South East economy set to bounce back quicker than all other non-London regions
The economic growth of England’s cities and the South is on track to outpace towns, the North and Midlands as the country recovers from the pandemic, according to EY’s latest Regional Economic Forecast.
When measured by Gross Value Added (GVA), the economies of just five out of nine English regions are forecast to be larger in 2023 than they were in 2019. Three of these regions are in the South: London (0.51% annual growth forecast); the South East (0.39%); and East (0.08%). Annual growth is also expected in the North West (0.11%), while marginal growth (0.01%) is forecast in the East Midlands.
Only the South East and London are forecast to employ more people in 2023 compared to 2019, with the South East expected to see an annual increase of 0.14%
Richard Baker, Managing Partner at EY in the South East, said: “The South East’s key sectors – from professional and financial services through to IT and the public sector – are among those which were least exposed to the pandemic, and the region has a good base for future growth.
“The levelling up agenda is a key issue for the national economy and there is a focus on the North-South divide. However, as a region, the South East must also address its own economic challenges and work towards a joined up regional plan which allows the region to continue to attract investment, provide opportunities for business creation and growth, and which also develops skills and retains employment.”
Of the region’s main locations outside of London, GVA in Guildford (1.18% per year), Windsor & Maidenhead (0.68%) and Reading (0.58%) is expected to rise ahead of London between 2019-2023. GVA in the Thames Valley region (0.60%) is also set to exceed that of London in the same period, thanks to the attractiveness of the location as a hub for technology-based businesses and growth in the real estate, health, retail and professional services sectors.
The South East is the only non-London region where there is also expected to be an increase in employment by 2023. Some of the biggest increases are forecast to be in Guildford, Windsor & Maidenhead and Oxford. Employment in the Thames Valley region is also forecast to grow above the South East average per year by 2023.
Mixed nationwide picture
Rohan Malik, EY’s UK&I Managing Partner Government and Infrastructure, said: “Despite a challenging backdrop, there are opportunities to reshape the country’s economic geography. The Government’s recent initiatives, including the Levelling-up Fund and National Infrastructure Strategy, are welcome, but new approaches are required to avoid a growing gap between towns and cities, and North and South.
“Some of the recent shifts in how we organise work and home life have been positive for economic rebalancing and mean there could be opportunities to create ‘virtual’ jobs in places that have found it difficult to attract higher value-added sectors. A policy focus on supporting sectors, like manufacturing, which matter to both investors and towns would help."
Regionally, London, the South East and the North West have seen the smallest declines in GVA over 2020. This is partly because these regions have the highest share of sectors likely to have been least affected by lockdown restrictions on activity, including financial and professional services and IT. Among other factors, these sectors were able to move a significant share of activity online during the pandemic.
The difference between towns and cities is starkest in the employment numbers: cities have seen employment fall by -0.47% in 2020, while towns have seen employment fall by -1.23%.
