Economic recovery spreads beyond London as employment rises

Cities across the UK are faring relatively well in terms of employment figures, with the national unemployment rate currently sitting at a four decade low. According to a new study, economic recovery is spreading across the UK, beyond the regions of London and the South East.

A new PwC study explores in how far key cities around the UK are able to support and enable peoples’ well-being. The study, titled ‘Demos-PwC Good Growth for Cities Index’, looks at a more broad set of indicators than gross value added (GVA) of the respective cities, as there is increasing focus on economic indicators’ secondary position to wider social conditions.

The study itself weighs ten indicators based on the opinions of 2,000 respondents, with this year’s index weighted: jobs (15%), health (14%), income (12%), skills (12%), housing (10%), work-life balance (9%), income distribution (8%), transport (7%), environment (7%) and new business (6%).The Index outcome is the result of the combination of the various elements, which are themselves derived from taking the mean score on a particular indicator and giving a city a score equivalent to the number of standard deviations it is away from the mean. A city with a +0.4 score, is then 0.4 standard deviations better than the mean in that indicator.

Top and bottom

The top scorer this year was Oxford, with a net +1.0 standard deviations from the mean across its indicators. Reading follows closely, while Southampton, Edinburgh and Bristol round off the top five. Reading has moved up one position since the previous analysis.

Sunderland has the worst relative score, driven down by low-income, poor health and lower housing ownership, followed closely by Swansea and Middlesbrough & Stockton, which suffer from a poor environmental scores.

One key driver for improvement above the mean across the various cities compared to previous surveys, is improvement to the employment rate. Unemployment has reached lows last seen in the 1970s. However, while employment in the cities is up considerably, pain points remain. House price to earnings ratios have worsened, as has owned occupation. Infrastructure appears to be unable to overcome increasing commuter times, while health outcomes continue to see declines.

The report adds that, with employment at almost saturation, further improvements to the total index score can no longer be a result of increased employment levels. Other areas, such as housing affordability, as well as wider structural conditions, from low- real-wage growth to dealing with improvements to stress, infrastructure and other social goods are needed.

The analysis also considers the regions (and their respective cities) that have seen the most improvement, whether above average, average or below average results. Jobs-wise, only Cambridgeshire, Peterborough and the West of England have seen below-average index performances. Income wise, however, four regions notched below-average results, a similar number to heath, although the Sheffield City Region was the only region to have below average results in both. Five regions noted above average work-life-balance scores, including the Sheffield City region, as well as Manchester and Liverpool. Income distribution, according to this study, has also improved in the latest report, with eight of the nine regions considered performing above average.

Wider success factors

The relationship between city index scores and average incomes is relatively weak. While income does appear to impact such scores, the lack of major outliers suggests that cities with higher scores but lower incomes are supporting their people in different ways.

Commenting on the overall theme of this year’s index results, Paul Terrington, PwC Head of Regions, said, “We’ve seen broad-based improvements in our good growth index across the UK, driven in particularly by falling unemployment rates. Some areas in the North and Midlands that had lagged behind in the recovery from the financial crisis are now showing clear improvements in their index scores. The economic recovery is now spreading across the country rather than being focused on London and the South East.”

Terrington summarised, “However, we are also seeing the price of prosperity in terms of  growing pressures on scarce resources of housing, transport and skills. If UK cities are to sustain the relatively strong performance of recent years as we move through Brexit and beyond, it will be critical to address these challenges as part of cities’ growth strategies, rather than trying to fix the problems later when they become serious constraints on growth.”