- London generates most wealth per person but Edinburgh and Belfast are catching up fast
- Scottish cities storm ahead with Aberdeen only UK city where GDP grew faster this year than last, and Glasgow not far behind
Our research shows that London is losing its economic edge to regional capitals Edinburgh and Belfast.
London’s previously unassailable leadership as the UK’s strongest economic contributor has been eroded as the financial crisis hit the capital much harder than elsewhere in the UK.
Our analysis of official calculations of ‘Gross Value Added’ – the measure of a region’s contribution to the UK economy according to the value of the goods and services it produces – shows that Edinburgh and Belfast are fast closing the productivity gap.
Londoners generated just £538 more wealth on average than residents of Edinburgh in the year to 1st January 2009, down from £708 in the previous year.
Edinburgh has been the UK’s second strongest economic powerhouse after London for over five years, but since 2007, the gap has been closing. If the trend continues, Edinburgh’s GVA would catch up with London’s in 2012.
Londoners are still the biggest contributors to the UK economy, generating £35,100 per head in the year to 1st January 2009. Edinburgh residents came second, with an average contribution of £34,562 per head, up 4.5% year on year. Belfast takes third place with £32,264 per head per year, up by 4.4% compared to the previous year. The average Briton generates £21,103 per year. (See table below for the UK’s Top 50 towns and cities)
Comments Marc Waterman, partner in our London office: “For years London was streets ahead of other UK towns and cities in generating wealth for the economy, driven by its huge financial services industry. But with the major restructuring that banks and financial services companies went through following the credit crunch crisis, London’s fire power has been weakened.”
“Investment banking has recovered since then, but nobody now believes that this sector can continue to deliver exponential growth.”
Although Edinburgh also has a large financial services sector, but it is less volatile compared to the City of London.
Explains Marc: “Edinburgh’s financial services sector is proportionately smaller than in London. The fact that there is less focus on investment banking in Edinburgh also spared it from the biggest blow.”
“Belfast is also strong in financial services, engineering and education, but cross-border trade with the Republic of Ireland is important to the Northern Ireland economy. Businesses in Belfast will be worried about how to sustain growth as the full impact of Ireland’s spending cuts hit home.”
“The next wave of public sector cut will also be a challenge for many regions.”
Aberdeen only UK city where GVA grew faster this year than last year
Aberdeen is the only Top Ten UK city where GVA grew faster this year than last year, rising to 4.8% from 4.3%. Growth was also strong in Glasgow, which saw an increase of 4.4% in its GVA per head compared to the previous year. The British economy as a whole experienced a growth of just 2.8% in the year to 1st January 2009, down from 5.1% in the previous year.
As the centre for the UK’s oil & gas industry, Aberdeen rode the wave of a 190% surge in oil prices between January 2007 and July 2008. The momentum is likely to continue with oil prices back over $100 a barrel.
Our research also reveals that Liverpool saw the fastest GVA growth of any of the top 40 UK cities, with Liverpudlians’ average contribution increasing by 4.9% compared to the previous year, though remaining below the national average at £19,647.
UK’s Top 40 towns and cities by gross value added (GVA)
(Latest figures available are for the year to 1st January 2009)
|Rank||Town/City||GVA – Year ending 01/01/08
(£ per head)
|GVA – Year ending 01/01/09
(£ per head)
|19||Bournemouth & Poole||20,105||20,732||3.10%|
|20||Brighton and Hove||20,575||20,659||0.40%|