City’s Long-Term Prospects Look Strong According To Latest Study
Southampton is expected to be in the top 10 of the UK’s fastest-growing city economies by the end of 2023 and could see its longer term future secured on the back of investments in the green economy - according to a new business report.
The UK Powerhouse study, which has been produced by Irwin Mitchell and the Centre for Economics & Business Research (Cebr), analyses 50 of the largest local economies by employment and GVA growth.
In the latest report, Southampton is predicted to see year-on-year GVA growth of 2.2% in Q4 2023 with the value of its economy growing to £7.5bn.
The report highlights Southampton’s 9th position for GVA growth in Q4 2023 represents a slowdown compared to how city was performing in Q4 2021. At the end of last year, Southampton was a close second place, with a year-on-year increase in GVA of 8.4%. The report says Southampton dominant transport and storage industry, reflecting its position on the coast and large port infrastructure, benefitted from the recovery in global trade volumes since the start of the pandemic.
UK Powerhouse predicts this trend could reverse over the coming year with continued supply chain disruption and the impacts of the Ukraine conflict and subsequent sanctions likely to impact the global trade environment.
Recent government announcements suggest however that Southampton’s growth prospects could pick up again in the longer term, with the city expected to be at the forefront of the rapidly developing hydrogen economy following the receipt of large-scale funding.
UK Powerhouse also examines the latest trends in Foreign Direct Investment into the UK.
Although both London and the South East have seen a 23% annual dip in the number of FDI projects in 2020/21, the vast majority of investment was in these locations.
The report says the dominance of London and the South East when it comes to FDI levels contributes to the continued contrast in economic outcomes between the South and North of England.
Bryan Bletso, Partner and head of International at Irwin Mitchell, said: “FDI brings potential for higher productivity and improved economic output for many years into the future. There are signs that despite a fall in the number of projects last year compared to the previous 12 months, more recent data from the United Nations points to a strong recent recovery.
“We are certainly seeing some encouraging signs with an increase in enquiries from organisations looking to invest here and as a national firm we seeing FDI activities spread across much of our national footprint.
“I’m optimistic that levels of FDI into the UK will increase and from a levelling up point of view, it is important that it doesn’t become concentrated in locations which are already growing quickly. The whole of the UK has a lot to offer and the regions which benefit most from investment from abroad are likely to see more growth and job creation in the coming years.”
Josie Dent, Managing Economist at Cebr and one of the report’s authors, said: “The economy is still expected to face some turbulence between now and the end of next year, notably through volatility in commodity prices, supply chain pressures, and the emerging cost-of-living crisis domestically. All of these factors are set to impact growth both at the aggregate level and, to a varying extent, within individual cities.
“This report highlights that much of the fastest growth during next year will be concentrated in the South. Locations such as Milton Keyes, Cambridge and Oxford have economies which are dominated by fast-growth sectors and they have also been hot spots for overseas’ investment. If economic levelling up is to be tackled effectively, these two issues must be recognised and quickly addressed.”