According to the latest EY Regional Economic Forecast, the technology sector emerges as a pivotal driver of growth in select UK regions amid a nationwide recession. A clear divide in economic performance is evident, with London and the South of England outstripping other areas with their robust tech and high-value sectors.
The forecast anticipates a moderate recovery in the UK's GVA (Gross Value Add), projecting an average annual growth of 1.9 percent from 2024 to 2027. This uptick is underpinned by a combination of declining inflation, a resilient labour market, and interest rate reductionsthat many are hoping for. London and the South East are at the forefront of this growth, with predicted annual GVA increases of 2.1 percent and two percent, respectively. Those two eclipse other regions like the North East, Wales, and Scotland.
Employment growth in the South of England is also set to exceed the national average. This swing is attributed to a concentration of high-growth sectors, underscoring the crucial role of industry composition in regional economic resilience once again.
Economic Recovery Favours Select UK Regions
The UK’s extended economic sluggishness is expected to end this year, at least that is what many are hoping for. But not all areas will equally share in this recovery. The UK's regional disparities have led to a concentration of high-growth industries in certain key areas. and that continues to accelerate. As a result, select locations are poised to benefit most as the headwinds in the economy lessen and opportunity for growth becomes more prominent.
Rohan Malik, EY UK&I Managing Partner for Government & Infrastructure, emphasises the importance of nurturing high-value sectors to bolster regional economies. He advocates for tailored growth plans, focusing on industry-specific development and skill-building in advanced technologies, like generative AI, to enhance productivity and attract investment.
“High value sectors will require a high value workforce, so building in-demand skillsets and competencies with latest technology should help a region attract investment while bolstering the local economy,” Malik said.
"For example, Generative AI has the potential to enhance regional and UK productivity rates, but will require a shift in skills to ensure the workforce can collaborate with and complement the technology."
Future Outlook
Looking ahead, EY forecasts subdued growth for much of 2024, with any econominc momentum that comes building towards the year's end. Real wage increases and lower energy prices are expected to fuel this recovery. As is the theme of this report though, growth is likely to remain uneven across the country.
A spotlight is on the tech and professional services industries who are poised for robust growth in GVA and employment. This surge is concentrated in the South, doubling down on the regional imbalance in high-growth sector opportunities. Against this backdrop of technological opportunity, fuelling the tech industry, the manufacturing sector, more prevalent in the North, faces challenges like automation, impacting employment growth.
The report also notes variations in labour market participation across the UK; areas with lower projected growth are directly linked with higher economic inactivity. EY state that addressing this issue will require a blend of policy measures, including targeted reskilling health initiatives.
The EY forecast identifies Reading, Manchester, and Bristol as key growth locations that can benefit from their strong tech and professional services sectors. Conversely, several northern areas, including Aberdeen and Blackpool, are projected to lag behind.
About the Author
James has 8 years with Fortune 200 US firm ITW, experience of managing projects in China, USA, and throughout Europe. James has worked with companies such as Tesco, Vauxhall, ITW, Serco, McDonalds. James has experience in supporting start-up and scale up companies such as Readingmate, Gorilla Juice and Harvest London. James completed his MBA at the University of East Anglia in 2018.
