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Prosperity in UK cities gains momentum as wider regional growth lags behind

  • Third edition of UK Prosperity Map from Barclays Wealth & Investments ranks UK regions and cities according to their current affluence
  • Regions aren’t seeing the boost in prosperity they enjoyed last year – but the picture is much brighter for cities, with Birmingham and Newcastle emerging hotspots of growth
  • 1 in 79 Brits is now a millionaire, up from 1 in 84 last year

The UK saw uneven rates of prosperity growth over the last year, according to the third edition of the annual UK Prosperity Map from Barclays Wealth & Investments.

 

Against a backdrop of fluctuating economic conditions and Brexit negotiations, the 2017 UK Prosperity Map shows that, while most areas of the country are more prosperous overall than last year, in many cases cities are outpacing their wider region, with clear disparities opening up when it comes to GDP per capita and earnings.

The research uses factors including numbers of millionaires, average earnings, business growth rates, house prices, and GDP per capita to generate a unique ‘Prosperity Index Score’ for each UK region and city.

London outpaced by cities in the North and Midlands

While London continues to dominate as the UK’s most prosperous city, other cities saw positive trends over the last year. Newcastle and Birmingham saw the biggest year-on-year increases in GDP per capita, at 4.4% and 4.2% respectively, growth well in excess of the overall UK figure over the same period (1.8%). When it comes to house prices, almost every city has seen higher house price growth than London (up 3%), with Birmingham (8%) and Manchester (7%) seeing the biggest increases.

Birmingham is also booming when it comes to start-up businesses – the city saw the highest business birth-to-death ratio of any in the UK with 1.81 businesses being created for every closure [1], beating London (1.78). At a regional level, London comes out top, but the West Midlands as a whole also ranks highly with a business birth-to-death ratio of 1.55, possibly indicative of a ‘ripple effect’ from Birmingham at the region’s economic heart.

Newcastle saw the greatest increase in average earnings of any UK city, up 6.3% – but this isn’t reflected in the wider North East region, which actually saw a 0.3% decrease in earnings. This points to the city as an island of growth in a region facing economic challenges.

Dena Brumpton, Chief Executive, Wealth & Investments, Barclays, said:

“The last twelve months have seen fluctuations in the UK economy, and this is reflected in the mixed picture of prosperity growth across the country in this year’s UK Prosperity Map. It’s encouraging to see that people across the country are benefiting from higher earnings and the momentum created by greater GDP per capita.

“The continued economic growth of the UK’s cities is further cause for optimism - but if the current trend of high prosperity growth in cities continues, regions risk being left behind by their flourishing centres. The challenge for businesses and policymakers is to find new ways of bridging this gap and ensuring greater balance in how each part of the UK is sharing in the country’s prosperity.

“We are continuing to work closely with our clients to help them boost their own prosperity, whether that is through investments, savings or planning for retirement.”

1 in 79 Britons is a millionaire [2]

The number of wealthy individuals continues to increase: the UK’s millionaire population grew by 7.6% year-on-year in 2016. Every region saw an increase in its number of millionaires since last year’s research, except Scotland, which saw no change. The East Midlands and South West saw the highest percentage growth in their millionaire population between 2015 and 2016 (11.1% and 10.5% respectively).

Paul Swinney, Principal Economist, Centre for Cities, commenting on the research, said:

“Overall, this year’s UK Prosperity Map shows that the Greater South East is still outperforming the rest of the country economically, based on its ability to attract in high-skilled business investment. While other areas of the country have benefited from falling unemployment, rising prices have softened the positive impact of increased wages. This research illustrates the need for the Government’s forthcoming industrial strategy to address the barriers that currently prevent over parts of the country generating prosperity for their residents that is seen in the south-eastern corner of England.”

Average earnings and GDP per capita increase, supporting prosperity across the UK

Despite uncertainty in the wider economic and political landscape over the last year, several macroeconomic indicators have seen widespread positive growth: GDP per capita [3] increased in every region and city of the UK, with the North West seeing the biggest increase at a regional level (3%). Average earnings are up in every region except the North East, which saw a small decline, with the West Midlands seeing the greatest rise at 3.9%. Unemployment decreased in every region except Northern Ireland and the South West.

Consumers are saving and spending – rather than investing

A survey conducted alongside the UK Prosperity Map research, shows that the average personal disposable income of UK adults is £281 per month after paying for essentials such as food, household bills and housing costs. When asked what they do with this money, other than spend it on leisure activities, 46% say they are mostly likely to put this into a savings account, 21% spend on necessary purchases, 21% spend on something they want but don’t necessarily need, and 15% spend it on home improvements. Just 12% invest this money into an ISA or pension. 

Notes to editors

Prosperity Index scores – region (see attached)

Prosperity Index scores – city (see attached)

About the UK Prosperity Map

The UK Prosperity Map is an annual piece of research compiled by Opinium on behalf of Barclays. It ranks UK regions and cities in terms of their affluence. A Prosperity Index score has been calculated by Opinium for each UK city and region. In addition data provided by Wealth X calculates UK millionaire numbers. The index uses third party figures on the factors listed below:

Factors used in regional Prosperity Index score

Median household wealth

Mean number of paid hours per week

GDP per capita

Mean gross annual pay

Unemployment rate

Business birth-to-death ratio

Average weekly household expenditure

Insolvency rate

Average house price

Households giving to charity

Proportion of pupils with A*- C GCSE grades

 

 
As these factors all have different units of measurement, the data is indexed to give a consistent measure of the regions’ performance across the different attributes. An overall index for each region is then calculated by summing all the measures, and the index scores are given an appropriate negative or positive weighting. The final step involves giving the scores a range of performance. This is calculated by summing all of the largest scores on each measure to give the highest score possible and then summing all of the lowest scores on each measure to give the lowest score possible.

The final index scores have a scale that runs from 0 to 1. If a region had the highest score across all factors, it would achieve an index score of 1; and equally, if a region scored the worst across all factors, it would achieve an index score of 0.

Data on the number of millionaires within each UK region, used alongside the Prosperity Index, has been calculated by Wealth-X and incorporates factors including spending, investment and asset valuations from both public and proprietary sources.

Where data points are only available on a bi-annual basis, the figures from last year’s index have been used for calculations.

Supplementing the Prosperity Index in the Prosperity Map research are data from Barclays’ proprietary data source, Barclays Local Insights, with spotlights on income, consumer spending, SMEs and housing.

Opinium also conducted a nationally representative survey alongside the UK Prosperity Map research amongst 2,0006 UK adults between 11th and 14th August 2017.


[1] The ratio figure is the number of new businesses created for every 'business death'.

[2] Calculated as number of millionaires for every UK adult aged 21 or older.

[3] Defined as gross domestic product divided by population

About Barclays

Barclays is a transatlantic consumer, corporate and investment bank offering products and services across personal, corporate and investment banking, credit cards and wealth management, with a strong presence in our two home markets of the UK and the US.

With over 325 years of history and expertise in banking, Barclays operates in over 40 countries and employs approximately 85,000 people. Barclays moves, lends, invests and protects money for customers and clients worldwide.

For further information about Barclays, please visit our website www.home.barclays .