London Is Thriving but the Rest of the UK Suffers
Associate Editor, CNBC
London’s economy is now significantly decoupled from the rest of the UK as a result of a combination of private industry, employment trends, personal finance and the strength of the housing market, according to a venture capital expert.
Speaking on CNBC’s “Squawk Box Europe” Jon Moulton, chairman, Better Capital, said there was now an “amazing difference” between London and the rest of the UK.
“You’ve got growth within the centre of London area, outside you haven’t got growth.
If you look at retail sector numbers on the high street outside London, it’s much worse than within it.
It’s really quite disturbing, we do have a real problem with regional underperformance in the UK,” he said.
Figures from the Office for National Statistics published this month show that the employment rate is indeed higher in the south-east of England at 74.8 percent, which includes London, and is lowest in the north-east at 66.5 percent.
Figures for unemployment and inactivity also mirror the trend with both higher in the north-east region and lowest in the south-east.
A North-South divide has long existed in the UK, with discrepancies between the wealthier south and the poorer north becoming more acute since the recession.
Successive UK governments have attempted to regenerate parts of Northern England which suffered after the demise of traditional manufacturing in the UK as the country turned more toward a service-based economy.
However, London is also home to some of the poorest areas and boroughs within the UK. The London Borough of Newham has the second-highest unemployment rate in the country.
Sample data from the ONS shows that household wealth and property wealth differs vastly between the regions, with London and the south-east of England for the former ahead of the north-east and north-west regions.
For median total household wealth excluding pensions the south-east region was deemed the wealthiest, with 207,000 pounds ($331,200) per household compared with 115,000 pounds in the north east.
The coalition government formed in 2010 following a general election has been vocal about ensuring a program of austerity to tackle the UK’s budget deficit.
In the line of fire has been what some critics deemed a "bloated" public sector.
Since the coalition government has been in power, public sector employment decreased in the year to the third quarter of 2011 by 4.4 percent.
However, again by region there exist major variations.
The proportion of the workforce employed in the public sector is the lowest in the south-east and London but highest in Northern Ireland, Wales and the north east England.
“If you draw a line around the M25 within there you have a country that is around 35 percent public sector; outside of that you get between 60 and 80 percent depending on where you go,” Moulton added.
The public sector has irked certain sections within the UK because of the variations in employment benefits – notably pensions – between public and private sector workers, with the former considered to have more lucrative pension deals compared with the latter.
Economist and strategist Roger Nightingale was scathing in his criticism of the public sector in the UK.
Speaking to CNBC he said public sector workers put in “lower effort” when working compared with the private sector.