Reading has proven to be one of the country’s best economic performing areas over the course of the pandemic, and its GVA has already increased by four per cent relative to its 2019 size – the biggest increase for any area in the country, according to new research published by professional services provider EY.
EY’s Regional Economic Forecast, published today, says the South East will be the second-fastest-growing region over the next three years, with its Gross Value Added (GVA) set to expand 2.9 per cent per year between now and 2025 – ahead of the UK average of 2.8 per cent growth and behind only London’s 3.1 per cent growth.
Employment in the region is forecast to rise 1.1 per cent per year to 2025, while the South East is one of just four regions in the country expected to see its working-age population grow over the same period.
By 2025, the South East’s GVA will be 8.5 per cent larger than it was in 2019 – again above the UK average growth of 8.3 per cent, although behind nearby London’s growth of 8.9 per cent.
Reading – says the report – has proven to be one of the country’s best economic performing areas over the course of the pandemic, and its GVA has already increased by four per cent relative to its 2019 size – the biggest increase for any area in the country.
By contrast, over four in five areas of the country have yet to see their GVA recover to 2019 levels.
Despite Reading’s strong performance, the rest of the region experienced an above-average economic contraction over the first two years of the pandemic.
The South East’s GVA recovered to 96.9 per cent of its 2019 size by the end of 2021, below the national average of 97 per cent and above only London (96.4 per cent), the North West (96.1 per cent) and West Midlands (94.5 per cent).
The latest Regional Economic Forecast 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 growth again during the post-pandemic recovery.
Only two regions – the East Midlands and South West – are forecast to gain economic ground on London by 2025, with the capital on course to overtake again in the years afterwards.
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 cent per year by 2025, compared to forecast growth of 2.6 per cent in towns.
Richard Baker, managing partner at EY in the South East, said: “The South East’s mix of sectors has meant the region, like many others, has seen some considerable challenges due to Covid-19.
“Post-pandemic, there are positive signs of recovery, which will be driven by a bounce back in key regional sectors like Information & Communication, and the professional, scientific and technical services.
“Accommodation and food services, as well as the arts, entertainment and recreation sector will see particularly strong growth as tourism returns to the region and pandemic restrictions ease.
“The region’s overall ability to retain and attract the right talent is crucial to maximising economic recovery and business growth opportunities.
“Greater workplace flexibility and the switch by many businesses to hybrid working could help open up more opportunities. Focusing on what attracts people and businesses to a region, including access to good transport infrastructure, affordable housing and attractive social and leisure space, which helps keep consumer spend in the region, 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.
“In 2021, alongside the Thames Valley Chamber of Commerce, EY was instrumental in the creation of the Thames Valley Sustainability Working Group, a purpose-led group bringing together businesses and thought leaders to help shape the Thames Valley’s response to the challenges presented by sustainability, climate change and our progress to Net Zero.
“The common framework being developed and delivered by this group has the potential to act as a catalyst for long term societal benefit, establishing consistent and comparable metrics and objectives.”
Between 2022 and 2025 Guildford (3.3 per cent) and Reading (3.1 per cent) are set to see the region’s fastest annual GVA growth rates, followed by Windsor and Maidenhead (3.1 per cent), Southampton (three per cent), Winchester (three per cent), Basingstoke and Deane (2.9 per cent), Oxford (2.7 per cent), and Slough (2.5 per cent).
The Thames Valley is expected to outperform the rest of the region in the run-up to 2025 with forecast three per cent GVA growth per year, driven by growth in the Information & Communication and professional, scientific & technical sectors.
Meanwhile, the report suggests the Thames Valley’s sector mix is the key to long-term recovery.
“Sector mixes will dictate the longer-term recovery,” said Richard.
“The North East’s public sector helped the region’s economy weather the pandemic but may mean slower post-pandemic growth.
“Conversely, city-friendly sectors like digital, science and technology, and services will eventually bounce back, taking places like London and Manchester with them after a slow start.
“Technology, Life Sciences and Digital industries will also continue to play a large part in the growth of the South East’s economy going forward.”