Growth for Cities in the UK

The potential for individual city growth, to some extent, depends on the external circumstances, but for the most part, it is driven by the internal arrangement of political and economic systems. Due to the recent referendum to proceed with Brexit, the government naturally turns it’s focus on encouraging growth within the borders of the UK.

However, it should be pointed out that city growth stretches beyond a measurement of economic success, such as Gross Value Added (GVA). The end goal also needs to be extended further to include aspects such as the public’s wants and needs in order to reflect both economic and social aspects. New policies on the development of local economic state should have a holistic view as to foresee potential externalities.

For the fifth consecutive year, PwC and Demos has put together a Good Growth for Cities Index report for measuring the economic growth and wellbeing in the eyes of the citizens. We will be basing the city ranking list on this report.

Below we provide a map with all the cities which have been given an index in the PwC-Demos report. 

A list of the cities are presented in the table which have performed best on all the index categories of public’s wants and needs. These cities were evaluated with the good index and ranked high on potential and existing improvement. 

The list below shows the cities which had the lowest index and the slowest growth in the year 2016.

In order to be able to rank and index different cities, a few categories were introduced in which the public’s opinion was expressed. According the PwC-Demos, the methodology mainly stayed the same as in previous years, but some adjustments were made to the one of the metrics making up the index, which is explained below.Generally there were three types of criteria applied to make up the list of cities:

The index also includes the categories that were chosen based on the UK public needs. They are explained in more detail below.

Secure jobs are the main thing which the public thought a growing city needs to be able to provide in order to have a healthy economy. Latest index weight in this criteria is 16%, which remains the same compared to 2015.

Good health is the measure that was in the second place according the importance, with 13% index weight. The public thinks that health needs to meet a certain standard to be able to work and earn a living.

Adequate income levels is rather self-explanatory and were marked as the third most important characteristic, and received 12% index weight, which was the same in as in the 2015 report.

Skills also has 12% of index weight and represents the ability to provide for the future via potential to be employed and earn enough for comfortable living.

Affordable housing is next in line with 10% index weight. In 2015, the index was 9%, so we can see a slight increase in the importance of this factor for the general public.

Work-life balance remains unchanged this year with a 9% index weight. Even though the public did not point out this characteristic among the first ones on the list, but since health factor was mentioned as quite important, then we can consider work-life balance related to health, since it is a fundamental part of balanced welfare.

Income distribution also stayed the same from 2015 which was 8%. This index looks at the fair distribution of income and wealth among all the members of the society.

Transport index speaks about good quality transport systems. In particular road and rail were pointed out. This year the index weight is the same as the year before which equals to 7%.

Environment weight increased slightly in the new results, and now equals to 7% compared to 6% the year before. This criteria, in the public’s opinion, is making sure that forests are preserved and reduction of carbon emissions are implemented in order to protect the environment.

New businesses is a new characteristic that was introduced for the first time in the 2016 good growth report, and presents the indexing of opportunities for high level entrepreneurship and business startups. This criteria replaced the previously used sectoral balance characteristic, which measured the shares of industrial production in the economy. In 2016 report, this index had a weight of 6%.

The reason why the last characteristic was replaced was that cities can grow successfully with a service-led economy, even though manufacturing and production are important. This can be supported by statistical data, and according to PwC’s research, 6% of the UK workforce were employed in newly-created jobs back in 2014 which did not exist previously in 1990. So for this adaptable and dynamic economy, a new measure is necessary to be able to match the needs of the public.

It is important to keep in mind that the data considered in the Good Growth for Cities report is only recent up to 2015. This means that the results were not affected by the Brexit vote in 2016. Researchers have begun to estimate that the most probable impact on the index will be within the jobs and income categories. This will possibly occur due to a slow down in the growth of the economy within the next couple of years.

A positive effect can be expected on the housing affordability category of the index due to current political and economic uncertainty.

The economic slowdown might negatively affect the new business categories of the index. Nevertheless, some benefits might arise from the reduced regulatory barriers and new trade agreements.

Health, skills, work-life balance, income equality, and environment are the spheres which will be affected less significantly, unless there is a substantial reduction in governmental spending.

In order to draw a more informed conclusion on city growth potential, Market Inspector compared the index weights. For comparison we have looked at previous year’s top highest and lowest ranked cities and compared the changes to 2015 results for the same cities. The summary is presented in the tables. 

Due to the differences in indexing methods and criteria, it is rather complicated to compare several sources of data to gain an extensive view on rankings in a wider scope. The closest we have is the European Regional Economic Growth Index 2016 (E-REGI), which is a report ranking European cities based on economic growth prospects, wealth, and business environment quality.

It is important to bear in mind that these two described reports take into consideration a different mix of criteria in order to rank each city. Even though the numbers presented cannot be taken as given and equally compared, we can still look at the E-REGI list, as this helps to gain an extended overview of UK cities and their placements on the bigger European rankings. We present the E-REGI list of top 55 cities from 2016 and the change in position on the list.

In addition to the European Regional Growth Index report and the list of top 55 cities in the ranking, we have also counted how many times each country has occurred in the list. The result helped us to reflect on the most successful and promising countries for their regional growth. 

As we can see from the table, UK is doing quite well in the European perspective and had 3 cities mentioned in the top 55 list of 2016. However, 3 cities dropped down from the list since 2015, which shows that there is a lot of room for improvement. This is especially true with the upcoming Brexit processes. The UK government will have to find ways to incite growth under such fluctuating circumstances.