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Economic momentum is expected to return to all parts of the UK between 2024 and 2027, but London and the south east are forecast to see faster GVA growth than the UK average, according to the EY Regional Economic Forecast.
As a result, employment within the UK is set to grow by 1.1% annually, but London (1.5%), the south east (1.3%) and the south west (1.2%) are expected to exceed that. All other locations are forecast to see employment grow at a slower rate than the UK average.
The news comes as London and the south east have accounted for 39% of overall UK GVA in 2023, compared with 36% in 2005. EY forecasts this to grow to 40% by 2027.
According to EY’s report, the growth gap has been exacerbated by the country’s post-pandemic rise in labour market inactivity, with the highest levels found in Northern Ireland (25.7%), the north west (22.9%) and Wales (22%).
While all areas of the UK are set to see a return to moderate economic growth over the next three years, London and the south of England are expected to outpace the rest of the country due to regional imbalances in sector composition and the labour market, according to EY.
Rohan Malik, managing director for government and infrastructure at EY UK&I, said: “While the UK’s prolonged period of economic stagnation should come to an end this year as all regions return to growth, the benefits will not be felt equally across all parts of the country.
“Nurturing high value sectors can boost resilience in tough times and accelerate growth in better years, but doing so requires regions to build their own tailored growth plans that consider which industries are set to flourish and how to cultivate them locally. High value sectors will require a high value workforce, so building in-demand skill sets and competencies with latest technology should help a region attract investment while bolstering the local economy.”
He added: “From a national policy perspective, the link between infrastructure and investment should not be understated, as evidenced by the remarkable growth of tech hubs alongside the M4 corridor. Streamlining the UK’s planning process could accelerate the much-delayed national infrastructure pipeline and help projects move more swiftly from concept phase to shovels in the ground.”
