West of England City region has seen strongest economic recovery outside London

Published on Incomes and Inequality


Rising rents and house prices are swallowing up the living standards gains from the West of England city region’s impressive economic performance over the last decade, according to a new report published today (Thursday) by the Resolution Foundation.

A Western Union – published ahead of the West of England’s first ever Metro Mayoral election on 4 May – shows that the region (made up of Bristol, Bath and North East Somerset and South Gloucestershire) weathered the financial crisis and its aftermath better than any major city outside London.

While economic output across most major UK cities has not yet returned to pre-crisis levels (measured in terms of GVA per head), output across the West of England city region is at a record high – around seven per cent above its pre-crisis peak. This strong growth has enabled it to extend its advantage over other cities, with output 26 per cent higher than the city region average.

The report shows that the region’s strong performance has been underpinned by high levels of employment, which at 76.8 per cent is higher than any other city region in the UK bar Cambridgeshire & Peterborough. The strong growth in recent years – the employment rate increased five percentage points in the last three years alone – has put the city region at the heart of the UK’s recent jobs miracle.

The Foundation notes that while this growth has been broadly shared across the region, areas of low employment still remain, for example in parts of Bristol such as Hartcliffe and Lawrence Hill, where almost half of local residents aren’t in work. More support for single parents – who are less likely to be employed in the West of England than in other cities (55 per cent are in work compared to a city region average of 58 per cent) – should also be prioritised.

A Western Union also warns that for many households the living standards gains from strong economic growth and rising employment are at risk of being swallowed up by even sharper increases in housing costs.

It notes that home ownership is becoming a harder dream to achieve for first-time buyers with average house prices across the area now around 10 times the typical annual salary. This is by far the biggest housing affordability challenge outside of London and Cambridgeshire & Peterborough.

This struggle for first-time buyers is being exacerbated by fast-rising rents. Average rents across the city region have increased 14 per cent faster than across other cities between 2011 and 2016 – equivalent to more than an extra £100 a month in rent. As a result, private renters across the West of England city region spend a greater share of their pay packets on rent (41 per cent) than any other city outside of London

The combination of high house prices and fast rising rents have meant that young people in particular are finding it harder than ever to own their own home. Since 2001, the proportion of home-owning 25-39 year olds has plummeted from 69 per cent to just 52 per cent by last year.

The report identifies three policy priorities for the new Metro Mayor to tackle the West of England’s living standards challenge:

  • Build more homes. Housing was a key issue in the recent Bristol Mayoral election, but housing costs are just as big an issue in other areas such as Bath. Given the rising ratio between pay and house prices, a significant boost in house building should be a priority.
  • Boost pay for low earners. With 1 in 7 workers set to be on the National Living Wage by 2020, the report calls on the Mayor to promote the higher voluntary living wage and use the £30 million a year West of England Single Investment Fund to boost productivity in low paying sectors to lift people out of low pay altogether.
  • Become Britain’s first full employment city. With the highest employment rate of any major city region, the West of England has an opportunity to become Britain’s first full employment city. Policy action should include back-to-work schemes for those furthest from the labour market – such as single parents – and better transport links within the city region to allow less connected and deprived areas to access employment opportunities.

The Foundation says that prioritising these issues should help the city region to maintain strong economic growth, ensure that gains are spread throughout the region and tackle the area’s housing crisis.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said:

“While many cities across Britain have struggled to weather the financial crisis, the West of England has performed better than anywhere outside of London.

“The region’s economic success has been underpinned by high employment. With the right policy action, the new Mayor could make the West of England Britain’s first full employment city. To achieve this the Mayor should target support at those who have missed out on the area’s recent job miracle, such as single parents and those living in less connected and deprived areas.

“But while the region’s economy has performed strongly, far too much of the gains from this growth have been swallowed by rising rents and house prices. Tackling the area’s growing housing crisis by building more homes will be key to ensuring people are able to keep more of their hard-earned wages, rather than just handing their pay rises over in higher rent or mortgage costs.”