EY - Manchester Forecast To See England’s Strongest Employment Growth To 2023

EY’s annual Regional Economic Forecast says that Manchester’s employment growth will be the highest in England at 1.4% (1.2% last year), equivalent to 25,500 new jobs between 2020 and 2023.

Employment gains are expected to come from strong performance in administrative and support service as well as the professional, scientific and technical sectors.

GVA is also expected to rise, by 2.2% per year between 2020 and 2023 – higher than both the North West and the UK (both 1.6%), but slightly behind other high performers Guildford and Windsor & Maidenhead. Manchester’s buoyant outlook is underpinned by its private service sectors, most notably, its professional, scientific & technical and administrative & support service sectors, which are forecast to experience the fastest increase over the period.

Liverpool and the wider North West picture
Liverpool is expected to see average employment growth of 1% from 2020 to 2023 - double that predicted in the last report (0.5% in 2018 to 2021) – attributed to gains in the administrative & support service and human health & social work sectors.

The city’s GVA is also expected to continue its year-on-year increase, rising by 1.8% per year over the forecast period (compared to 1.5% between 2018 and 2021 and 0.7% between 2015 and 2018), performing slightly better than the North West and UK average (1.6%). The professional, scientific & technical and administrative & support service sectors are expected to experience the fastest areas of growth over this period.

In terms of the wider North West picture, GVA and employment growth forecasts for the North West match those of the UK over the 2020 - 2023 period, growing at an average of 1.6% and 0.7% per year, respectively. The professional, scientific & technical and administrative & support sectors identified as the sectors likely to be the most dynamic in the region.

Chorley is predicted to show good signs of growth, over the 2020 - 2023 period, similar to that of Liverpool, with GVA increasing by 1.9% and employment at 1.0%. Warrington, although trailing behind the likes of Manchester and Liverpool, is also expected to increase GVA by 1.6% and employment by 0.7%.

In other towns across the North West the disparity between the major cities and towns is most evident. Towns like Preston, Blackburn and Lancaster are set to grow in terms of both GVA (1.3%) and employment (0.5%, 0.4% and 0.6% respectively) but at a lower rate than the North West and considerably less than major cities like Manchester and Liverpool.

Across England, the largest cities will outperform their regions in economic growth. GVA in core cities will grow at 2.2% annually on average, compared to 1.5% for towns. In terms of forecast employment growth, cities will grow at 0.9% annually, 50% faster than the 0.6% growth forecast in towns.

Bob Ward, Managing Partner for EY in the North West, said: “Manchester continues to see growth and success, leading the way and outpacing the regional and national picture. Liverpool is also predicted to go from strength to strength, doubling its average employment growth rate for the forecast period.

“It’s encouraging to see major towns in the region like Chorley and Warrington set to post impressive growth in terms of GVA and employment by 2023.

“However, we can’t get complacent and, although growth is expected across the region, it’s clear that, not only does the report highlight a North-South economic divide, it also shows us that major towns like Preston, Blackburn and Lancaster are still missing out on the investment and growth that our cities enjoy.

“It’s clear that the top-down approach isn’t working, and government alone is not going to solve this problem. Yes, recent announcements like the green-lighting of HS2 will certainly help with infrastructure and connectivity but we need a different approach if we are to truly ‘level-up’ the economy.

“The North West benefits from a mixed economy - that’s what makes it resilient - with growth set to match the UK. However, we need more devolution right across the North so that regions have the power to invest in towns and communities, not just the core cities. What’s needed is a blend of public and private sector investment to spread the wealth right across the region for the benefit of everyone.

“Local businesses need to invest in our high streets, supported by a sensible approach to policy-making around business rates and planning regulations. We need further investment in the regions from larger businesses who can help invest in skills and develop our labour market, to address the geographic imbalance.

“Our local investment hubs need to cast their net wider, outside of the cities and into the North West’s growing towns. Today’s report has already shown us that this approach works with towns like Chorley and Warrington already prospering and both set for impressive growth in GVA and employment over the next few years.
“We have huge opportunities across the North West, our professional, scientific & technical sectors are already buoyant but with a consolidated approach to improving infrastructure and connectivity and capitalising on the benefits brought about through digital and technology, we can ensure that the region’s prosperity is enjoyed by all our towns, not just our major cities.”

The national outlook

The UK economy is expected to strengthen over the coming months but the geographic imbalances between the North and South of England will widen over the next three years unless a new approach to policy is adopted, reveals EY’s Regional Economic Forecast. The report shows that despite efforts to tackle the North-South imbalance, the share of the UK economy accounted for by the four most southerly regions of England increased from 60% to 63% between 1997 and 2019. This trend is set to continue: London, the South East and the East of England will be the three fastest growing regions while the North East, Yorkshire and the Humber and the South West, will be the slowest growing locations.

EY’s fifth economic forecast for England’s regions, cities and towns warns that imbalances in growth between different places within regions will also continue to increase, with larger cities pulling further away from towns and other smaller neighbours. Gross Value Added (GVA) in the largest cities in England is expected to grow at 2.2% annually on average compared to growth of 1.6% for towns.

