Most cities in the Midlands region perform above the UK average in latest Good Growth for Cities index

  • Cities in the Midlands perform well on jobs, health and the number of new businesses per head
  • Coventry and Milton Keynes in the top 10 of the 2016 UK city rankings

Most cities in the Midlands are performing above the UK average, according to the latest 2016 Good Growth for Cities Index, produced by PwC and the think-tank, Demos.

Published today [8 November 2016] the fifth annual Good Growth index measures the performance of 42 of the UK’s largest cities, England’s Local Enterprise Partnerships LEPs and the new Combined Authorities against a basket of categories defined by the public and business as key to local socio-economic success.

Moving beyond a simple measure of gross value-added (GVA), the 10 factors comprising the index include jobs, health, income and skills, work-life balance, house-affordability, travel-to-work times, income equality and pollution, as well as business start-ups (new this year).

The 2016 report says that as a whole, the eight cities in the Midlands (Table 1) included in the Good Growth index are performing well on:

  • Jobs, where half of the cities are above UK average level.
  • Health and new businesses per head, where almost half of the cities in the region are above average, and the rest at the UK average level.
  • Transport and environment, where all cities in the Midlands score around the UK average, or above in the cases of Coventry and Milton Keynes respectively.

The index also reveals that Leicester, Coventry and Nottingham are all performing at or above the UK average on all measures. Stoke and Derby are close behind with only one measure each falling below average.

Milton Keynes is the best performing city within the region, ranking 7th overall in the UK. It also has the most wide-ranging score profile.

It is above average for jobs, income, health, new businesses, owner occupation and environment but below average on elements such as work-life balance, housing affordability and income distribution, suggesting that the city is facing the ‘price of success’ dilemma.

When compared with the index produced in 2015, the category with the largest improvement in score is jobs for the majority of Midlands’s cities.

These improvements are in line with the national trend as the economy recovered significantly between 2012 and 2015. Across the region, the areas that have seen the biggest score reductions are owner occupation and work-life balance.

Commenting on the performance of cities in the Midlands, Matthew Hammond, regional chairman for PwC in the Midlands, said:

“Our Good Growth for Cities Index comes on the heels of our European Real Estate report and both make encouraging reading for the Midlands region.

“Birmingham remains the most investable city for real estate in the UK ahead of Manchester, Edinburgh and London and as the ‘capital’ of the Midlands remains the first choice destination for those relocating out of London.

The investments in infrastructure including rail, metro trams and HS2 combined with high levels of commercial and residential development activity across the city are making a dramatic difference to the look, feel and welcome the city provides to visitors.

Our reputation, image and profile beyond the boundaries of our region is changing and for the better.

“The West Midlands Combined Authority area fares favourably in our Good Growth report too, sitting third in the UK, a springboard for the advent of an elected Mayor in 2017 to take the Region further forward.

“The eight Midlands cities we report on are showing positive and largely above average indicators in jobs growth, new businesses per capita, transport and ease of movement, health measures, and the environment itself.

The ingredients for quality of life as set out in our report highlight the Midlands and its cities as a more liveable, workable, investable places, particularly compared with the South East.

This evidence gives the region a domestic and internationally competitive edge which we have seen with a number of recent investment announcements.
“The challenge in 2017 and beyond will be for our public, civic, business, education and leaders across our industries to work together to improve deliver wider economic, employment and skills dividends across the wider Midlands population.”

Across the UK

The majority of UK cities and Local Enterprise Partnership (LEP) areas are now outperforming their pre-financial crisis peak.

However, a number of cities that have previously scored highly terms of jobs, incomes and business start-ups are beginning to experience growing pressures on housing affordability, transportation and work-life balance.

As in the 2015 Good Growth index, Reading and Oxford scored the most highly, widening the gap between them and the other cities in the index. This result is largely driven by the large number of business start-ups within these cities – a new category for this year’s index.

Overall, more than two-thirds of the 42 cities now score more highly than they did in the 2014 Good Growth index, suggesting improvements have been broadly spread across the UK.

