Read the papers, and it’s all too easy to think that London is the only part of the country where business takes place and economic recovery is taking hold. Even the politicians have highlighted the growing gulf between the capital and the rest of the country, with the Business Secretary Vince Cable lamenting last year that London was turning into “a giant suction machine draining life out of the rest of the country.”
But there is growth outside of the capital – some of it very impressive, indeed. Even regions that have traditionally struggled, such as the South West, have been experiencing better economic times of late. And industry sectors that have been through some lean years are in improving health in parts of Britain. Who would have thought that manufacturing would be a UK success story again? But look to Yorkshire in recent years, and that’s what you’ll see.
There’s no denying that the British capital does dominate the UK economy and has been taking an increasing proportion of national output. By 2012, London’s slice of Britain’s economic cake had reached 22.4 per cent, according to the Office of National Statistics. Between 2007 and 2012, London’s economic output grew by an astonishing 15.4 percent, far outstripping the performance of any other region.
And, yes, London’s done exceptionally well in employment terms, too. The think-tank Centre for Cities gauges that between 2010 and 2012, London accounted for 80 per cent of the national growth in private sector jobs. In comparison, Britain’s next ten largest cities accounted for just 10 per cent of extra private sector employment during the same period.
In part, the increasing gap between the capital and elsewhere is down to population. It’s a big city and getting bigger – fast. By 2020, London will be home to nine million people, up from 8.3 million today. Plus, there’s the fact that London takes the lion’s share of foreign direct investment in the UK, which adds to its impressive economic standing.
But the Government has been working hard to boost business growth in areas outside London and the South East through measures such as the Regional Growth Fund programmes. These have helped more than 3,400 SMEs invest in their businesses and create local jobs. Then there are the new Enterprise Zones, 24 areas across England that offer companies business rates relief and enhanced capital allowances for investment in plant and machinery. These attempts to foster entrepreneurship across Britain are not without their critics. No less an authority than the National Audit Office has questioned the value of such schemes, saying they have been slow to create jobs and have yet to demonstrate their worth.
Yet, the signs are that, by several measures, businesses in various parts of the country are now beginning to catch up with their rivals in London. Ian Powell, who chairs accounting giant PWC, said recently that the firm’s offices in the North of England have been increasingly busy, with a marked uptick in deals and jobs.
“UK regions are growing, with the North performing particularly strongly,” he commented, singling out retail and manufacturing as the most lively sectors.
The success of Northern businesses was also revealed in another recent study by PWC’s accountancy rival, EY, which found that the fastest growth in turnover was among firms in the North. And when looking at the business north of the Watford gap, Yorkshire is a particular centre of activity and growth, it would seem. PWC’s Powell observed:
“Manufacturing and speciality engineering are undoubtedly enjoying a resurgence in Yorkshire and the North East.”
Yorkshire is also the fastest-growing region of Britain for private equity deals, surely a sign of business confidence and success.
And it’s not just the North of England that’s experiencing more business growth. A recent study of the intentions of purchasing managers – a tried and tested measure of what’s really happening in the private sector economy – also suggests that regions outside London are gaining momentum. The research by Lloyds Banking Group shows that:
- In the final quarter of 2013, Wales’s rate of growth in business activity was close to a record high
- There was evidence of a strong rise in activity in the West Midlands and the South West of England
- Activity in Northern Ireland expanded at its fastest monthly rate for ten years
- London and the South East showed some signs of slowing. Only the East Midlands and North West England showed slower expansion than the capital
The apparently strong performance of the South West of England is particularly remarkable. The research covered January, when the impact of extreme flooding in the region was already being felt. Yet despite the weather-related disruption, the South West region came out as the fastest-growing for private sector activity. Even a deluge of Biblical proportions can’t seem to stem the enterprising zeal of business owners in Devon, Cornwall and the surrounding counties.
And there is other evidence that this increased business optimism in many parts of Britain is translating into new jobs. Taking the Midlands as an example, accountants KPMG collated material from recruitment and employment agencies in the region at the beginning of 2014 and found that the number of vacancies for staff in the Midlands – both permanent and temporary – grew at the fastest rate for 15 years; permanent staff saw average pay increases that were the highest since October 2007; and, the number of candidates looking for permanent positions fell for the ninth month in a row. In other words, those looking for work in the middle counties of the country weren’t struggling to find it, as new jobs were created and people were being paid more to do them.
So, while London’s mayor Boris Johnson may applaud the capital as a commercial powerhouse that attracts all the best talent and “gently expels… economic activity around the country”, all the evidence is that the regions are doing pretty well on their own. It would seem that business outside the M25 really is alive and kicking.
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