Cities in the North of England amongst fastest improving cities - PwC’s Good Growth for Cities index 2017

  • Strongly improving performance from new Metro mayor cities such as Greater Manchester, Liverpool, Birmingham, and Middlesbrough
  • The improvements in both Greater Manchester and West Yorkshire resulted in scores above the 2011-13 LEP average.
  • Liverpool, Leeds and Newcastle are amongst fastest improving cities this year
  • Oxford and Reading top index for second year running, but Birmingham most improved
  • But the price of success is reduced housing affordability and increased average commuting times

Cities across the UK are seeing strong jobs growth and are catching up on the historic top-performers in the South of England, according to the latest Demos-PwC Good Growth for Cities Index.  

While the highest ranked cities still tend to be mostly in the South of England, except for Edinburgh, the top 10 improvers in the 2017 index include Leeds, Newcastle, Liverpool, Birmingham and Derby, suggesting that the North of England and the Midlands are steadily narrowing the gap. Only London and Southampton from the South are among the top 10 improvers relative to last year’s index.

John Hawksworth, chief economist at PwC, commented that:

“The UK has been a great job-creating machine in recent years and this has driven improvement in our good growth index this year across all major UK cities. On average across the UK, the index is now at its highest level since it began in 2006 and all regions have benefited from this upturn.

“But there has also been a price to pay for this in terms of worsening housing affordability, increased average commuting times and more people having to work long hours. The cities that are highest ranked on the index also tend to suffer the highest price of success.”

Published today [8 November 2017] the sixth annual Good Growth for Cities 2017 index sets out to show that there’s more to life, work and general well-being than GDP. The index measures the performance of 42 of the UK’s largest cities, England’s Local Enterprise Partnerships (LEPs) and the new Combined Authorities against a basket of ten indicators based on the views of the public as to what is key to economic success and wellbeing.

These include employment, health, income and skills - the most important factors, as judged by the public - while housing affordability, commuting times, environmental factors and income inequality are also included, as is the number of new business starts.

The top 10 highest ranked cities, and the most improved since last year were:

 

Highest ranking cities (2017 index)

Top 10 improvers since last year

1

Oxford

Leeds

2

Reading

Birmingham

3

Southampton

Leicester

4

Edinburgh

Newcastle

5

Bristol

Southampton

6

Milton Keynes

London

7

Cambridge

Middlesbrough & Stockton

8

Coventry

Wolverhampton & Walsall

9

Leicester

Liverpool

10

Swindon

Derby

Source: PwC analysis

The index shows that all 42 UK cities improved their score relative to our 2016 Index, driven primarily by increasing employment. In general, those cities that have seen the biggest improvements in their overall score have also experienced particularly large falls in unemployment in recent years.

Growth comes at a price

 

Figure 1: Average change in score since 2013-15, by element of index

However, while all 42 cities have improved their year-on-year scores in the 2017 index, success comes at a price. A reduction in housing affordability, falling owner occupation rates, rising average commuter times, and minor declines in both health and work-life balance since last year’s report suggest pressure on scarce resources of housing, transport and labour during the recent period of economic recovery between 2013 and 2016.  

Jonathan House, Local Government Partner, PwC commented:

“If cities are to sustain the strong performance of recent years, this puts a priority on delivering place based growth which is inclusive and addresses key supply side constraints particularly infrastructure.

“Delivering good growth cannot be achieved by any one person working alone but goes hand-in-hand with place based transformation, where local government, central government and the private sector act together and work collaboratively to deliver outcomes and where place based leaders facilitate local economic growth, prosperity and well-being.”

Opportunity Areas lack skills and entrepreneurship

Our analysis shows that most of the Government’s 12  Opportunity Areas do not score well against the measures of ‘skills’ and ‘new business starts’ in our index. 10 of the 12 Opportunity Areas performed below the average of all cities in the index against both of these measures (see chart below), though Doncaster has performed better recently on new business starts and Norwich is slightly above the UK city average for skills.

The scale of the challenge has also been getting greater - over the past five years 10 of the 12 areas have seen a worsening of performance with regards to new business starts relative to the UK average. This highlights the need for action, and the relevance of the support to the opportunity areas proposed by the government.

