British cities are falling behind their European competitors – so what do we do?

Just one of the many European cities eating Britain's lunch. Image: Getty.

As is now well established, the UK’s urban areas play a critical role in the UK economy. But until now, little has been known about how the UK compares to other countries in this respect, and how individual UK cities compete against European counterparts.

The Centre for Cities' new report Competing with the Continent presents an in-depth picture of how UK city economies compare to 330 European cities from across 17 countries. It reveals a number of important findings which should be a key consideration for the government as it seeks to create an economy that works for all, at a time when the UK is set to leave the EU.

Here are four key takeaways:

1. UK cities play a bigger role in the national economy than in other countries

The UK is the most urbanised economy in Europe: its cities generate 60 per cent of the country’s GVA (gross valued added).

In comparison, Spanish cities make up just 45 per cent of their national GVA, German cities 36 per cent, and Italian cities just 32 per cent. (See the full breakdown here).

2. UK cities also make the biggest contribution to the European economy

In total, UK cities represent 21 per cent of Europe’s urban economic output, the largest share of any nation. As a comparison, German cities represent 19 per cent of urban Europe GVA and French cities 18 per cent (the full breakdown is here).

In addition, London is the largest economy in Europe, with a GVA of £340bn. The chart below gives a list of all the cities in the report by GVA – London, Manchester and Birmingham all make the top 20:

3. Yet UK cities are lagging behind in terms of productivity

Despite the UK economy being so dependent on its cities, too many of them fall behind their continental competitors on productivity.

Nine out of 10 UK cities (57 out of 63) perform below the European city average, and more than half are among the 25 per cent least productive cities in the continent.

The map below gives a quick breakdown of the UK’s productivity problem – a couple of cities in the South East do very well, but many others are lagging behind (more detail on this here).

4. Poor skills levels are likely to be the biggest cause of low productivity.

UK cities are home to the third largest concentration of low-skilled residents in the continent, behind only Spanish and Polish cities.

Only six UK cities have a lower proportion of low-skilled residents than the European average. Three out of four UK cities also have a lower proportion of high-skilled residents than the European average, although nationally the proportion of high-skilled residents is high.

So what do we do?

These findings raise serious questions about how Theresa May can go about achieving her ambition of spreading prosperity to all parts of the country, raising wages for residents of all cities, and ensuring UK cities are able to attract investment and trade on the international scene.

Given the country’s economic structure and the growing strength of its services sector, it is clear that cities must attract more knowledge-intensive firms and jobs in order to compete in the years to come. To do so, cities must also provide the highly-qualified workforce which these types of firms require – and that will require a long term commitment to improve educational attainment and skills levels across the country.

Finally, policymakers should focus on making the most of big cities, which largely lag behind compared to their counterparts. If these cities are firing on all cylinders, they could provide opportunities for individuals living far beyond their administrative boundaries.

You can read about these findings in more detail here. Or you can head to our European Cities Data Tool to explore all our data on the 330 cities covered in the report.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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A growing number of voters will never own their own home. Why is the government ignoring them?

A lettings agent window. Image: Getty.

The dream of a property-owning democracy continues to define British housing policy. From Right-to-Buy to Help-to-Buy, policies are framed around the model of the ‘first-time buyer’ and her quest for property acquisition. The goal of Philip Hammond’s upcoming budget – hailed as a major “intervention” in the “broken” housing market – is to ensure that “the next generation will have the same opportunities as their parents to own a home.”

These policies are designed for an alternative reality. Over the last two decades, the dream of the property-owning democracy has come completely undone. While government schemes used to churn out more home owners, today it moves in reverse.

Generation Rent’s new report, “Life in the Rental Sector”, suggests that more Britons are living longer in the private rental sector. We predict the number of ‘silver renters’ – pensioners in the private rental sector – will rise to one million by 2035, a three-fold increase from today.

These renters have drifted way beyond the dream of home ownership: only 11 per cent of renters over 65 expect to own a home. Our survey results show that these renters are twice as likely than renters in their 20s to prefer affordable rental tenure over homeownership.

Lowering stamp duty or providing mortgage relief completely miss the point. These are renters – life-long renters – and they want rental relief: guaranteed tenancies, protection from eviction, rent inflation regulation.

The assumption of a British ‘obsession’ with homeownership – which has informed so much housing policy over the years – stands on flimsy ground. Most of the time, it is based on a single survey question: Would you like to rent a home or own a home? It’s a preposterous question, of course, because, well, who wouldn’t like to own a home at a time when the chief economist of the Bank of England has made the case for homes as a ‘better bet’ for retirement than pensions?

Here we arrive at the real toxicity of the property-owning dream. It promotes a vicious cycle: support for first-time buyers increases demand for home ownership, fresh demand raises house prices, house price inflation turns housing into a profitable investment, and investment incentives stoke preferences for home ownership all over again.

The cycle is now, finally, breaking. Not without pain, Britons are waking up to the madness of a housing policy organised around home ownership. And they are demanding reforms that respect renting as a life-time tenure.

At the 1946 Conservative Party conference, Anthony Eden extolled the virtues of a property-owning democracy as a defence against socialist appeal. “The ownership of property is not a crime or a sin,” he said, “but a reward, a right and responsibility that must be shared as equitable as possible among all our citizens.”

The Tories are now sleeping in the bed they have made. Left out to dry, renters are beginning to turn against the Conservative vision. The election numbers tell the story of this left-ward drift of the rental sector: 29 per cent of private renters voted Labour in 2010, 39 in 2015, and 54 in June.

Philip Hammond’s budget – which, despite its radicalism, continues to ignore the welfare of this rental population – is unlikely to reverse this trend. Generation Rent is no longer simply a class in itself — it is becoming a class for itself, as well.

We appear, then, on the verge of a paradigm shift in housing policy. As the demographics of the housing market change, so must its politics. Wednesday’s budget signals that even the Conservatives – the “party of homeownership” – recognise the need for change. But it only goes halfway.

The gains for any political party willing to truly seize the day – to ditch the property-owning dream once and for all, to champion a property-renting one instead – are there for the taking. 

David Adler is a research association at the campaign group Generation Rent.

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