PwC research reveals strong jobs market helps support good growth in the Midlands despite household spending pressure

·       Strong performance on jobs provides the Midlands with its most positive contribution to the region’s good growth assessment, with Herefordshire, Warwickshire and Stoke-on-Trent all scoring above the national average.

·       Household spending power falls below the UK average in both the East and West Midlands.

·       When household spending power is combined with other social and environmental metrics, East Midlands ranks fifth nationally, compared with tenth for the West Midlands.

·       Across the UK, nearly half of the population live in areas where economic growth is not translating to better quality of life.

·       Report argues the next phase of devolution must allow local areas to retain more of the revenues generated by local growth, alongside more freedom on how best to use resources.

New research from PwC reveals a mixed picture of prosperity across the Midlands, with households in the region having lower spending power than the UK average. It highlights different outcomes in the East and West Midlands when considering health, housing, financial resilience and jobs.

PwC's ‘Good Growth Barometer’ provides one of the clearest pictures yet of prosperity across the UK. It calculates how much income households have remaining after housing costs and taxes, adjusted for differences in household size and composition. The report also measures non-financial factors affecting quality of life across the UK, based on approximately 50 local indicators that include access to healthcare, green space, housing, and safety.

Household spending power in the Midlands is below the UK average

Across the Midlands, annual household spending power is below the UK average. The East Midlands figure stands at £22,752 - £618 below the UK average - and £22,552 in the West Midlands, £819 below average. Gross household incomes in the West and East Midlands are 4.2% and 5.7% below the GB average respectively. Lower housing costs and smaller households narrow the gap created by below-average gross household incomes in both regions, but don’t close it.

However, the picture changes when wider quality-of-life outcomes are considered alongside household prosperity. PwC’s combined Public Value Score brings together household spending power with social and environmental outcomes such as health, housing, financial resilience and the local environment. Looking beneath the overall score then helps identify the factors most closely associated with stronger or weaker good growth outcomes in each place.

The East Midlands has a Public Value Score of £2,052 and ranks fifth among the 11 GB regions and devolved nations. The West Midlands fares poorly in contrast, with a score of £1,610, the second lowest of any English region.

Financial resilience and health weigh on the West Midlands

The West Midlands’ Social Value Score of minus £269 is among the lowest in the country, with financial resilience and health the largest constraints. Housing also makes a sizeable negative contribution, while safety, social connectivity and the environment and green space create further smaller pressures.

Performance varies across the region, with Birmingham among the region’s weaker-performing local authorities, while Warwickshire records a higher Public Value Score of £2,860. Birmingham is also where the region’s pressures are particularly evident, with significantly below average mental health outcomes and individuals struggling to keep up with bills.

Jobs provide the Midlands’ most positive Social Value contribution, with areas including Herefordshire, Warwickshire, Staffordshire and Stoke-on-Trent all scoring above the national average.

East Midlands benefits from positive social outcomes

Despite gross household incomes sitting 5.7% below the UK average, the East Midlands performs better once non-monetary drivers are considered. Its Social Value Score of £156 is modestly positive, with financial resilience being the largest positive driver of this, supported by above-average results across health, jobs, social connectivity and housing.

There is significant variation within the region. Leicestershire sits towards the higher end of both the household spending power and Public Value distributions, supported by stronger economic and health outcomes. Rutland also records a relatively high Public Value Score despite more moderate household spending power, strong mental health outcomes and job satisfaction drive a positive wedge between traditional economic outcomes and a more comprehensive measure of wellbeing. Nottingham and Leicester stand out as underperformers across both measures, with financial resilience, health and housing among the factors weighing on their results. Leicester was also identified among the ten lowest-scoring local authorities in Great Britain for household spending power, at £18,060 annually, £5,845 below the national average.

Alex Hudson, Market Senior Partner at PwC said:

“The findings underline that there is no single, simple Midlands growth story. Both the East and West Midlands face a household spending power gap, but the wider factors shaping people’s lives differ considerably between places.

