‘Northern Powerhouse’ a myth as region expected to lag behind south in 2025
George Osborne’s plan to build a “Northern Powerhouse” has been undermined by a report by the Centre for Economics and Business Research (CEBR). It shows Britain’s North-South divide will grow significantly over the next decade – and says the economic gap between London and the North of England is expected to rise by 94% to £110 billion over the next 10 years. London is expected to grow 27% in real terms in the next decade to just under £450 billion at 2012 prices, compared with a combined growth rate of 14% across the North West, North East and Yorkshire and the Humber. The CEBR says this would leave output in these regions more than £110 billion lower than London’s in 2025. It is thought that the economic gap between the fastest and slowest growing cities and regions will increase. To actually close the gap needs a “radical rethink” with more devolved powers and targeted investment. Further austerity has the potential to hold back the economies of some of the UK’s poorest regions. Planned infrastructure investment in London was considerably higher than in other regions. The CEBR considers a focus on local rail and roads would be more beneficial for northern regions than flagship projects like HS2. (Adding another runway in the south east is also only likely to increase the north south divide and focus profitable long haul flights around London.)
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‘Northern Powerhouse’ a myth as region expected to lag behind south in 2025
Economic gap between London and the North of England is expected to rise by 94pc to £110bn over the next 10 years, new report finds
George Osborne’s plan to build a “Northern Powerhouse” has been undermined by a report that shows Britain’s North-South divide will grow significantly over the next decade.
The economic gap between London and the North of England is expected to rise by 94pc to £110bn over the next 10 years, according to a report by the Centre for Economics and Business Research (CEBR).
London is expected to grow 27pc in real terms in the next decade to just under £450bn at 2012 prices, compared with a combined growth rate of 14pc across the North West, North East and Yorkshire and the Humber. The economic consultancy said this would leave output in these regions more than £110bn lower than London’s in 2025.
The report showed Cambridge, in East Anglia, was the fastest growing UK city in the second quarter of 2015, followed by Milton Keynes in the South East, then London. “Middlesbrough and Hull were among the five slowest growing cities, implying that the gap between these cities and wealthier cities will widen,” the report said.
Niall Baker, an executive at law firm Irwin Mitchell, which commissioned the report, said the Government’s plans to close the economic gap between the North and South required a “radical rethink” with more devolved powers and targeted investment needed.
Scott Corfe, economist at the CEBR, said: “Significant announcements to spread growth across the UK have been surprisingly lacking to date. More radical measures are needed to generate a series of regional powerhouses.
“Without these the Government risks breaking its vow, particularly as further austerity has the potential to hold back the economies of some of the UK’s poorest regions. It is vital that private enterprise is allowed to thrive in these regions as a way of offsetting austerity.”
The report highlighted that planned infrastructure investment in London was considerably higher than in other regions, despite the Chancellor’s pledge to pump money into transport projects. Projected spending in London stands at £5,426 per resident, compared with £1,248 per person in the North West and £223 per person in the North East.
Mr Osborne hailed a new devolution deal with Sheffield last week, which will unlock access to a £900m pot of government cash over the next 30 years to boost local investment in manufacturing and innovation.
The report recommended more devolution of powers to the regions, and suggested a focus on local rail and roads would be more beneficial for northern regions than flagship projects such as the HS2 rail link.
The report also said the introduction of tax competition across regions such as the power to determine business rates could help narrow the economic gap.
“Devolution of rates, combined with more regular revaluations, may help struggling areas to better attract and retain businesses,” the report said.
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