The report says that despite the government’s promise to raise standards, London’s economy is moving further ahead and Britain’s sharp regional disparities are set to worsen.
On Wednesday, ahead of Treasurer Jeremy Hunt’s Budget, accountancy firm EY said London and large areas of south-east England were forecast to experience stronger economic growth than the rest of the country.
Overall, we expect UK economic growth to average 1.9% a year between 2024 and 2027, driven by lower inflation, a strong jobs market and the Bank of England’s outlook for interest rate cuts.
However, London and the South East will grow by 2% and 2.1% respectively, higher than any other region and significantly better than the North East of England, Wales and Scotland, where average growth is closer to 1.5%.
Despite equalization efforts, the overall contribution of London and the South East to the UK economy will increase from 39% in 2023 to 40% in 2027, already up from 36% in 2005. the report said.
Rohan Malik, EY’s managing partner for government and infrastructure in the UK and Ireland, said the benefits of economic growth were “not felt equally across countries” as regional growth disparities worsened.
He said: ‘The UK’s long-standing geographical inequalities mean that many of the country’s high-growth sectors are clustered around a select few locations, making it difficult for the country to thrive in the coming years. As we recover, these sectors will be the biggest beneficiaries.”
It comes after the Guardian revealed that less than a fifth of the leveling projects approved by Michael Gove to improve towns across the UK have been completed, making it a government centerpiece. It’s the latest sign that progress on a 2019 campaign promise is stalling.
The UK economy slipped into recession at the end of 2023 as households cut back on spending amid the cost of living crisis. However, some regions have been hit harder than others, with EY finding that regions where average incomes tend to be lower have suffered sharper declines in economic activity, such as Wales, Northern Ireland, Yorkshire and the Humber. I warned you that there was.
Separate figures released by the CBI lobby show private sector activity continued to decline in the three months to February, with output now flat or falling since August 2022.
CBI chief economist Alpesh Pareja said Wednesday’s budget gave the prime minister an opportunity to remove barriers to growth and “double down” on high-growth sectors.
Activities are expected to intensify over the next three months, he said, adding: “The government could use this momentum to put the country on a sustainable growth path.”
However, EY says the lack of targeted regional support and the concentration of high-value economic activity such as professional services and technology in some parts of the UK mean the recovery could exacerbate regional fragmentation. He warned that this meant that the amount was high.
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According to the report, three of the five regions with the lowest growth rates between 2024 and 2027 are expected to be in the north of England, with Aberdeen (average annual growth of 0.8%) and Blackpool (1.1%). , Warrington (1.3%) and Cumberland (1.3%). and Dundee (1.4%) followed by the rest of the UK.
The accountancy firm says Reading has overtaken Manchester as the UK’s fastest growing place, with the town on the M4 corridor set to benefit from an expanding technology sector by 2.5% per year from 2024 to 2027. predicted to grow by %.
Areas such as the wider Thames Valley, Windsor and Maidenhead will also benefit from Big Tech’s expansion. Manchester and Bristol were expected to follow, with average growth rates of 2.2% each over the next three years.
Progress in other sectors will be more mixed, including weaker performance in manufacturing. Manufacturing typically accounts for a large proportion of economic activity outside London and in the south-east.
Peter Arnold, EY’s chief UK economist, said the UK’s economic outlook was likely to improve as households benefited from lower energy prices and Bank of England interest rate cuts.
“While the UK economic outlook looks brighter for 2025 and 2026, a return to moderate growth is unlikely to be balanced across the country.”
