Productivity in London is 40% higher than the UK average
London’s average GVA per job is £77,125, compared to UK average of £54,300
UK regional variations in productivity per job reflect variations in workplace skill levels and transport connectivity
London’s average productivity is 40% higher than the UK average, according to PwC’s latest UK Economic Outlook.
The report examines UK regional productivity, revealing wide variations in domestic productivity per job, as well as from an international perspective. PwC concludes that UK output per worker is around 10-15% behind Germany, France and Sweden and more than 30% behind the US.
London emerges as the nation’s most productive region due to its position as the UK’s ‘economic centre’. 17% of the UK’s workforce is based in London, with an average GVA per job of £77,125 (according to 2017 data, the latest available from the ONS). This compares to the national average of £54,300 per job.
There are large regional productivity gaps, with London’s performance contrasting to areas in other parts of the UK such as Yorkshire and the Humber, where productivity is approximately 16% below the national average, at £44,953 per job. However, the UK average has been skewed by London’s strong performance.
In addition, the gap between the best and worst performing local enterprise partnerships (LEPs) in England is widening, with productivity in the highest-ranking LEP being around 2.1 times more than the lowest-productivity LEP in 2017, as compared to 1.8 in 2002. Five of the eight UK LEPs with above average productivity levels are located in London or the South East.
Regional variances are due to factors such as physical and digital connectivity, the skills of the workplace population, business size, business investment and innovation, and industrial structure.
UK GDP could be boosted by 4% - or £83 billion - if local areas with below-average productivity levels could make up half of the gap.
John Hawksworth, chief economist at PwC commented:
“Places that are better connected physically and have access to skilled workers tend to have higher productivity levels.
“We find, for example, that a 1% increase in skills is associated with a 2% increase in productivity in a local area. Similarly, physical connectivity also matters, which reinforces the case for increased investment in transport infrastructure for areas that tend to lag behind, whether in the North of England or the far South West such as Cornwall.
“The prize from closing the regional productivity gap could be large. If LEPs that are performing below the UK average can close 50% of this gap in productivity performance, it could add around £83 billion to the economy, equivalent to almost 4% of GDP.”
The report suggests a number of strategies that could be employed to help boost productivity across the regions. Notably, businesses can promote workplace training and upskilling, a recommendation that is reinforced by PwC’s recent global skills survey, which showed that the desire of UK employees to learn new skills is not being met by employers.
In addition, investment in local infrastructure could boost connectivity (and therefore productivity). LEPs could collaborate to strengthen intra-regional connectivity.
Notes to editors:
The full UK Economic Outlook will be published on 26 November 2019 at: https://www.pwc.co.uk/services/economics-policy/insights/uk-economic-outlook.html
PwC’s global Upskilling Hopes and Fears survey was carried out by Opinium for PwC. More than 22,000 people were surveyed globally. The sample size in the UK consisted of 2004 adults ranging from ages 18-65, excluding retirees. Other countries surveyed were: USA, Germany, Netherlands, India, Australia, France, Singapore, China, South Africa, Poland. In total 22,094 adults were surveyed.
Further information on PwC’s New World. New Skills programme can be found here: https://www.pwc.com/gx/en/issues/upskilling.html
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