East Midland set to gain ground on London’s economy by 2025
The East Midlands is one of only two English regions forecast to close the economic gap to London by 2025 when compared to pre-pandemic performance, according to EY’s latest Regional Economic Forecast.
The East Midlands economy, measured by Gross Value Added (GVA), is expected to be 9.5% larger in 2025 than it was in 2019 – the biggest increase among all English regions, ahead of the South West (9%) and London (8.9%). The UK’s GVA is forecast to have grown 8.3% relative to its 2019 performance by 2025.
EY says the East Midland’s performance will be in part thanks to the region’s resilience during the initial stages of the pandemic, with the region’s GVA declining by just 1.7% between 2019 and 2021. By contrast, UK GVA fell 3% over the same period, while London’s GVA fell 3.6%.
GVA and employment in the region are forecast to grow at a similar pace to the rest of the UK from 2022 to 2025, with average annual growth rates of 2.7% and 1% respectively.
However, the report sets out the scale of the task needed to level up the UK economy. While the research shows the pandemic has helped to narrow the UK’s regional economic divide, the gap between London and the rest of the country it set to grow again during the post-pandemic recovery. The capital is on course to regain lost ground to the East Midlands and South West beyond 2025 too.
The report also forecasts that the economic gap between cities and towns will continue to widen, with England’s major cities expected to grow 2.9% per year by 2025, compared to forecast growth of 2.6% in towns.
Simon O’Neill, office managing partner for EY in the Midlands, said: “The East Midlands economy has undergone a period of transformation in recent years, moving away from more traditional manufacturing to focus more on other sectors, including administrative support and services. While COVID-19 has undoubtedly had a significant economic impact on the region, the East Midlands’ mix of sectors has helped it weather the last few years better than other areas – and will set up the region up for a good recovery too.
“The region is set to see strong growth in professional services and health, as well as a robust recovery in administrative and support services and the transport sector. The East Midlands has long been a professional services, science and transport hub – and the region’s laboratories and vast delivery and fulfilment centres have become all the more important over the course of the pandemic.
“However, with the data showing London recovering from the pandemic more quickly than much of the rest of the of the country, action is needed to ensure places like the East Midlands don’t get left behind in the long-term. Greater flexibility on where people work, aided by the pandemic, could help things. Focusing on what attracts people and businesses to a region, attracting the right mix of sectors and job opportunities, and tackling issues that affect quality of life will be key to taking advantage of this.
“As previous EY research has shown, the UK’s Net Zero and levelling up ambitions go hand-in-hand: the billions of pounds of investment required to reach Net Zero present a golden opportunity to transform not only the environmental sustainability of the UK economy, but its regional balance too. The manufacturing and utilities sectors, for example, are key to the Net Zero agenda – and they are vital to regional economies.”
EY says that between 2022 and 2025, GVA in Nottingham is expected to expand by 2.8% per year – the only regional location above the average for the East Midlands (2.7%). Growth in the city is forecast to be led by activity in the administrative & support service and human health and social work sectors. Employment in the city is expected to grow at an average rate of 1.2% per year between 2022 and 2025.
Locations in the East Midlands are expected to see GVA growth between 2.4% and 2.8% over the next three years. After Nottingham, the fastest growing regional locations are expected to be Leicester (2.7%) Mansfield (2.7%), Boston (2.5%) and Derby (2.4%).