Is the capital still in the capital?

In 2012, The Economist (external link) newspaper suggested that the north and south of the UK were so different – politically, socially, economically – that they were becoming two separate countries. But, in 2019, if you were to divide the nation by cutting around the outline of Greater London (rather than cleaving it in two along the Watford Gap) the differences would be even starker.

From take-home pay to house prices, from obesity rates to air pollution, London and the rest of the UK are two very different entities.

The economic divide

The most significant contrast between London and the rest of the UK may be an economic one; the capital’s contribution to GDP is larger than the next eight largest English cities put together. On top of this, says Jonn Elledge, editor of the CityMetric (external link) website, ‘London is one of the most productive regions in Europe.’ Conversely, ‘most of the big secondary cities in the UK are among the least productive cities in north-western Europe. In terms of how much wealth they’re generating, they’re on a par with East Germany or Western Poland.’ According to EU data from 2016, the single richest region in northern Europe was ‘inner London – west’, while six of the 10 poorest (as measured by GDP per person) were other regions in the UK.

It’s a disparity not lost on the rest of the UK. In 2014, research by the Centre for Cities and Centre for London (external link) showed that only 24% of UK adults felt that London had a positive impact on their local economy. More recently, YouGov (external link) found that 45% of Brits have an unfavourable view of the capital, mostly due to an imbalance in public spending.

But there are also signs of change. Manchester is forecast to be the strongest performing British city in economic terms over the next few years. A report from professional services firm EY (external link) projects an annual 2.4% and 1.2% boost to gross value added (GVA) and employment, respectively, from 2017 until 2020.  Could the gap between London and the rest of the country be starting to close?

Sign of the times

In the past year a number of large businesses have announced that they will move significant parts of their operations from London to cities in the north of England, often as a cost-saving measure. Communications company TalkTalk (external link) announced in November that it will relocate several hundred employees as it moves its head office from London to Salford in Greater Manchester. BT (external link) is moving out of its central London headquarters – where the company has been situated for nearly 150 years – in a bid to cut costs. Channel 4 (external link) will move around 300 staff from the capital to Leeds, echoing the BBC (external link)’s decision to relocate major parts of its operation – and more than 2,000 staff – to MediaCityUK in Salford Quays.

But the significance of these indicators should not be overestimated, Elledge warns. News stories about individual companies moving headquarters are not enough to prove that meaningful change is afoot. What’s more, when it comes to house prices, the gap between other cities and London has narrowed several times in the last few decades only to subsequently widen again.

A report from the estate agent Savills predicts that the house price divide between the capital and the rest of the UK will narrow over the next five years, with property prices in the North West predicted to rise by a fifth (21.6%).  

Network effects

However, Elledge adds, there are precedents which suggest that investment, particularly in transport infrastructure projects away from London, could make a difference. ‘If we did connect all those northern cities and give them their own public transport networks so that it became possible to live in the suburbs of Liverpool but work in central Manchester, everything we know about economics suggests that should pay off.

‘If you look at the Rhine-Rhur region of Germany, which is kind of like the North, in that it’s an industrial area with lots of cities butting up against each other without clear boundaries, that shows that this model can work.’

HS2 (external link), the high-speed rail network slated for a phased completion between 2026 and 2033, could prove to be a major spur for economic development in the Midlands and the North. The network will connect Liverpool, Manchester, Leeds, Birmingham and London, with 25 stations in total and trains capable of travelling up to 250mph.

Post-Brexit Britain

Brexit has the potential to alter the makeup of the UK economy too, but whether it will have a rebalancing effect, or merely hit the weakest areas hardest remains to be seen. ‘London’s economy won’t completely collapse,’ says Elledge. ‘But if you look at somewhere like Sunderland, where Nissan is by far the biggest employer, or Wolverhampton, where it’s Jaguar Land Rover, you can lose one company in these places and that would have major consequences for the entire local economy.’

The good news, however, is that Brexit has already changed the conversation concerning economic development across the UK. ‘People are now thinking ‘Why did these places vote in this particular way?’, says Elledge. ‘That could create some kind of political pressure to actually think about other bits of the country. The debate has already shifted a bit.’