03City monitor 2018
There is considerable variation in the economic performance of cities across the UK. The purpose of this chapter is to show the scale and nature of this variation by highlighting the performance of the 63 largest cities on 18 indicators covering:
- Business dynamics
- Digital connectivity
For most indicators the 10 strongest and 10 weakest performing cities are presented. Tables of the full list of cities can be found on:
Growing populations can give an indication of the economic opportunities that are available in cities. Cities that provide more job and career opportunities are likely to attract and retain more people than cities that do not.
- In 2016, 53.9 per cent of the UK population (around 35.4 million) lived in cities.
- The four biggest cities (London, Birmingham, Manchester and Glasgow) accounted for almost a quarter of the total UK population (24.3 per cent) and 45.2 per cent of the total population living in cities. London alone was home to 15.3 per cent of the UK population and accounted for 28.3 per cent of the population living in cities.
- 29 out of 63 cities experienced a higher population growth than the national average between 2015 and 2016.
- Eight out of the 10 slowest-growing cities were located in northern England and in Scotland. Aberdeen is the only city that recorded a decline in population between 2015 and 2016, shrinking by 0.3 per cent.
- The age breakdown of population growth shows that there have been large increases in those aged over 50. London saw the largest increase of its 50 plus population of any city.
Table 1: Population growth
City economies are predominantly driven by their businesses. The overall number of businesses in a city, as well as the number of new business start-ups and closures, are all good indicators of the strength of a city’s economy.
Business starts and closures
- Three out of five businesses (60 per cent) that started up in 2016 were located in cities. This has increased in recent years: in 2010, 58 per cent of business starts were in cities.
- London had the highest number of start-ups per 10,000 population (112.3), followed by Slough (82.9) and Milton Keynes (80.7). At the other end of the spectrum Dundee (33.7), Swansea (32.6) and Sunderland (32.2) were the lowest-ranked cities.
- Meanwhile, 61 per cent of UK business closures occurred in cities in 2016.
- Between 2015 and 2016, the number of business closures increased by 15.9 per cent nationally, with Aberdeen, Belfast and Doncaster experiencing the highest increases in closures (33.1, 42.9 and 59.7 per cent respectively). Moreover, Telford and Plymouth were the only two cities where the number of closures fell.
- London, Aberdeen and Northampton were the three cities with the highest number of closures (90.7, 68.3 and 64.3 per 10,000 population).
- Birmingham, Manchester and Peterborough had the highest churn rate (7.1, 6.8 and 6.6 respectively) – these cities saw the greatest difference between new businesses setting up and current businesses closing.
Table 2: Business starts and closures per 10,000 population
- Cities were home to 54 per cent of all UK businesses in 2016. Between 2015 and 2016 the stock of businesses increased by 5 per cent in the UK, and by 6 per cent in cities as a whole. Looking at the past 10 years, the business stock increased by almost a quarter nationally, and by more than a third in cities.
- Leeds was the city with the fastest year on year growth in business stock (11.3 per cent) between 2015 and 2016, followed by Manchester (10 per cent).
- London alone accounted for 23 per cent of the total UK business stock and 42 per cent of total cities business stock, far larger than Manchester and Birmingham (each accounting for less than 4 per cent of the total UK business stock).
- London also ranked first for business stock per capita, with 566 businesses per 10,000 population, followed by Reading (474), Milton Keynes (463) and Brighton (453).
- Dundee (221), Plymouth (217) and Sunderland (204) on the other hand had the lowest levels of business stock per 10,000 population.
Productivity and innovation
Productivity and innovation are drivers of long-run economic growth. Finding new and better ways of making goods and delivering services improves the performance of businesses which in turn increases the capacity of city economies.
- Only 10 cities out of 62 had levels of productivity above the British average in 2016.
Slough, London and Reading were the three cities with the highest levels of productivity, with GVA per worker at least 25 per cent above Great Britain’s average of £56,600.
- As Figure 17 shows, there is a very clear geography to productivity, with cities in the Greater South East tending to perform better on this measure than cities elsewhere. This is reflective of the make-up of jobs across cities, with jobs in cities in the Greater South East tending to be in higher-skilled occupations than elsewhere.
Table 4: GVA per worker
- In total, about 11,400 patent applications from the UK were published in 2016. Of this, 59 per cent of all patent applications published were registered in cities.