Bob Ward continued: “Encouragingly there appears to be a strong consensus that regional disparities need be addressed. But our forecast shows the scale of the task facing Government in seeking to ‘level up’ the country and just how important the policy announcements in the Budget will be.

“Despite the launch of at least 40 geographic policy initiatives over the last five decades, the UK remains one of the most regionally unbalanced developed economies. Recent city centric initiatives such as the Northern Powerhouse and Midlands Engine have been successful in boosting the economic performance of some locations, but the impact has not been felt across the whole country. If we are to succeed in ‘levelling up’ the economy, a more radical and segmented approach is now urgently required.”

Geographic imbalances set to widen

EY’s analysis shows that between 1997 and 2019 towns and communities in England grew 1.8% – a sixth slower than the rate achieved in the larger cities and way behind the 3.2% achieved by London and the 3% of Manchester. Towns in the North East and Yorkshire and the Humber only grew at 1.4% annually during the period, and those in the East Midlands by 1.7% – the three worst performing regional groups.

The report shows how desperately ‘levelling up’ is needed. In every region of the country the largest cities are forecast to grow faster than towns, increasing the already significant gaps in economic performance. London, the South East and the East of England will be the three fastest growing regions in England with GVA forecast to grow between 2020-2023 by 2.1%, 1.9% and 1.6% respectively. Towns in the North East and Yorkshire and the Humber will grow at 1.1% compared to growth of 1.7% in Newcastle and 1.9% in Leeds.

The UK’s fastest growing cities between 2020-2023 2020 to 2023 are forecast to be Manchester 2.2%, Nottingham 2.1%, Bristol 2% and Cambridge 2%. Reading is also identified as a fast-growing location at 2.2% GVA.

Imbalances in growth are partly structural, says EY
The variation in performance by place in the EY forecast, reflects differences in sector structure. For example, the public sector and manufacturing are disproportionately important to towns in the North and Midlands. With expectations of continued pressure on current Government expenditure, the Government acknowledging that the future trading arrangements with the EU appear likely to mean friction at customs, and a challenging global outlook for goods trade, the prospects for the both sectors appear relatively weak. The public sector typically accounts for over 20% of economic activity in Northern towns and manufacturing contributes 14% to 15% of the local economic output. This compares to around 7% of economic activity from manufacturing in the South East and 3% in London.

In contrast, Professional and Administration Services and the ICT sectors are set to perform strongly, growing at 3.2% and 3.1% respectively – twice the rate on average of other private sector dominated parts of the economy in the next three years. Spending on Health is forecast to grow at 2% but, while current projections suggest this will offset some of weaker growth from manufacturing and other public sector activity, it appears likely to flow more to faster growing cities nationally and towns in the South of England.

Bob Ward adds: “One of the big challenges is that the imbalances in growth are partly the result of sector dominance in certain regions and are therefore partly structural. These challenges are exacerbated by other policies conflicting with attempts at geographic rebalancing. Future policy will need to be sufficiently powerful and better integrated to overcome these headwinds.”

Employment will grow faster in cities than towns in every region in England

According to the report, employment is expected to grow in cities at 1% annually between 2020-2023 – double the 0.5% growth forecast in towns. In every region in England, the growth in employment will be highest in the largest cities and lower than the regional average in the towns. Manchester tops the table for employment growth in the period to 2023 at an average of 1.4% per year, underpinned by gains in the administrative & support services and professional, scientific & technical sectors. Meanwhile, The North West and Yorkshire and the Humber growing at 0.3% annually, and the West Midlands and the North East growing annually by 0.3% and 0.2% respectively, are expected to be the regions with the slowest growing town labour markets.

The report warns that, if there are more opportunities in cities, there may be a temptation for some people to either move or commute to pursue these opportunities. This may in turn risk further weakening the economies of towns.

Expected regional wage growth to 2023 does offer some positive support for the Government’s ambitions though. EY’s report suggests that there will be improved wage growth throughout England, with all regions seeing faster growth than over the previous three years.

Policy recommendations – an agenda for change

EY is encouraged by the clear priority the Government is giving to ‘level up’ the UK economy and believes there is strong support for a new and more radical approach. EY has set out five key recommendations that it believes will help drive the agenda for change. These include: putting the agenda at the heart of policy-making, rather than it being treated as a separate strand of activity; developing policies from the ‘bottom up’, based on local strategies rather than ‘top down’ national initiatives; allowing for differences by recognising that a variety of approaches will be required for different locations; using aggregated local plans to help inform resource decisions nationally on issues such as infrastructure, skills and housing; and developing targeted interventions, including those focussed on technology.

Debbie O'Hanlon, EY Managing Partner, UK Regions, comments: “The geographic imbalances in the UK are long-standing and it’s clear that there is no silver bullet or easy solution. This will take concerted and integrated policy thinking by government, as well as business, academia, and other stakeholders. Collaboration is vital and we must all be committed to supporting attempts to maximise the opportunities and performance in all parts of the country.”