The Chamberlain News

London basks in economic boom, while Birmingham ‘punches below its weight’

Britain’s economic recovery is dominated by job creation in London, leaving cities like Birmingham, Manchester and Liverpool struggling to keep up, a major economic study has found.

Ten times as many new jobs are being created in London than anywhere else and the capital remains a magnet for young adults who are leaving other English cities in their thousands to seek employment there.

However, the by the Centre for Cities think tank rejects any suggestion that London’s economic growth should be artificially restrained and recommends instead that the Government help the economies of Birmingham and other English cities to grow by devolving powers and budgets.

The recommendation was welcomed by Cities Minister Greg Clark, who promised the process of shifting power from Whitehall to cities would “continue apace” through growth deals being negotiated by Local Enterprise Partnerships.

Mr Clark added: “This report makes clear that our cities need more control over their own future and more freedom to build on their own strengths rather than be restricted by uniform national ways of doing things.”

The Cities Outlook report underlines the absolute dominance of London. Since 2010, 79 per cent of private sector jobs growth in the UK has occurred in the capital.

Meanwhile, Britain’s next nine largest cities accounted for just 10 per cent of all new private sector jobs created, with Birmingham leading the way in England as far as the total number of new jobs generated is concerned.

The report describes Britain’s economic recovery as “desperately unbalanced”.

The study warns that some of the next largest cities to London – Birmingham, Liverpool, Manchester and Bristol – are failing to punch their weight, adding: “Cities such as Birmingham and Manchester should be making a much larger contribution to the national economy than is currently the case and understanding how to change this should be an economic and political priority.”

During the period 2010-12, the number of private sector jobs in London grew by 216,700, or 5.7 per cent. In Birmingham over the same period, growth was 15,400 new jobs or 2.2 per cent.

Only Liverpool among the core English cities matched London, with a 5.8 per cent growth rate in private sector jobs.

The data shows that London remains largely unaffected by Chancellor George Osborne’s austerity measures and crackdown on local authority and government spending.

The number of new public sector jobs in the capital shot up by six per cent between 2010 and 2012, against a fall of three per cent in Birmingham.

The study demonstrates London’s dominance on a range of economic indicators.

• The capital has an employment rate of 71 per cent, against 63 per cent in Birmingham.
• There were 76 business start-ups per 10,000 population in London, but only 34 per 10,000 of population in Birmingham.
• 47 per cent of London residents have high level qualifications compared with just 26 per cent in Birmingham.
• Only eight per cent of Londoners are without formal qualifications, against 15 per cent in Birmingham.

The report comments: “London needs to be supported to continue to thrive but it is also important that businesses looking for other attributes in other locations, suitable premises, access to skilled workers, good transport connections and flexible approaches to planning, are attracted to Birmingham and Manchester as well as Barcelona and Munich.

“This means the UK needs to do more to support more of its city economies to thrive and make the most of its strengths. Part of this is about investment in general economic drivers such as national infrastructure projects, reforms to planning and skills.”

The report warns of the dangers of a “polarised” debate about the role of London in the UK economy, with one side claiming the capital “sucks the life out of the UK”, while the other argues that the “rest of the nation is a drain on the capital”.

Neither position is accurate or helpful, according to Centre for Cities.

The report warns: “A stronger London means a stronger UK economy. But a stronger UK economy also needs strong performing cities outside of London. Growth is not a ‘zero-sum’ game.

“London is one of the most successful city economies not only in the UK but the world. Constraining its growth would harm the UK economy overall.

“Taking steps to ensure London continues to grow and reinvest in its own economy, while still generating revenue that can be redistributed across the country, would be a more fruitful approach.”

London’s absolute economic dominance is never likely to be reversed unless the government extends the “policy privileges” afforded to the capital to other cities. In practice, this means devolving more powers and funding to cities like Birmingham, probably through Local Enterprise Partnerships.

The report concludes: “In the context of the ongoing English question, policy makers should be giving those cities that can demonstrate appropriate scale and capacity greater flexibilities and freedoms to tailor policy to their requirements.”