South East: Skills and new businesses drive decade of recovery

For the third year running, the two highest performing UK cities on Demos-PwC Good Growth for Cities 2018 index are Oxford and Reading, followed by Southampton, reflecting improvements, particularly in income levels, in the latest reporting period.

The most recent results also show a continuing gap between Oxford and Reading and the rest of the index, reflecting continued improvement across jobs, income, health and skills in each of these cities.

Published November 1, 2018, the seventh annual Good Growth for Cities 2018 index sets out to show that there’s more to life, work and general well-being than just measuring GDP. The index measures the performance of 42 of the UK’s largest cities, England’s Local Enterprise Partnerships (LEPs) and the nine combined authorities, against a basket of 10 indicators based on the views of the public as to what is key to economic success and wellbeing.

These include employment, health, income and skills – the most important factors, as judged by the public – while housing affordability, commuting times, environmental factors and income inequality are also included, as is the number of new business starts.

Improving average skills levels for the UK’s youngest workers and driving new business formation have been the strongest drivers of good growth over the past decade, while unemployment levels have fallen back to around pre-crisis levels. However, this long-term retrospective analysis also highlights areas where there have been structural deteriorations for cities across the UK, particularly around reduced housing affordability and owner occupation rates and steep increases in average commuting times.

These longer-term trends contrast with shorter-term movements in the index, which have been driven primarily by falling unemployment rates and, in part due to this, higher household income levels.

The latest Index analyses a decade of economic and social data to determine what long-term factors drive good growth. PwC analysis shows that the average city in our index has improved its good growth score significantly over 10 years from 2005-7 to 2015-17 and has now more than recovered from the recession and downturn triggered by the global financial crisis.

Keith Harrington, PwC South East region chairman, commented: “I am pleased to see that Oxford and Reading have maintained the top spots for the highest-ranking cities in the index. This reflects continued sustained improvement across a range of measures, including jobs, income, skills and health scores in the index.

“Milton Keynes movement in the overall top-10 index for highest ranking cities and now featuring in 4th place amongst the top-10 improvers is in part due to the increase in new businesses and strong jobs growth. This is testament to the city attracting a rich mix of FTSE and iconic inbound overseas businesses, private and family business owned firms, as well as being renowned for its focus on science, technology and innovation.

“The growth story for the South East is compelling given the high GVA and attractiveness of the region to business. Continued collaboration across business clusters to develop a shared approach to economic development is essential to unlocking transformative growth across the region.

“Overall, I’m heartened to see almost all UK cities have seen improved good growth scores in recent years, driven primarily by cyclical falls in unemployment rates that have now rippled out from the South East of England to regions like the North East that were previously lagging behind.

“But the flip side of this success has been worsening housing affordability and consequent falls in homeownership rates precisely for those young people who have invested in acquiring new skills.  As they are pushed further from city centres to afford a place to buy or even rent, average commuting times have also risen. Having largely recovered from the financial crisis, addressing the housing and infrastructure supply constraints that drive these negative trends will be key challenges for the next decade for both central and local government, looking beyond the immediate issues around Brexit.”

Nigel Tipple, chief executive of the Oxfordshire Local Enterprise Partnership (OxLEP), said: “The Good Growth for Cities findings support the strong economic assets of the region, that not only have worldwide reach, but are also internationally-established and are vital as the UK moves towards building a globally-facing economy.

“Oxfordshire is a world-leader in the transformative technologies of digital health, space-led data applications, connected and autonomous vehicles and technologies underpinning quantum computing, and according to the county’s recent science and innovation audit, if fully-utilised, these four technologies alone could potentially add £180 billion GVA growth to the UK economy by 2030.

“Working with partners, we hope to identify new opportunities through our economic vision, helping us to clearly articulate the major potential offered by the corridor.”

Hilary Chipping, CEO, South East Midlands Local Economic Partnership (SEMLEP): “It’s great to see Milton Keynes recognised again this year as a top performing city. It remains one of the most innovative places in the country which puts Milton Keynes in a position of strength to maximise future growth opportunities.

“It’s also very positive to see that all LEP areas are seeing overall improvements in their ‘good cities’ index scores. This demonstrates the effectiveness of working with local authority colleagues and local businesses to promote long-term sustainable and inclusive economic growth.”

The top 10 highest ranked cities in our latest index, which relates to the period 2015-17, and the most improved since last year’s index were:

Source: PwC analysis

The index shows that almost all major UK cities improved their score relative to our 2017 index, driven primarily by rising employment. In general, those cities that have seen the biggest improvements in their overall score have also experienced particularly large falls in unemployment in recent years.

Shaun Williams, executive director, engagement & advancement, University of Southampton commented: “A key element of Southampton’s continuing rise in the PWC Good Growth Index is the far-reaching impact of the University of Southampton on the city’s commercial, cultural and civic life. As the second biggest employer in the region, and home to more than 24,000 students from more than 120 countries.

“The University touches every area of the city’s life, including; working with business partners and incubating city entrepreneurs, enriching the city’s arts and culture offerings, providing employment opportunities to more than 6,000 people, funding a core element of the city’s public transport infrastructure and playing a key education and research role in the city’s health and healthcare.”

‘Price of success’ growing bigger

However, the “price of success” has also become increasingly evident recently as we see declining scores since last year’s index for transport, owner occupation rates and particularly housing affordability, which highlights some of the ongoing challenges faced by UK cities.

The South-East has also performed well amongst England’s 38 Local Enterprise Partnership (LEP) areas. Top performing LEP Oxfordshire, was narrowly ahead of Buckingham Thames Valley and Thames Valley Berkshire.