UK. Only Milton Keynes, Cambridge, Oxford, Nottingham and Outer London grew faster than Inner London during 2015 and it would appear that this trend is likely to continue. Our latest findings predict that, by the end of 2025, London’s economy will have grown by 26% since our 2015 compared to much lower, though still respectable, levels of growth amongst the cities which make up the Northern Powerhouse (Greater Manchester – 17.7%, Leeds and Liverpool – 17.1%, Newcastle – 16.4%, Sheffield 15.1%). The extent to which devolution and investment in these cities will ameliorate the disparity is yet to be seen.

The value of the gap in economic prosperity between London and the Northern Powerhouse cities currently stands at £62 billion but, according to our projections, may reach £115 billion by 2025.

Efforts to bridge this economic gap will centre on not only the devolution of powers to local governments, as is underway in the Greater Manchester region and is shortly to follow in the Sheffield city region, but also the infrastructure investment which has long been necessary to connect the cities of the Northern Powerhouse with one another, and the capital. Our report follows a series of announcements at the Budget in March which included a £300 million pledge by the government to improving journey times between the large cities in the north of England.

“Increasing infrastructure investment to reduce journey times and improve connectivity across the north of England are vital if the Northern Powerhouse is going to succeed. Not only should there be a significant increase in infrastructure spending in the north, the Government must listen to businesses when deciding where its transport hubs should be located. In Sheffield, for example, the Government’s current plan is to locate the HS2 station at Meadowhall even though the financial benefits of it being located in the city centre are shown by all the date to be manifestly far greater.”

- Paul Firth, Regional Managing Partner, Sheffield

Our report also shows that there are encouraging areas of economic growth within the manufacturing sector, particularly in the vehicle manufacturing industry which reported quarter-on-quarter growth for the fifth successive quarter and, in doing so, hit a ten-year high in production. And, whether it is the function of government efforts or a natural outcome, some movement has been made towards rebalancing the economy with reliance upon financial services has reduced across the UK, most acutely in London.

For further information and to download the latest version of the report, visit