The UK's economic divide between North and South to widen, report says

The economic gap between the North and South will keep expanding until 2020 as efforts to rebalance the UK economy fall short, according to new research.

London and the South East will surge ahead of all other regions over the next three years, churning out 2.2% and 2% economic growth respectively, compared to 1.8% for the rest of the nation, EY's regional economic forecast has found.

Employment will also burn brightest in the capital city, delivering the highest jobs expansion out of all UK regions at 0.8% per year.

While Manchester is set to boost the North as the UK's strongest performing city, the North East will eke out the weakest growth at 1.2% per year and see employment fall by 0.1% over the period.

The report measures economic growth through gross value added (GVA), which tracks the value of goods and services in a given area.

Mark Gregory, EY's Chief Economist for UK and Ireland, said: "The UK has made little progress on regional rebalancing over the past three years, and we expect more of the same over the next three years.

"In fact, we expect that the fastest growing regions over the next three years will be the four most southerly ones, London, the South East, the South West and the East.

"This means that the economic gap between North and South could be larger in 2020 than it was in 2010."

Manchester is expected to serve up economic and employment growth of 2.4% and 1.2% respectively each year until 2020, with Stoke-on-Trent, Hull, Liverpool and Leeds securing GVA growth of 1.2%, 1.4%, 1.5% and 1.7%

In contrast, Luton, Thames Valley, Bristol and Exeter will see the value of goods and services in their areas expand by 2.3% each year over the period

Debbie O'Hanlon, EY national markets leader, said: "The strong GVA performance both historic and projected for Manchester demonstrates that location is not a binding constraint on growth.

"It is a reflection of the substantial investments that have been made in the city over the last decade.

"However, the success of Manchester and the strong southern cities highlights the fact that city growth typically outpaces regional growth.

"In every region, the fastest growing cities outpace average regional growth and the smaller towns and cities are growing more slowly.

"The rebalancing problem is more acute within local economies than between them but policy is focused on larger cities and groupings.

"A national approach to economic rebalancing is needed to ensure that smaller cities and towns and the more remote parts of regions can grow faster."