Cambridge had the highest number of patent applications published per resident in 2016. This was more than three times the number in Coventry, the city with the second highest number (108.9 applications published per 100,000 residents).
- London had the highest absolute number of patent applications published in 2016, with 1,948 publications. Relative to its resident-base the capital ranked 19th nationwide, with 19 applications published per 100,000 residents.
- Seven of the top 10 cities with the highest number of published patent applications are located in the south of England, with the exceptions being Coventry, Derby and Aberdeen.
Box 8: Measuring Innovation
Patent data is widely used to measure innovation. The data is based on the number of patent applications, at their date of publication (in 2016). Applications are usually published about 18 months after the application is submitted to the patent authority, but this does not mean the patent is granted.
There are some limitations with this data:
- Patents only demonstrate more technical innovations and exclude process innovations, trademarks and creative innovation, much of which takes place within service sector businesses
- The address of the patentee does not confirm that the innovative activity occurred at this address
- That said, the data still offers some insight into where innovation occurs across the UK, and as shown in the tables, there is a great deal of variation across the country.
Since 2017, we have included patent applications made to the European Patent Office (EPO) as well as the UK Intellectual Property Office (IPO). While firms that only seek protection in the UK will generally apply to the IPO, those who want a wider international protection are likely to apply through the EPO instead. The analysis finds that EPO published patent applications represent more than half of the total number of published patent applications from the UK in Jan-October 2016.
Table 5: Patent applications published per 100,000 residents
High employment rates, employment growth and low unemployment point to well-functioning labour markets, with the demand for workers amongst employers being high. Low employment rates and high unemployment are suggestive of a combination of poor skills and weaker employer demand.
- 42 out of 63 cities across the UK saw their employment rate improve in 2017, and 15 did so by two or more percentage points.
- Overall, UK employment increased by 0.5 percentage points between 2016 and 2017, from 73.7 per cent to 74.2 per cent. The city average remains slightly lower than the national average, at 72.7 per cent.
- 36 cities had employment rates below the national average. To bring these cities up to the current UK average a further 487,400 residents in these places would need to find employment.
- Dundee, the UK city with the lowest employment rate in 2017 (64.1 per cent), would need almost 9,800 of its residents to find employment to reach the UK average. Birmingham (the city with the highest deficit in absolute terms) would need 117,700 of its residents to find jobs to match the UK average.
- Southern cities tend to perform better than cities elsewhere. York is the only city outside of the south of England to feature in the top 10. Moreover, no southern city is listed in the bottom 10.
- Big cities tend to fare worse than the average, with only four (Bristol, Leeds, Portsmouth and London) of the twelve biggest cities having employment rates above the national average. Meanwhile Birmingham, Liverpool and Nottingham are all in the bottom 10.
Table 6: Employment rate
Jobseeker’s Allowance claimant count
Jobseeker’s Allowance (JSA) is currently being rolled into Universal Credit which has led to inconsistencies in the definition of a claimant looking for work across the country. While this has a big impact when looking at change in claimant rates, a static picture still provides a good indication of the relative strength of different labour markets and so is presented here.
- Almost two thirds (64 per cent) of those claiming Jobseekers’ Allowance lived in cities in November 2017.
- With the exception of York and Edinburgh, all top 10 cities with the lowest claimant count rate were located in the Greater South East of the UK.
- On the other hand, eight of the bottom 10 cities with highest claimant count rate were located in the north of England.
Table 7: Jobseeker’s Allowance claimant count
Private sector jobs growth
- 44 of 62 cities increased their number of private sector jobs between 2015 and 2016, and 28 did so by more than the British average (2 per cent).
- 13 cities saw reductions in their number of private sector positions, and in four cities the number of jobs dropped by more than 2 per cent. (Middlesbrough -5.1 per cent, Aberdeen -4.9 per cent, Newcastle -2.8 per cent and Plymouth -2.1 per cent). Middlesbrough experienced a significant shift in its ranking moving from eighth (3.9 per cent) in 2015 to last (-5.1 percent) in 2016.
- Overall, cities led the private sector jobs growth in 2016 with 269,000 net jobs created, 62 per cent of the total 436,000 net jobs gain in Great Britain.
