UK productivity crisis: London lags while Manchester grows

London’s productivity slump deepens as Manchester’s economy surges ahead

London's productivity growth has slowed significantly since the 2008 financial crisis, with the capital's average annual increase at 0.2%, less than half the national average of 0.6%. Meanwhile, Manchester's city center has shown robust growth, with an average annual GVA increase of 3.6% since 2008.

The slowdown in London's productivity is broad-based, affecting sectors such as health, transport, and education. Experts point to factors like a weak pound, restrictive immigration requirements, and high energy costs as contributing factors. Additionally, high housing costs push workers further from their workplaces, limiting labor mobility.

Before the crisis, London's productivity growth was strong, averaging 2.7% per year between 1991 and 2007. However, the UK's largest cities outside of London, including Manchester, have underperformed relative to the national average, acting as a drag on total productivity. A report by Professor Sir Richard Leese, a key advisor on regional economic strategy, highlights this trend.

In contrast, Greater Manchester's productivity growth has been stronger than the UK average since 2008, with its economy growing faster than London and the rest of the UK. However, the poor performance of UK cities overall is attributed to factors such as low R&D, weak skills stock, poor transport connectivity, and low housing density. Addressing these challenges will be crucial for boosting productivity and economic growth across the country.