Two Scottish cities, Edinburgh and Aberdeen, remain in the top 10 highest performing cities within the index.

Edinburgh has maintained its position as the third highest placed city, although Aberdeen has moved down a little and out of the top 5, which may reflect the adverse effect of lower oil prices on the city in the latter half of the 2013-15 period.

At the other end of the scale, while Middlesbrough and Stockton and Sunderland sit at the bottom of the index, they have nevertheless still improved upon their performance in last year’s index.

Combined Authorities
This year’s index includes an assessment of the seven Combined Authorities and City Regions (Table 3).

At least six of the seven score “above average” in work-life balance, house price to earnings ratio and income distribution, but all fall below average in terms of income and owner occupation, with generally poor performance in jobs, health and skills.

The West Midlands Combined Authority sits in the middle of the ranking of all combined authorities across England with a score of -0.30 and a ranking of 3rd. It has high scores in work-life balance, house price to earnings and income distribution. The authority, however, has weaknesses in areas such as skills, jobs and income.

Alison Breadon, head of PwC’s Government and Public Sector team in the Midlands said:

“This is the first year we have looked specifically at the performance of England’s seven Combined Authorities, as these bodies will become increasingly important in determining the economic success of cities and their surrounding areas.

“Our analysis found that overall performance remains mixed and this places heightened importance on the role to be played by city mayors and other local policymakers to take advantage of newly devolved powers.

“All seven Combined Authority areas are due to elect their first mayor in 2017 and these areas will prove a test case for others still trying to define an appropriate governance model for devolution.

“Accountability, however, is about more than mayors. Engaging the public is also critical to delivering good growth and for localising decision making.

Our research (2) indicates that the public is open to the case for further decentralisation but only if the powers devolved are well defined and communicated, with a focus on the purpose and outcomes of decentralisation, rather than structures.”

The potential impact of Brexit

PwC chief economist, John Hawksworth said that, while the data used to compile the Good Growth index predated the EU referendum outcome, some inferences can be drawn:

“All the elements of our Good Growth index could be impacted by Brexit to some degree, although housing, jobs and income may see the largest effects.

“Starting up new businesses, for example, could suffer as a result of increased economic uncertainty.

On the other hand, changing trade relations and regulations after Brexit, the shock to the status quo, and the potential opening up of new markets outside the EU could create opportunities for new entrants.

“Similarly, investment in transport infrastructure could be hit by reductions in Foreign Direct Investment (FDI), but the Chancellor may seek to offset this through greater public investment in transport in the Autumn Statement.

“Collectively, all these factors serve to emphasise the uncertainty surrounding the effect of Brexit. For policymakers across UK cities and regions it is therefore important to understand these risks and the local impact they may have.

And, even more than usual, it is important that businesses are agile, and have contingency plans in place for both mitigating the risks and seizing the opportunities that Brexit may create.”

Agenda for action

PwC says cities and Combined Authorities need to focus on delivering devolution and this year’s Good Growth index has highlighted the challenge facing the Combined Authorities in particular, as they shift from doing the deal to delivering ambitious plans for growth and public service reform.

And while many deals are still on the table – although some places are having to go back to the drawing board – devolution starts with a mindset change rather than a deal.

PwC says that cities, working with their partners, need to clearly articulate and deliver their own agenda and vision for their future.

While good growth requires collaboration across a wide range of stakeholders in a place, PwC urges an agenda for action focused on the three key players: local institutions, central government and the private sector.

Stephanie Hyde, head of regions at PwC, says each has a critical role to play in making good growth a reality on the ground in cities across the UK:

“For the new Prime Minister to deliver an ‘economy that works for all’, the challenge is to unlock the potential of the UK’s cities as engines of sustainable growth by investing in the social and physical infrastructure businesses require to succeed and people need to prosper.

“Devolution is a central part of the answer to unleashing the economic potential of the UK. By giving local leaders the ability to control the levers of good growth, cities can tailor their approach to economic development to their own unique strengths, weaknesses and potential.”

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