Table 8: Private sector jobs growth
Public and private sector jobs
- In 2016 the private to public sector employment ratio in Great Britain was equal to 2.8.
- In general, the job market in cities tends to be more dominated by publicly-funded activities than the national average. Out of 62 cities, only 16 had private to public employment ratios above the British average. Crawley had the smallest public sector of any city, where there were eight private sector jobs for every publicly-funded one. It was followed by Slough and Swindon.
- In the bottom 10 cities, Oxford had almost the same number of private and public sector employees, mainly the result of its universities. This highlights that higher levels of publicly-funded jobs do not necessarily mean a less successful economy.
Table 9: Ratio of private sector to publicly-funded jobs
Skills levels are a key component of the success of a city economy. Those cities that have a high proportion of graduates tend to have stronger economies than those that have a large number of people with no formal qualifications.
High level qualifications
- While cities were home to 55.8 per cent of the UK working-age population in 2016, they were home to 57.9 per cent of those with a degree or equivalent qualification.
- But the UK’s highly-skilled population is concentrated in a few cities. The top 10 cities combined accounted for around 30 per cent of the total UK highly skilled population (compared to 22.6 per cent of the working age population), whereas the bottom 10 only accounted for 3.2 per cent of the population with high level qualifications (but 5 per cent of the working age population).
- Northern cities fare poorly on this measure. Six of the top 10 cities are located in the South, while only two southern cities (Southend and Gloucester) are in the bottom 10.
- Scottish cities perform relatively well when compared with the rest of the UK, with Edinburgh, Aberdeen and Glasgow ranking in the top 10 and Dundee in 14th position.
Table 10: Residents with high level qualifications
No formal qualifications
- Cities were also over represented for people with no qualifications, being home to almost 59 per cent of the population with no formal qualifications.
- Most of the best performing UK cities were small or medium sized, while four of the UK’s twelve biggest cities – Glasgow, Liverpool, Birmingham and Bradford – were in the bottom 10.
- Moreover, southern cities tend to perform better than cities elsewhere. Edinburgh is the only city outside the south of England to feature in top 10.
- Some cities have very polarised skills profiles: Glasgow had the 7th highest share of working age population with high level qualifications (46.6 per cent), but also a very high share of population with no formal qualifications (13 per cent). Similarly, Belfast was 26th in UK for highly skilled population (35.1 per cent), but had the fifth highest share of population with no formal qualifications (13.7 per cent).
Table 11: Residents with no formal qualifications
Wages reflect the types of jobs available in cities. Those cities that have higher workplace wages typically have a greater number of high-skilled jobs in them than those that have lower wages.
- In 2017, the average weekly workplace wage in cities was £577, compared to the UK average of £539.
- However in only 15 cities did workers earn more than the UK average. The average London weekly wage was £727; 76 per cent higher than in neighbouring Southend (£413).
- Overall the UK saw no change to its real weekly earnings between 2016 and 2017 (£539).
- However, 35 cities saw their weekly salaries decrease in real terms between 2016 and 2017. Exeter recorded the largest fall (-£35 per week), followed by Bradford (-£34 per week) and Reading (-£31 per week).
- On the other hand, Luton experienced the largest increase in wages, with a real increase of £29 per week between 2016 and 2017, followed by York (£19), Middlesbrough (£13), Dundee (£14) and Brighton (£12).
Table 12: Average workplace wages
As the UK economy has recovered from the last recession, there has been an increasing focus not just on achieving growth but ‘inclusive’ growth. And this has become ever more prescient in light of the EU Referendum vote.
Experimental data on incomes of residents (which includes wages, pensions, benefits and other income) released by the ONS using administrative data sources allows us to create a Gini coefficient for each city to measure what inequality looks like across our cities. The Gini coefficient gives a value between zero and one, with zero representing perfect equality and one representing a very unequal society. The estimates for cities show that:
- The most equal cities tended to be in the north of England or Wales. Burnley and Hull were the most equal of all English and Welsh cities.
- The top 10 least equal cities were dominated by those in the Greater South East, with Cardiff and York being the only two exceptions. Cambridge was the least equal, followed by Oxford and London.
- Those cities that were most equal also tended to have weaker economies, for example having lower average incomes, fewer knowledge-based services jobs and less productive economies (see Figure 19). This means that although these cities were more equal, they were poorer overall.
