South West ‘poised to be UK’s joint second fastest-growing regional economy over next three years’

The South West is set to return to moderate growth over the coming years, matching the South East and Northern Ireland as the UK’s joint-second fastest growing regional economy.

According to the EY Regional Economic Forecast, the South West, alongside the South East and Northern Ireland, is projected to record average annual GVA growth of 1.6% between 2025 and 2028, level with the UK average and behind only London and the East of England, which are forecast to average annual GVA growth of 1.7%. However, this economic momentum will take time to build and the South West’s growth is expected to remain muted in 2025, with 0.9% GVA growth forecast in the region over the next 12 months, slightly below the forecast UK national average (1%).

Bristol is forecast to record an average annual GVA growth of 1.9%, making it the UK’s joint third fastest growing town or city outside London, behind only Reading and Manchester and level with Cambridge. The city’s annual GVA and employment growth are both expected to surpass the UK national average of and 0.7% respectively.

Torbay follows closely and is projected to achieve a GVA growth rate of 1.6% and an employment growth rate of 0.8%.

Knowledge-intensive industries are expected to be among the South West’s strongest growing sectors over the next three years. Information and communication (which involves technology-led activity) and professional, scientific and technical activities (which includes R&D as well as business-to-business services) are expected to achieve average annual GVA growth of 2.5% and 2.3% respectively.

The professional, scientific and technical activities sector is forecast to be of the South West’s fastest growing sectors for job opportunities over the next three years with an average annual rate of 1.7% between 2025 and 2028. This is more than double the region’s overall forecast employment growth rate of 0.7%.

The sector will be particularly crucial for Bristol’s economy, with the city’s professional services sector expected to record average annual GVA growth of 2.6% over the next three years.

The electricity, gas and steam sector, which includes everything from electricity generation, transmission, trading and distribution to fuel mains, is also expected to be one of the South West’s leading sectors with 2.5% average annual GVA growth between 2025 and 2028. This partly reflects the anticipated growth of the South West’s renewable energy generation.

The arts, entertainment and recreation sector is also forecast to be a leading contributor to the South West’s economy, with average annual growth of 2.5% in GVA and 1.7% in employment expected for the next three years. The sector is expected to fare better in the South West than in the rest of the country, with 1.9% GVA growth and 1.2% employment growth forecast for the sector across the UK.

The South West’s Accommodation and food service sector is expected to see average annual GVA growth of 2.3% over the next three years, compared to the 1.8% GVA growth forecast for the sector nationally.

Karen Kirkwood, managing partner at EY in the South West, said: “As the UK economy continues to recover, the South West is well-positioned to leverage its strengths in key sectors. The region’s economic momentum is expected to be underpinned by its relatively high concentrations of skills in high-value add sectors like tech, renewable energy and professional services, which are expected to be particularly important for Bristol’s position as a leading UK city for growth. Household spending is expected to rise over the coming year as consumers become more confident, and this should be good news for the South West’s hospitality sector.”

 

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