Cambridge is set to be one of the fastest expanding cities in the UK over the next three years, with forecast Gross Value Added (GVA) per year of 2.5%, reveals a new EY forecast.
Cambridge set to be one of UK’s fastest expanding cities, says new EY forecast
- East of England’s economy to also grow by 2.5% GVA a year between 2015 and 2018, outpacing UK average growth of 2.3%
- Employment growth of 1.0% – one of the fastest in UK outside of London
According to the EY UK region and city economic forecast report, the East of England’s economy is also predicted to grow by 2.5% GVA between 2015 and 2018. This performance means that the East of England (2.5%), along with South West (2.5%) and South East (2.3%) will outperform or equal the UK growth average (2.3%) in 2015.
Employment growth in the East of England is also predicted to be one of the fastest in the UK outside of London in 2015 at 1.0% – coming behind Luton (1.6%), Reading (1.4%), Bristol (1.2%) and Manchester (1.2%). The report also reveals employment in the three months to August 2015 versus the three months to May 2015 rose by 32,000 in the East of England, with the unemployment rate down 0.3%.
Stuart Wilkinson, Partner at EY in Cambridge comments on EY’s new forecast: “This is great news for Cambridge and the East of England, with economic growth of 2.5% and employment growth of 1.0%, making it one of the UK’s fastest growing regions outside of London.
“This growth is being fuelled by the region’s strengths in the UK’s rapidly expanding sectors – professional services, information & communications and real estate – reflecting the city’s strengths in knowledge and research-based sectors, including advanced electronics and pharmaceuticals.”
South of England outpacing rest of the UK
Economic growth is also thriving for the rest of the Southern regions, with London and the South of England continuing to outpace the rest of the UK over the next three years. London is forecast to record an average GVA of 3.0% per year over the period, with the East of England (2.5%), South West (2.5%) and South East (2.3%) likely to outpace the UK three year average of 2.3%, albeit to a lesser extent than the capital.
Mark Gregory, EY’s Chief Economist, UK & Ireland, says: “It’s more of the same for dominant London over the next three years thanks to the city’s outstanding professional services, technology and communications sectors, the return to growth in financial services, and the boost from inward migration.
“In contrast, we predict growth in the UK will slow slightly whilst remaining stable, as inflation impacts consumer confidence, interest rates begin to rise and public expenditure reform bites. Compared to the rest of the country, these factors will be felt less in the Southern regions, which should be buoyed by good corporate investment and growth, alongside healthy property markets. Strong migration growth in the Southern regions compared to the rest of the country – bringing with it an enlarged labour force and skills – is also supporting this expansion story.”
How does the East of England compare against other UK regions?
Scotland, Northern Ireland and Wales, as well as the North East, are predicted to be the slowest growing economies of the UK over the next three years, and will endure a challenging 2015. These areas of the country, which broadly have lower wages and higher unemployment, are expected to be hit hardest by the Government’s public spending reforms in the form of benefits freezes and spending cuts, which will limit their economic growth in the years ahead.
Stuart Wilkinson comments: “While the South will flourish, the growth story is very different in the three devolved administrations of the UK and the North East. The strong pound and the slowdown in China and key emerging markets has limited the UK’s manufactured exports, which the North East and Midlands in particular rely on to support corporate growth and employment. A further dependence on the public sector, which will see more job cuts over the coming years, will also limit these areas’ expansion in comparison to many other parts of the country with stronger private services’ sectors.”
Luton, Reading and the Thames Valley feel the ‘London effect’
London’s neighbouring cities are forecast to grow faster to 2018 than those in the rest of the UK. Of those cities analysed in the report, the Thames Valley, Luton and, in particular, Reading are expected to lead the way, with Cambridge, Bristol and Exeter close behind. With GVA growth between 2015 and 2018 of 3.1% per year, EY predicts that Reading will be one of the UK’s fastest growing cities in economic terms, expanding at a marginally faster rate than London.
With three-year GVA growth of 2.5% – equal to that of Cambridge – Manchester is the best of the rest and the standout Northern city, illustrating clearly the potential of the Northern Powerhouse.
Mark Gregory comments: “The London effect is certainly being felt in its surrounding cities and should help Reading, Luton and Cambridge to perform strongly to 2018 as investment continues. It’s also worth noting that each of these cities has benefitted from industry specialisation – Reading with information and communications, Luton with manufacturing and logistics and Cambridge with professional services and education. This approach is one that cities up and down the UK must learn from when shaping their economic development strategies. Successful cities around the world have differentiated and integrated propositions for investors.”
EY Economics for Business provides knowledge, analysis and insight to help businesses understand the economic environments in which they operate, both in the UK and within the Global economy. ey.com/uk/economics
EY Regional Economic Forecast report Methodology:
The forecasts presented within the EY Regional Economic Forecast report are produced within the Oxford Economics Local Authority District Forecasting Model and are fully consistent with the UK EY ITEM Club Autumn 2015 forecast. The forecasts depend essentially upon three factors:
- National outlooks
- Historical trends in an area augmented by local knowledge and understanding of patterns of economic development built up over decades of expertise
- Fundamental economic relationships which interlink the various elements of the outlook.
The forecasts are demand based and assume no supply side constants. They also assume the continuation of existing government policies.
Key data definitions:
- GVA data is presented in 2012 prices and excludes output from the ‘extra region’ i.e. the contribution from North Sea oil and gas extraction, UK embassies abroad and UK forces stationed overseas.
- Total employment is jobs based and includes employees in employment, the self-employed, Her Majesty’s Forces and government supported trainees.
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