Northern Powerhouse 'Failing' Indicates New Research

Legal Experts Urge Government To Do More To Support Northern Economy

10.12.2015

Kate Rawlings, Press Officer | 0114 274 4238

Business specialists have called on the government to do more to support the ‘Northern Powerhouse’ after figures indicate the scheme is failing to show results.

The report by EY shows that London and the South East will drive UK growth over the next three years, with the capital projected to expand by 3pc per year between 2015 and 2018 in gross value added (GVA) terms, which measures economic activity in terms of goods produced and services delivered.

This is above the average of the UK average of 2.3pc.

The research indicates that the South East and east of England will expand at faster rates than average, growing at rates of 2.5pc and 2.4pc respectively.

But by contrast, the North East is only expected to grow by 1.6pc a year over the same period, as Government spending cuts continue to exert a drag on growth.

The figures back findings from by law firm Irwin Mitchell, who released their Powerhouse report looking at 10 year predictions for growth, earlier this year.

Official data released on Wednesday revealed the North-South divide widened last year.

Londoners contributed an average of £42,666 each to the UK economy in 2014, in comparison to the GVA per head of £18,216 in the North East and £21,011 in the North West.

Office for National Statistics (ONS) data showed London’s economy grew by 6.8pc between 2013 and 2014, helped by strong growth in the property and finance sectors.

The data also showed the increase in GVA in the five years to 2014 was 28.9pc, which was also driven by the property sector.

By contrast, between 2009 and 2014 Liverpool contracted by 0.8pc, amid a collapse in manufacturing.

This translates to a real terms decrease of almost 10pc.

Mark Gregory, EY’s chief economist, claimed that stronger growth in financial services and inward migration meant that London would continue to be the dominant driver of growth in the UK.

Strong corporate investment and buoyant property markets are also expected to help southern regions to weather spending cuts and gradual interest rate rises by the Bank of England better than their northern counterparts.

While Manchester was described as the “standout Northern city”, which EY said illustrated the “potential of the Northern Powerhouse”, Steve Wilkinson, managing partner at EY, said Chancellor George Osborne’s plan to boost growth and jobs in the North would have “limited impact in the short-term”.

Expert Opinion
The EY report is interesting reading and fully supports the findings of our Powerhouse research published earlier this year.

The figures should serve as a warning to the government that a radical approach must be adopted to boost the economy in areas outside of the South East or face an ever widening gap between the North and South of the country.

While improving the rail network and making HS2 a priority are important, the government cannot solely rely on improving infrastructure to help boost the Northern economy.

Many of these targets are a long way off and the country will not see their impact or any results for many years to come.

The Chancellor needs to look at what he can do in the short term to inject finances and promote growth outside of London.
Roy Beckett, Partner