It is predicted that London’s economy will outpace the rest of the UK for at least the next three years, expanding the north-south divide further. This is despite the UK Chancellor George Osborne’s ‘Northern powerhouse’ initiative (1).
The Capital was the fastest growing region of the UK in 2014, the Office for National Statistics has announced. Its growth was almost twice as fast as Manchester’s, the past five years of data has shown (2).
The Chancellor has recently announced a course of devolution deals to northern cities, such as Manchester, Sheffield and Liverpool. The aim is to stimulate economic growth outside of London. He has described the programme, which is launching in Manchester in May, as “a revolution in the way we govern England” (1).
However, Mark Gregory, EY’s Chief Economist, said stronger growth in financial services and inward migration means London will continue to be the dominant driver of growth in the UK.
Successful corporate investment and buoyant property markets are expected to help southern areas to weather spending cuts and gradual interest rates rises by the Bank of England better than Northern regions.
The Capital is expected to expand by 3% per year between 2015 and 2018 in gross value-added terms, which measures economic activity in terms of goods produced and services supplied. This is in comparison with the UK average of 2.3%, according to EY (3).