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Which parts of the UK make the greatest contribution to the national economy?

Very few parts of the country account for large shares of its economic output.

Blog post published on 27 January 2023 by Paul Swinney

The ONS has this week published its latest data on where economic output happens in the UK at very small geographies and it tells us that it disproportionately happens in very few parts of the country.

The chart below shows what share of UK output is accounted for by what share of land. If the economy was spread equally across the country, there would be a straight 45 degree line on the chart. That the actual line is curved, and steepest towards the left, reminds us that the economy in fact clusters in certain parts of the country.

Figure 1: Different parts of the country make different contributions to the economy

Source: ONS

This won’t come as a surprise to followers of Centre for Cities. What might come as a surprise though is just how much of the UK economy happens in so few areas. As the table below shows, just 0.005 per cent of land accounts for 10 per cent of all UK output; 0.3 per cent of land produces 25 per cent of output; and 2.4 per cent of land produces half of the economy.

Figure 2: So much is generated for so many by so few (places)

Share of total UK land	Share of economic output	Share in urban areas
0.005%	10%	100%
0.272%	25%	80%
2.404%	50%	62%
17.311%	75%	49%
43.106%	90%	49%

Source: ONS

The areas where the economy clusters is overwhelmingly urban. Almost all of the 0.005 per cent of land that accounts for 10 per cent of output is in inner London (see Figure 2). Of the land that generates the first 25 per cent of output, 80 per cent of this is in cities or large towns.

This occurs because of the inherent benefits that different parts of the country offer. Successful cities (and their centres in particular) offer access to lots of skilled workers and to a network of knowledge that allows people to exchange ideas and information. The result is the clustering seen above, or the clustering of cutting-edge businesses that our At the Frontier report sets out in detail, despite it being higher costs (e.g. rents, congestion) from doing so.

It would be understandable if someone used this data to argue that policy should be trying to make the economy less concentrated. However, there are two problems with this view. The first is that there aren’t many levers policy has to pull to change this geography because of the inherent benefits that different places offer.

What policy has a greater latitude to do is to attempt to boost these benefits where they aren’t as large as they should be. This is especially the case in most big cities outside of London, which trail well behind their counterparts on the continent. Tackling this underperformance should be the main goal of levelling up if it is to narrow the economic divides in performance across the country.

The second problem is that it would misunderstand that having very few major places of production in the UK economy wouldn’t bring benefit to the places around them. The obvious point here is that people commute, so cities provide prosperity for people living in and around them. For example, if a job is in Leeds city centre the person who is employed in that job could also live in Headingly, Harrogate, Wetherby etc.

This leads to a large flow of cash from the places of production to the places of residence. On a net basis, each week UK cities generate around £1.7 billion in wages for people living outside of them. The goal for policy should be to boost places of production where they need support, and make sure that people living around them have both the skills and the transport connections to access the opportunity that is available.

This week’s data release reminds us that different parts of the country play different roles in the national economy. The concentration of the economy isn’t a bug but a feature. Policy should work with this feature.