“The East Midlands demonstrates how strengths in health, jobs and financial resilience can support wider prosperity even where incomes remain under pressure. In the West Midlands, the evidence points to a need to connect economic growth more closely with action on financial security, mental health and housing.

“Devolution creates an opportunity to respond more precisely to those local conditions. Growth will make the greatest difference when investment is targeted not only at creating economic opportunity but also ensuring this is translated and reaches the right people and communities.”

The national picture

Overall, the research highlights the disparity in household spending power across the UK, with some neighbouring towns and local authorities having significant gaps in disposable income.

The research shows the scale of the North-South divide in household spending power, with every northern region of England falling below the GB average while households in London and the South East have significantly more disposable income.

Households in the North East have spending power 6.6% below the UK average, equivalent to £1,542 less a year, while those in the North West are 6.4% below average, a shortfall of £1,493 annually. By contrast, households in the South East have spending power 9.0% above the GB average, worth an additional £2,154 a year.

London has the strongest gross household income position at £68,856, 20.4% above the national average of £57,192. However, London’s higher housing costs and larger households narrow that advantage and reduce household spending power after tax by £43,602 (63%) to £25,254 per year, only 8.1% above the national average of £23,376, or £1,883 more per year.

In the South West and Scotland, lower housing costs and smaller household sizes boost spending power above what gross income alone might suggest. In the South West, gross household income is only 1.1% above the UK average, but spending power is 3.8% above average, an extra £892 a year. Scotland starts with gross household income 5.5% below the GB average, but lower housing costs and smaller households more than offset this, leaving spending power 0.8% above average, or £175 more a year.

One capital, two realities

London’s overall economic strength masks significant differences in household spending power between boroughs, with no clear inner-outer London divide. While income remains a key factor in household finances, housing costs and household size mean spending power can vary widely across the capital.

This disparity is clear in two neighbouring boroughs: Richmond upon Thames and Hammersmith and Fulham. Annual household spending power in Richmond upon Thames, the highest in London, is £35,448, which is 93% higher than the £18,384 recorded in Hammersmith and Fulham, the lowest in London, equivalent to an extra £17,064 per year. Hammersmith and Fulham’s high housing costs and low household incomes, due to many single households, are the main reasons for the borough having such low household spending power.

Overall, 14 London boroughs including Tower Hamlets, Newham and Barking and Dagenham fall below the average household spending power across the UK, while 9 boroughs including Kingston upon Thames, Bromley and Wandsworth have household spending power at least 20% above the UK national average.

Rachel Taylor, Government and Health Industries Leader at PwC, said:

“The research shows just how differently prosperity is experienced across the UK, with stark variations not only between regions but on each other’s doorstep. The better we understand what drives those differences, the more precisely we can tackle them. Delivering good growth in every postcode will require local leaders to have the flexibility to focus resources where they can make the biggest difference.”

The South East: side by side, but far apart

The contrast between Slough and neighbouring Windsor and Maidenhead is particularly striking. Slough has the lowest household spending power in the South East, and the second lowest across the UK. By contract, Windsor and Maidenhead has the highest household spending power across the whole of the UK, 110% higher than Slough, equating to an extra £19,812 per year.

According to the report, households in Slough face greater difficulty managing day-to-day finances, with limited savings and higher debt, while poorer mental health weighs on the area’s health score. Housing is another pressure, particularly around home ownership and household size. Immediately next door, Windsor and Maidenhead performs well above the regional average on health, supported by stronger mental wellbeing, and leads the region on housing, where the ability to meet housing costs makes an important positive contribution.

Well-connected rural areas see higher wellbeing

Beyond the regional picture, the analysis shows people in more rural areas tend to report higher life satisfaction and better mental and physical health than those in more urban areas. But within rural areas, places with stronger links to major towns and cities perform better, suggesting that these communities can combine the wellbeing benefits of rural living with access to jobs, services, transport and wider economic opportunity.

Economic growth is not translating into better lives for all

Just over half of places combine stronger household spending power with positive social and environmental outcomes. However, for 12.5 million households, or around 46% of the UK population, economic growth is translating less effectively into a better quality of life.