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Economy / Jobs

The London problem in two charts

Yes, yes, we all know that the London dominates the British economy. And we probably all realise that this situation is becoming more, rather than less, pronounced over time. Nonetheless, it’s not always easy to get your head around quite how significant this problem is.

So, let’s illustrate it. This chart shows the total GDP of economies of the “Core Cities”: a membership group containing the eight biggest English regional cities outside London. (We’ve stuck to England partly to simplify matters, and partly based on the assumption that cities in the devolved countries have other factors acting on their economies.) As we’ve said before, the limits of a city can actually be quite hard to define. To stay consistent, here we’re using the definitions set out by Eurostat, the official statistical agency of the European Union.


Nominal GDP value in major British cities. Dotted lines represent provision or predicted figures. Source: CityMetric Intelligence/Eurostat.

The first thing that leaps out at you is that, in economic terms, there’s no competition for the title of England’s second city: it’s Manchester, by a country mile. This, though, seems to be a function of its size rather than wealth: Eurostat puts its 2014 metropolitan population at 2.7m, compared to Birmingham’s 2.0m. On a per capita basis, Manchester’s GDP is actually slightly lower.

Other than that, though, there aren’t really any surprises here. All eight cities follow a similar trajectory of gentle growth up until the 2008 crash, then a sluggish recovery since. Affluent Bristol seems to have recovered from the financial crash of 2008 rather better than the bigger but poorer Leeds. In essence, though, it’s the same story all around.

Now, let’s see what happens when you throw London into the mix.

Nominal GDP value in major British cities. Dotted lines represent provision or predicted figures. Source: CityMetric Intelligence/Eurostat.

Blooooooooody hell.

A few thoughts on what this graph tells us.

1) London’s economy is bigger than those of the next eight English cities put together.

Around 1.9 times bigger in fact – up from 1.7 at the turn of the century. It’s an order of magnitude bigger than any of its national rivals.

2) This is not just a function of population size.

Under Eurostat’s fairly broad definition, London’s population is actually bigger than the next eight cities put together – and so, you’d expect its economy to be bigger too.

Nonetheless, its economic importance is out of all proportion to its size. According to the definition of London we’re using here, it’s around five times bigger than that of Manchester. But even in 2000, its economy was already more than seven times bigger; that number is now comfortably north of eight.

3) London’s growth is much, much faster.

So steep is London’s growth trajectory that the others look like they’re flat-lining by comparison. This problem, if we want to call it a problem, has been getting worse. And:

4) There is absolutely no sign of this slowing down.

This disparity in growth presents us with a problem. On the one hand, London’s success is a significant driver of the UK economy: on the face of it, national growth figures would look a lot worse without it. So, it’s a good thing, right?

Possibly not – because this disparity lies at the root of many of Britain’s major national problems. It explains why London house prices have long ago detached from reality (more money in the city; more people fighting to move there). It explains the growing popular resentment of the capital and all it stands for.

And it explains why Alex Salmond, the man who could be about to lead Scotland to independence in tomorrow’s referendum, has made such political capital from describing London as a “dark star, inexorably sucking in resources, people and energy”.

As Salmond said, when he first used this label at a New Statesman event last March, the problem with London is, “Nobody quite knows how to control it.” It’s not immediately obvious whether we should– but it is clear that the current disparity isn’t helping anyone.
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