Economic Gap Between London And East Midlands Set To Grow To £49bn

The economies of Derby, Leicester and Nottingham grew strongly in the second quarter of 2016, but the region continues to be outperformed by London and other cities in the South East - says a new report.

Law firm Irwin Mitchell’s latest UK Powerhouse report, which has been produced with the Centre for Economic and Business Research (Cebr), provides an estimate of GVA¹ and job creation within 38 of the UK’s largest cities 12 months ahead of the Government’s official figures.

In the most recent version of the report, Derby saw GVA increase to 2.2% in Q2 of 2016. The value of its economy stands at £6.8bn and the growth represents a big uplift compared to Q1 when year-on-year growth stood at 1.5%.

Nottingham’s GVA also grew at 2.2% taking the total size of the economy to £7.9bn. Leicester’s economy grew by 1.9% in the 12 months to Q2 in 2016. Although this was lower than in Q1, the city saw the annual rate of job creation grow by 2.1% - higher than Derby and Nottingham.

In a blow to the Government’s ‘Midlands Engine’ initiative, the UK Powerhouse report highlighted that the economic output gap between the East Midlands and London will grow by £48.9bn over the next 10 years.

First announced last year, the Midlands Engine is a key part of Prime Minister Theresa May’s industrial strategy and similar to the ‘Northern Powerhouse’ plan, it aims to rebalance the UK’s economy by supporting regions outside of London through infrastructure investment and political devolution.

Highlighting the need for the Midlands Engine initiative to be successful, the report said that the East Midlands economy as a whole would grow by 14.8% over the next decade whilst London’s economy would grow by 17% during the same period.

Expert Opinion

“This study highlights the huge potential of the region but it also reveals that more needs to be done to ensure it can flourish and enjoy the same rate of growth as fast-growing cities in the South East.” Niall Baker - Chairman of IM Asset Management & Partner

Irwin Mitchell produced its first UK Powerhouse report in October 2015. The report predicted a growing economic gap between the South East and the rest of UK and made nine policy recommendations along with a call for the government to radically rethink how it looks to rebalance the UK’s economy.

¹GVA – Gross Value Added