The twelve opportunity areas selected are: Oldham, Blackpool, Bradford, Doncaster, Scarborough, West Somerset, Norwich, Derby, Fenland & East Cambridgeshire, Hastings, Ipswich and Stoke-on-Trent. Figure 2 below plots the performance of these areas in the 2014-16 index on two key aspects of social mobility reflected in our index: skills and new business starts (as an indicator of entrepreneurship).

 

Figure 2: Performance of opportunity areas in skills and new businesses, 2014-16

In addition to above-average skill levels in Norwich, the other interesting outlier is Doncaster, which performs substantially above all other opportunity areas and the UK average with regards to the number of new businesses. The experience of Doncaster helps to highlight the size of the opportunity to deliver place based growth and unlock substantial benefits to the local economy and workforce.

Strong performance by Metro Mayor Cities

Our analysis of English Combined Authorities shows a strong performance in metro mayor cities. Three of the six newly elected mayors were elected into regions containing cities in the top 10 improvers in our index:  Liverpool, Birmingham and Middlesbrough.

While the election of mayors per se had no direct bearing on the index scores outcomes, the devolution process which created the cities and combined authorities has been a work-in-progress for a number of years and this has already had a positive effect on local performance and so the good growth index scores for these cities.

Table 1: Breakdown of good growth scores for Combined Authorities   

Green = above average, Amber = around average Red = below average  

Other core cities in the top 10 improvers were Leeds and Newcastle – highlighting the increased pace of recovery in major urban centres in the UK outside the South of England.

Table 2 shows the 2013-15 and 2014-16 Good Growth index scores for Combined Authorities in England, with those represented by an elected metro mayor shaded. These scores are shown relative to the UK LEP average in 2011-13. Comparing to 2013-15, in this year’s index all Combined Authorities (with the exception of Cambridgeshire and Peterborough) experience an improvement in their score. The improvements in both Greater Manchester and West Yorkshire resulted in scores above the 2011-13 LEP average.

Table 2: Combined Authorities scores, 2013-15 and 2014-16

Technology

The turnover of the UK digital tech industries was estimated at £170 billion in 2015. This is a growth rate of 22% (or £30 billion) in five years. Over the same period, the total number of UK digital tech businesses grew by 28%, more than twice as fast as non-digital businesses.

Nearly 70% of all UK digital technology investment in 2016 was into regional clusters outside London where tech businesses raised more than £4.6bn. For example Manchester is now home to 62,653 digital jobs, 898 start-up births and has a digital tech turnover of £2.6bn.   

Good Growth scores in England’s LEP areas

Our final piece of analysis shows index scores for all 38 Local Enterprise Partnership (LEP) areas in England.

Figure 3 shows that over 80% of LEP areas now have index scores above the 2011-2013 average, with Oxfordshire remaining the top performer. As with the overall index for cities, we typically see higher scores for more affluent areas, particularly in and around the Home Counties.

Figure 3: Good growth scores across LEP areas, 2014-16

The geographic distribution of scores can be seen clearly in Figure 4. This map shows that the majority of “above average” scores are in a continuous bloc in the South and West of England. However, there are notable outliers to this, with York, North Yorkshire and Easting Riding, and Cheshire and Warrington in the North among the highest performing areas. Improvement in LEP scores since the 2016 report has reduced the number of areas with scores materially below the 2011-13 average, with these far more geographically dispersed.

Figure 4: Geographic distribution of scores

Finally, Figure 5 shows the change in scores for all LEP areas in England, between 2013-15 and 2014-16. As with all other geographic samples, the analysis shows generally substantial improvements in score, driven by falling unemployment.

For LEPs, not every area experienced an improvement in score between the two periods, although this was the case for the great majority of areas. Some of the biggest improvements are seen in LEP areas in the North and Midlands, with Liverpool City Region and Leicester and Leicestershire showing the strongest performance, closely followed by Black Country and Humber. 

Figure 5: Change in score for Local Enterprise Partnerships, 2013-15 to 2014-16

Final comment:

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 that had lagged behind in the recovery from the financial crisis are now showing clear improvements, so it's clear that the recovery is now spreading across the entire UK.

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

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