- Just 10 cities were more unequal than the English and Welsh average. This is likely to reflect the greater preference of higher income people to live in the hinterland around cities rather than in cities themselves.
Table 13: Gini coefficient
Housing stocks and prices together provide useful insights into cities’ housing markets, highlighting both supply and demand and their impact on house affordability.
Housing stock growth
- Cities account for 52 per cent of the UK’s housing stock.
- The UK’s dwelling stock increased by 0.8 per cent between 2015 and 2016, consistent with previous years (0.7 per cent between 2014 and 2015).
- In 30 cities housing stock growth exceeded the UK average, with Telford and Cambridge experiencing the highest growth (1.7 per cent), followed by Swindon and Slough (1.5 per cent).
- Around 34,200 new houses were built in London between 2015 and 2016. This represented a housing stock growth of 0.9 per cent, ranking London 23rd nationally.
Table 14: Housing stock growth
- In 36 out of 62 cities, house prices grew by more than the Great Britain average of 3.8 per cent.
- Not all cities saw increases though – five cities saw their average house price fall. Aberdeen saw the largest fall (-1.9 per cent), followed by the northern cities of Burnley, Middlesbrough, Preston and Huddersfield.
- Southend experienced the highest house price growth, with average prices increasing by 11.4 per cent, followed by Slough (10.8 per cent) and Northampton (10.2 per cent).
- House prices in London (£592,500) were twice the British average (£278,200). Oxford and Cambridge were second and third with £523,200 and £505,200, considerably above next placed Brighton (£394,600).
- At the other end of the spectrum, Burnley had the lowest average house price with £102,300, and it decreased by 1.7 per cent compared to last year. The prices in London were 5.8 times than in Burnley, and houses in the city were less than half the British average.
Table 15: House price growth
- In 2017, on average house prices in Britain were 10 times the annual salary of residents.
- Oxford was the least affordable city, with house prices being 17.3 times higher than annual earnings. In total, only 16 out of 62 cities were less affordable than the British average.
- On the other hand Burnley was the most affordable city, with an affordability ratio of 4.2.
- All the top 10 least affordable cities were located in the south of England. Meanwhile with the exception of Dundee the 10 most affordable cities were in the north of England.
Table 16: Housing affordability ratio
Accounting for over 80 per cent of total greenhouse gas emissions, CO2 emissions are one way to gauge how ‘green’ a city is and the size of its carbon footprint.
- In 2015, cities accounted for 54 per cent of the UK population but only 45.5 per cent of the UK’s total CO2 emissions, reflecting the lower carbon emissions per capita in cities than elsewhere.
- Average UK emissions per capita in 2015 totalled 5.9 tonnes (down from 6.2 tonnes in 2014), but the city average was as low as 5 tonnes.
- Swansea and Middlesbrough are significant outliers. They were two of only eight cities to emit more CO2 per capita than the national average. This was driven by large industrial installations which accounted for more than three quarters of total emissions in each city.
- All cities except Crawley, Slough, Stoke and Wakefield reduced their emissions per capita in the year between 2014 and 2015.
- In seven cities (Belfast, Cambridge, Oxford, Telford, Sunderland, Exeter and Middlesbrough) emissions per capita reduced by more than 10 per cent.
- Big cities are significant emitters, but they are very efficient when emissions are considered on a per capita basis. London for example accounted for 10.4 per cent of total UK emissions in 2015, but was twelfth out of 63 cities for per capita emissions with only 4.1 tonnes emitted for every resident (down from 4.4 tonnes in the previous year).
Table 17: Total CO2 emissions per capita
Broadband connectivity is a key component of the infrastructure offer that a city can make to businesses, entrepreneurs and residents. The development of optical fibre has considerably increased broadband speed across the country, now enabling access to ‘ultrafast’ (>100Mbps) speeds.
- In 2017, more than half of UK premises (53.1 per cent) had access to ultrafast broadband.
- In 56 out of 63 cities the proportion of properties with access to ultrafast speeds exceeded the UK average.
- Six of the top 10 cities were located in the south of England, whereas only two cities in the bottom 10 were in the south of England (Southend and Milton Keynes).
- While there is variation in the coverage of ultrafast broadband, with the exception of Hull all cities had at least 90 per cent of their properties covered by ‘superfast’ broadband (> 30 Mbps).