London Surges Ahead Amid Widening UK Regional Growth Gap

The regional growth gap in the UK is widening as London is expected to continue pulling ahead.

Regional disparities are set to widen further, despite national efforts to grow, according to new data from EY ahead of the Spring Budget, with London and the south-east of England to benefit the most from a return to growth.

Accountancy firm EY forecasted stronger economic growth in London and the wider south-east of England than for the rest of the country, continuing to widen regional growth differences, despite Government's national initial levelling up promise.

The UK's overall economic growth is forecasted to average 1.9 percent a year between 2024 and 2027- encouraged by lower inflation, a strong jobs market and the potential of interest rate cuts from the Bank of England.

However, London and the south-east is expected to grow by 2 and 2.1 percent- above the average of every other region and significantly stronger than other regions in the northeast, Wales and Scotland which are projected to see growth closer to 1.5 percent.

Despite efforts to level up regional development, London and the south-east will increase their overall contributions to the UK economy from 39 percent in 2023 to 40 percent in 2027, having already increased this from 36 percent in 2005.

Rohan Malik, UK and Ireland managing partner for government at Infrastructure at EY has said that the benefits of economic growth will not be equal across the country, continuing to widen the regional growth gap.

This follows after the Guardian revealed less than a 20 percent of government-approved projects to level up nationally by approving towns across England have been completed.

Britain's economy fell into a recession at the end of 2024 amid the cost of living crisis. EY have warned that the lack of targeted regional support, along with the high-value concentration of economic activities will make it harder for the UK to recover from the recession.

Sachin Agrawal, UK Managing Director at Zoho UK, said: "There is an urgent need for government and businesses to come together and address the growing regional economic divide, highlighted in EY's findings, to prevent the UK's regions from being left behind. The London and urban-centric focus of economic investment often leads to people leaving their home regions in search of economic prosperity, at the expense of local businesses and the community."

"This is particularly important ahead of the Spring Budget, and we hope to see the Chancellor announce policies to help to solve the growing regional divide. However, businesses also have a large part to play in promoting economic distribution through their strategy and location."

"Businesses moving away from overcrowded urban centres can save significant costs on overheads and can help to facilitate flexible working models that enable staff to stay closer to home. This prevents the need for staff to relocate while offering a more affordable lifestyle with less congestion and can reduce 'brain-drain' from those areas, potentially enabling further prosperity."

"Technology is a key enabler for regional businesses in providing a seamless employee experience, regardless of location. To maintain a high level of productivity, businesses need to rely on communication and collaboration tools that allow staff to stay connected at all times, whether for meetings or day-to-day tasks. This can also help to keep staff motivated wherever they are working from."