Thames Valley: EY reports Reading set to be fastest-growing UK city

According to EY’s 'UK Region and City economic forecast', Reading is set to be the UK’s fastest-growing city over the next three years with GVA of 2.5%. The figure for the Thames Valley will be 2.1%. By comparison, London’s growth is predicted as being 1.9% GVA. This is also the figure for the South East as a whole, which will be the fastest-growing region, as against a UK average of 1.5% GVA growth until 2019.

Fuelling Reading’s strong predicted performance is the fact that digital is the UK’s fastest-growing sector and it accounts for 25% of Reading’s GVA. In addition, Reading benefits from growth in other key sectors such as “professional, scientific and technical” and “administration and support services”.

Oxford is another important city driving growth in the Thames Valley and it is expected to see 1.7% GVA growth until 2019.

Richard Baker, EY’s managing partner for Reading and the Thames Valley, commented: “This is our first region and city forecast since the EU referendum and it’s positive to see Reading’s and the broader Thames Valley region’s strong economic performance outpacing London and the wider South East. This growth is reflective of the region’s position within the M4 growth corridor, as well as its ability to absorb jobs relocating from London.

On a more cautionary note, he added: “We need to continue to invest in transportation links, skills development and education. These are critical areas of need for the businesses based in our region, as well as crucial to our ability to attract and support start-ups, scale-ups and overseas companies.”

Not such good news is the prediction that there will be slower economic growth overall across the UK. The regions reporting the largest slowdown in GVA growth are predicted to be London and the East Midlands. London’s growth is expected to dip from 3.9% (2013-16 growth) to 1.9%, and that of the East Midlands from 2.1% to 1.2%.

Moreover, there is likely to be little progress on economic rebalancing because slowing growth will reinforce the existing strengths across all regions and cities over the next three years. The slowest regional growth levels are expected in the North East (0.7%), and in Scotland and Wales (1.0%). Among the cities, Newcastle, Liverpool and Hull all face a challenging outlook, with GVA of 0.8%, 1.1% and 1.0% respectively over the next three years.

The gap, however, is not simply one between north and south. Manchester will experience the second fastest employment growth of all the cities that EY’s forecast covers (0.7% a year) and a GVA growth of 2.0% over the same period. Leeds too is also expected to outpace the performance of Yorkshire and the wider UK with GVA of 1.7% and jobs growth of 0.3%.

In fact sectors rather than regions are often the determinants as the expected GVA growth of Reading (2.5%), Cambridge (1.8%) and Oxford (1.7%) would suggest. EY’s report forecasts that the GVA of information and communications, and professional services will grow by 11% and 10% respectively over the next three years. By contrast, manufacturing will only grow by 2% over the same period.

Baker commented: “Little progress is likely to be made on economic rebalancing over the next three years and, in a slower growing economy, closing the gap will become even harder. Devolution is a clear step in the right direction but enabling the regions alone will not be enough. National policy must be designed to complement regional policy through targeted initiatives to support trade, deliver infrastructure, invest in skills and support growth in key sectors.

“The changing UK landscape means that it is even more important to continue to monitor economic developments at the region and city levels and to include the potential implications of emerging economic, industrial and trade policy for all parts of the UK, including Reading and the Thames Valley.