Bristol forecast to be one of UK’s fastest growing cities for economic growth until 2021
11 December 2018
Bristol is set to be one of the UK’s fastest growing cities over the next three years, with 2.0% Gross Value Added (GVA) growth per year over the period 2018-2021, according to EY’s Regional Economic Forecast.
Bristol’s growth forecast is above the UK average of 1.7% and joins three other cities outside of London topping the chart for GVA growth: Reading (2.3%), Manchester (2.2%) and Birmingham (2.0%). Cardiff and Exeter were not far behind with an estimate of 1.8%, demonstrating the growth opportunities we see in the West.
Employment growth in Bristol at 0.9% is also expected to outpace the UK average of 0.5% until 2021 – matching the employment outlook in Reading as the UK’s fastest growing city (in GVA growth terms).
The South West saw a significant slowdown in its economic growth activity in 2018, with 0.8% Gross Value Added (GVA) growth compared with 1.7% in 2017. However, the South West is expected to recapture some ground with its growth rate improving to 1.5% until 2021, although this is still lower than the UK average of 1.7% and Bristol’s growth of 2.0%.
Employment growth in the South West, at 0.4% per year over the period to 2021, will also lag behind the UK rate of 0.5% and Bristol’s 0.9%. Job creation in business services is expected to be partially offset by falling employment in the manufacturing, public administration and defence sectors.
Andrew Perkins, Managing Partner at EY in the South West, said: “EY’s forecast has identified that city growth typically outpaces regional growth, with Bristol’s GVA and employment growth accelerating to outpace the South West and UK average until 2021. Bristol’s growth has been driven by a strong performance in the professional and administration services sectors.
“Whereas in previous reports, the South West, the East and South East have been the fastest-growing regions of the UK, our latest report says these regions have all slowed relative to the rest of the country, with slower growth in the services sector pulling back growth rates in the southern regions.
“In the case of the South West, the region’s weaker GVA performance just strengthens the case for driving deeper geographic rebalancing to maximise the potential of all the UK’s regions. Brexit makes this policy even more important, both to maximise growth but also to support the UK’s transformation to be in a position to prosper after Brexit.”
Rebalancing gap gets smaller in the UK economy
According to the report, UK growth is set to be more geographically balanced over the next three years. However, this rebalancing will principally be the result of slower growth in the services sector, which will have a detrimental impact on the south of the UK, rather than other regions ‘catching up’ through an improved performance.
The UK economy is growing slower than its historic trend – with annual growth of 1.7% a year to 2021, more than half a point lower than trend. London will continue to outperform all other UK regions through to 2021, but in the three years since our first regional forecast, there has been no reduction of the imbalances between the South of England and the rest of the country.
The fastest growing regions of the UK with the highest GVA growth forecast per year up to 2021 are: London (2.1%), the West Midlands (1.7%) and the South East (1.7%). The slowest growing regions are forecast to be the North East (1.1%), the East Midlands and Wales (both 1.4%).
Core cities outperforming the rest
EY’s analysis of eight core cities in the UK (Birmingham, Bristol, Cardiff, Leeds, Liverpool, London, Manchester and Newcastle upon Tyne) saw growth of 2.2% annually on average between 2015 and 2018, whereas large towns grew at 1.8%. EY’s forecast expects this distinction to continue with growth rates of 1.8% for core cities and 1.6% for large towns over the next three years.
The UK’s strong performing cities will continue to grow faster than average, however the gap to the slower growing areas will be less than in the recent past with little more than a 1% difference in average annual growth rates between the fastest and slowest growing locations.
Employment growth expected to slow over the next three years
EY expects the rate of employment growth to be around 0.5% per annum on average over the next five years, compared to over 1.4% in the five years to 2018 – a major change in pace. A slowing economy, expected reduction in immigration and technological change are all contributing to this anticipated shift in the labour market over the coming years. The South East is the only region expected to see employment growth accelerate in the next three years compared to the previous three years.
The report says a slowdown in the retail sector, especially on the high street, also poses significant challenges for smaller towns and communities as retail tends to be a major employer in these locations. There are also similar challenges facing the manufacturing sector. The sector has grown over the last three years and employment has increased as a result. However, it is expected to grow more slowly over the next three years as technology is used to drive productivity in a more challenging labour market.
Andrew Perkins continues: “This report demonstrates how geographical imbalances not only remain within the UK economy, but are actually widening at a local level within regions. With smaller places more vulnerable to economic downturns it is critical that we start to develop policy now to drive greater balance and security in economic activity across the whole of the UK.
“This is an opportunity for geographic rebalancing to an extent, but the national approach to geographical rebalancing must identify how to ensure that smaller cities and towns, and the more remote parts of regions, can benefit from the success of the faster-growing cities. Improving connectivity, both physical and digital, will be critical in ensuring the economy is one in which everyone has a chance to participate fully, regardless of location.”