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Northern Powerhouse struggles to gain traction as North East economic growth slows

A new report has concluded that economic growth will decline in North East cities across 2016, suggesting that the Government’s Northern Powerhouse initiative is still struggling to gain traction.

Law firm Irwin Mitchell’s latest UK Powerhouse report, which has been produced with the Centre for Economic and Business Research (Cebr), provides an estimate of GVA and job creation within 40 UK cities, 12 months before the Government releases its official figures.

Highlighting a general slowdown in the economy, the study reveals that although Newcastle’s economy grew by 2% in the 12 months to Q3 in 2015, the rate of growth in 2016 is expected to fall slightly to 1.9%.

The total value of the goods and services produced in Newcastle is expected to increase to £8.9 billion in the next 12 months. In Sunderland, where year-on-year growth up to Q3 of 2015 was 1.8%, GVA is expected to grow by 1.5% during 2016 to reach £5.3billion.

London’s economy recorded 3.1% growth in the 12 months to September 2015 and although this is set to fall this year to 2.7%, it continues to outperform key cities of the ‘Northern Powerhouse’ region.

Boosted by a growth in demand for business services and advanced engineering, Milton Keynes was the fastest growing city in 2015 and will remain to be so in 2016.

Looking further ahead, the report’s projections for the next 10 years still show that London will continue to grow at a much faster rate than other parts of the UK.

Irwin Mitchell’s report forecasts that by the third quarter of 2025, London’s economy will have grown by 26.9% since 2015. Over the next 10 years Greater Manchester’s GVA is predicted to grow by 18.3% with other large cities in the North expected to record similar increases in GVA with Leeds and Liverpool growing by just under 18%, Sheffield 15% and Newcastle recording a 17% increase.

The value of the economic gap between London and the northern region currently stands at £62billion and is expected to reach £115.3billion in 2025 according to the study’s latest analysis².

Niall Baker, Chief Executive of Business Legal Services at Irwin Mitchell said: “The information provided by our latest tracker also shows that there is still much to be done to tackle the North-South divide and it’s vital that more is done now before it is too late.

“The recent devolution deals unlock considerable funds to help boost investment and long-term growth in a number of these cities, however, much of the impact won’t be fully realised in 2016.”

Irwin Mitchell produced its first UK Powerhouse report in October 2015. The report predicted a growing economic gap between the South East and the north of England and made nine policy recommendations along with a call for the government to radically rethink how it looks to rebalance the UK’s economy.

The report’s Powerhouse Tracker provides a ‘nowcast’ of GVA and employment for key cities across the UK. Cebr has utilised a range of timely indicators to create a detailed estimate of how the regional economies of the UK are performing up to 12 months ahead of the Office for National Statistics.

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