Irwin Mitchell Launches UK Powerhouse Report

Report Calls For Radical Review Of Government’s Wealth Spreading Agenda


David Shirt, Press Officer | 0161 838 3094

The economic gap between London and major cities in the UK, including those within the so-called ‘Northern Powerhouse’, is set to widen significantly over the next 10 years unless the Government has a radical rethink of its current policy for tackling the north south divide – says a new report.

View our interactive map - the UK Powerhouse

The joint study by national law firm Irwin Mitchell and leading think-tank, the Centre for Economic & Business Research (Cebr) is called ‘UK Powerhouse – supporting economic strength and bridging the prosperity gap’ and has been launched ahead of the Conservative’s Conference in order to raise concerns about the Government’s wealth-spreading agenda.

According to the study’s unique Powerhouse Tracker, a city-by-city measurement of current and projected economic strength, London’s economy is expected to grow by 27% in real terms between 2015 and 2025 to just under £450bn (2012 prices).

At the same time, the combined rate of growth across the North West, North East and Yorkshire & Humber, is expected to be a little over 14% - leaving output in these regions more than £110bn lower than that of London in 2025.

Expert Opinion
“We believe it’s vital that the entire United Kingdom has the opportunity to flex its economic muscle. Not only do we want to see London continue to flourish, it’s absolutely vital that the rest of the UK doesn’t get left behind.

“Although it is good news that London and the South East will continue to prosper, it’s clear that a radical rethink of the Government’s wealth spreading agenda is required. Investment in infrastructure is one part of the mix and we believe that the Government needs to listen to the voice of business and employ a range of policies tailored to different regions, rather than assuming that a one size fits all approach will work.”
Niall Baker, CEO & Partner

The report’s analysis and economic modelling from the latest ONS data (2013) showed that at the end of June 2015, four of the five fastest growing cities were in the South of England.

While each city economy appears to have been firmly in recovery over the past year, the report found that not all cities have yet managed to recover to their pre-financial crisis levels of economic output. In contrast to the UK as a whole, output in real terms in nine cities in the 12 months to Q2 2015 remained below the levels recorded in the same period to Q1 2008.

Excluding a couple of exceptions, the report says that the underperforming economies are concentrated in the North of England and the devolved nations of Wales and Northern Ireland.

Projected city growth between 2015 - 2025

The in-depth study suggests that the value of London’s economy will be £444.7billion by 2025 with the city creating an additional 537,020. This 11.1% growth in employment compares to 8.6% in Greater Manchester, 6.9% in Sheffield, 8.1% in Liverpool, 7.6% in Leeds and 9.3% in Birmingham.

The report predicts that in the next ten years, the fastest increases in real GVA growth will be in the South with cities including Cambridge, Milton Keynes and Oxford continuing to outperform places such as Hull, Middlesbrough and Swansea.

As part of the UK Powerhouse study, Irwin Mitchell commissioned a YouGov survey of 1,000 businesses to examine the policy measures which the business community themselves think are the best way of boosting regional economic growth.

Overall the survey found that only 31% of businesses thought the Government had taken the relevant steps to address economic growth in the region they operated in, whilst 38% thought more action was required. The regional breakdown of the survey results is stark. Despite all the rhetoric around building a ‘Northern Powerhouse’, a net balance of businesses in the North of England disagreed that the Government was doing enough to support regional economic growth.

Almost half (48%) of the 1,000 businesses questioned felt that greater devolution of powers would boost economic growth in their region. Belief in further devolution was strongest in the North of England, with close to three fifths (59%) of bosses agreeing that it would boost economic growth.

Businesses were also asked about polices they thought would boost economic growth in the region. Over half said the ability to determine business rates and increased infrastructure backed up by local decision-making. Education / skills policy and the ability to set a local minimum / living wage were also frequently cited in the report.

The survey also asked businesses to choose the one policy that they would like to see improve economy growth in their region and across all businesses surveyed, improving road infrastructure (16%) and telecommunications infrastructure (15%) were mentioned most.

The survey also found that with the exception of London, businesses in general expressed a preference for road investment over rail investment as a means of improving regional economic growth. This is particularly the case in the North of England and the Midlands.

Nine point plan

Irwin Mitchell’s UK Powerhouse report will be published later this month and will provide a review of policy considerations for ensuring the prosperity gap can be closed and the Government’s wealth spreading agenda can succeed.

The report’s authors, Cebr, recommends a number of policy measures aimed at narrowing the regional divides in economic performance and to ensure the continued growth of existing powerhouses such as London. These include:

1. Further devolution of policies to cities, regions and local authorities
2. Rethinking transport policy with a  greater emphasis on local rail and roads
3. Introducing a regional Living Wage
4. Devolving business rates and considering a land value tax
5. Tackling housing shortages
6. The introduction of tax competition across regions
7. Greater involvement of businesses in local education policy
8. The establishment of more industry clusters/enterprise zones around UK universities
9. The devolution of Air Passenger Duty (APD) in England

To visit the UK Powerhouse section of the website, click here