London to grow quicker than other UK regions until 2018
London is still expected to be the fastest growing region in the UK over the next few years, according to a report out today from accounting giant EY.
The capital is expected to rack up an average forecast Gross Value Added (GVA) of three per cent a year to 2018.
This year London GVA is expected to grow at a rate of 3.4 per cent, compared with 2.3 per cent for the wider UK.
Mark Gregory, EY’s chief economist for the UK said: “London’s booming professional services is doing well and the return to growth of the financial services sector means that this is certainly not a surprise.”
The news is not so rosy for the rest of the country, however.
Economic growth in the north of England is not going to take off until at least 2018.
The government's so called “Northern Powerhouse” and the “Midlands Engine” initiatives are both unlikely to properly get going until next decade, the report found.
At the same time, the report warned austerity measures will limit growth in the UK’s devolved administrations and the North East, expected to have a GVA growth rate of 1.6 per cent.
Anna Round, senior research fellow for the North East at Institute for Public Policy North told City PM: “We’re on the road to development. It is going to be slower in the North, partly because we’re starting from the back foot due to the financial crisis.”
“Skills funding, especially in further education, remains very tight and this is a risk to future productivity,” Round added.
Meanwhile, nearby Reading is set to be one of the UK’s fastest expanding cities over the next three years, with a GVA of 3.1 per cent.
The report also estimates that employment in London will grow by 2.1 per cent in 2015, almost double the UK growth of 1.1 per cent.
Gregory warned however: “There could be a skills battle if the North continues to grow its digital economy.”
Manufacturing is a big part of the drive towards creating the Northern powerhouse, along with the science, technology and service sectors.
However the head of the trade body the British Chambers of Commerce (BCC) John Longworth has branded branded current attempts to boost manufacturing as “failures”.
Longworth told City PM: “It looks like manufacturing is heading into terminal decline.”
The manufacturing sector is expected to shrink by 0.2 per cent in 2015, though this downward trend should then reverse in 2016 to growth of 0.7 per cent and two per cent in 2017.