Where are Britain's biggest city economies?

Couldn't work out how to illustrate this so here is a metaphor. Image: Getty.

The latest instalment of our weekly series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Europe's cities.

We talk a lot, round here, about which are the largest cities by population. (Nerds gonna nerd.) We talk a fair amount, too, about which have the richest residents.

What we don't talk about so much is the intersection of those two factors: which cities have the biggest economies? Where are Britain’s powerhouses and engines really located? London, obviously – but beyond that, what does the league table look like?

Let's fire up the datatron.

The first thing to say is that London is so much bigger than its nearest rivals – so many more people, generating so much more wealth – that it completely knackers the charts. Here's a scatter graph plotting population (of each city's primary urban area, explained here) against GVA (gross value added, a measure of economic output).

See if you can somehow pick London out of the crowd:

Let’s take it as read that London is far bigger than the other cities. To make these charts look in any way meaningful we're going to have to drop the capital.

Here's a bar chart showing the 20 largest city economies outside London.

GVA in £bn. Image: Centre for Cities.

Unsurprisingly, Manchester and Birmingham are way, way ahead of the pack. What’s perhaps more unexpected is that, at least on this measure, the Manchester economy is slightly bigger. I thought this might be a quirk of the population data – using a definition on which Manchester simply has more people than Birmingham – but surprisingly, no.


That said, there's not a lot of space between them. They're of the same order of magnitude, and a long way ahead of the next cities down. Which gets to be second city is an unanswerable question, but nowhere else is really in the running for the title.

There are a few more surprises in the next bit of the chart. That Bristol would have a bigger economy than Leeds, for example: maybe this is me making dodgy assumptions, but Leeds feels like it should be on the next level up from Bristol, not struggling to keep up with it. And yet.

Similarly, it's striking that Reading’s economy is nearly as big as Nottingham's, and that Cardiff is out performed by Bournemouth, Milton Keynes and Southampton. As ever, it's one thing to know there's a north-south divide in theory. But Reading? On a par with Sheffield?

Part of this is down to size, of course – more people will mean a bigger economy, generally speaking. So here's that scattergraph again, without London this time. This time it's interactive, so you can hover over a dot to find out which city it is and get the data.

 

There's a clear correlation between the two variables (duh). But it's not perfect. Dots that are higher than they should be represent cities that are outperforming the average (economies bigger than you'd expect for a given population); dots that are lower than they should be are the opposite.

Reading is on one side of that notional line; Sheffield on the other. You can probably guess which way round.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and also has a Facebook page now for some reason. 

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“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.


You can read the Centre for Cities’ full report here.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

Want more of this stuff? Follow CityMetric on Twitter or Facebook