Inequality & poverty
·
Cities and regions

Uneven ground

Assessing the state of UK geographic economic inequality facing the new Government

Charlie McCurdy
Charlie McCurdy

The new Government inherits an economy marked by 16 years of stagnation and high levels of inequality, with regional inequalities among the most important. This briefing note assesses the state of geographic economic inequality facing the new Government. In the world of social science there are heated debates about which measure to focus on, but there are many different important measures required to paint a full picture of regional inequality. So, in this note we take a broad view, exploring the gaps that people experience – in employment, wages, income and poverty – as well as geographic gaps in productivity, which tell us about the ‘effectiveness’ of local economies.

Key findings

  • The good news is that employment and wage gaps between different parts of the country have fallen since the 1990s. For example, the employment gap between low (10th percentile) and high-employment (90th percentile) local authorities shrank by 3 percentage points over the 2010s. This reflects that it has become easier to find work in historically low-employment areas than it used to be. In Tower Hamlets and Manchester, for example, the employment rate has risen from around 50 to 70 per cent over the last 30 years.
  • Wage gaps have also come down, primarily at the bottom of the pay distribution, thanks to a rising minimum wage. For example, the pay gap between the lowest-paid workers in Basingstoke (one of the highest-paid areas) and Plymouth (one of the lowest-paid areas) was 26 per cent in 1997, but this has shrunk to just 3 per cent by 2023.
  • The less good news is that overall income gaps between places haven’t changed much since the late 1990s. The average income per head in the richest area (Kensington and Chelsea) is over four times that of the poorest area (Leicester). The average before-housing-cost income per head in Hammersmith and Fulham has been consistently two-to-three times higher than in Burnley since the late 1990s, for example.
  • Productivity gaps between places are also both large and persistent. In 2022, gross value added (GVA) per job in London was 45 per cent above the national average, while Manchester’s GVA per job is just 7 per cent above the average, with Leeds 2 per cent above and Birmingham 4 per cent below. These productivity gaps are rooted in the 1980s deindustrialisation period, as areas outside of London struggled to transition from manufacturing industries to tradable services as effectively as London did.
  • The bad news is that spatial disparities in child poverty have increased. In 2022-23 nearly half of children in Birmingham, Tower Hamlets, Manchester (all 48 per cent), Sandwell (47 per cent), Stoke, Oldham, Wolverhampton and Walsall (all 46 per cent) were in families in poverty. The geographic location of child poverty hotspots has shifted: in 2014-15, 19 of the 20 hotspots were in London, but by 2022-23, only 3 remained in London with rest split between the North West and West Midlands.
  • The big-picture story on how regional economic gaps have evolved is mixed. Wage and employment gaps have fallen, but income and productivity gaps remain stubbornly high and child poverty gaps have grown. It is especially concerning that across all of these domains low-performing areas have tended to remain low performing, while the reverse is true for high-performing areas.

Further reading

Uneven ground
Assessing the state of UK geographic economic inequality facing the new Government
·
Charlie McCurdy
Talking trade-offs
Deliberations on a higher-productivity future in the Birmingham and Greater Manchester urban areas
·
Tania Burchardt, Tara Goatley, Lindsay Judge
Half time
The UK’s commitment to halve poverty by 2030
·
Adam Corlett
Charlie McCurdy
Charlie McCurdy Economist