With the UK’s low productivity set to be a key concern in the Autumn Budget, new analysis published today reveals the huge disparities in productivity across the country which underpin this problem.
The new briefing, published by the think tank Centre for Cities, examines the variation in productivity levels across Britain. It shows that cities in the Greater South East (1) are by far the most productive places in Britain, and are 44% more productive than cities in other parts of the country. If all British cities were as productive as those in the Greater South East (GSE), the national economy would be £203bn larger – equivalent to four extra city economies the size of Birmingham.
The strong performance of cities in the Greater South East also makes the region one of the most productive places in Europe. For example, the new analysis shows that the GSE is considerably more productive than Germany – often held up as an economic model for the UK to follow – with workers in the GSE producing 7% more per hour than their German counterparts in 2015.
The new briefing therefore shows that Britain’s low national productivity is a result of the economic underperformance of cities outside the GSE, most of which fall below that national average for productivity. In 2015, only 12 of Britain’s 62 cities performed above the national average for productivity, eight of which are in the GSE. In contrast, major cities in the North and Midlands such as Leeds, Manchester and Birmingham all fell below the national average.
The analysis highlights a number of other important findings which should be key considerations in Government measures to boost productivity, both in the Budget and upcoming Industrial Strategy:
Commenting on the findings of the new briefing, Andrew Carter, Chief Executive of Centre for Cities, said:
“This analysis reveals the stark disparities in productivity across different parts of the country, which should be a central concern for policy-makers tasked with addressing Britain’s sluggish economic output. Productivity is not a problem in the Greater South East, but it is a major issue in cities elsewhere in the country. In particular, Britain’s major cities should be leading the national economy, but instead they are causing it to lag behind that of other countries.
“Unless we get these places to punch at their weight, the national economy will continue to be hamstrung. The Government should therefore focus its efforts to improve national productivity on addressing the issues that hold cities back, such as tackling skills gaps or improving infrastructure. Doing so will have a greater impact than measures aimed at boosting specific sectors, and should be a top priority in both the Budget and upcoming industrial strategy.”
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We should not be surprised that productivity is higher in the GSE and a few key cities outside it. Wages and land costs are higher there so only the most productive businesses cab afford to locate in these areas. This is not to deny that there is also a line of causation from agglomeration economies in big metropolitan but it is surely unlikely that the success of GSE based on a world city like London can easily be located across the UK. At the very best you might, with concentration of public and private investment get a small number.