The South West is only one of two regions in England set to gain ground on London's economy over the next three years as the UK recovers from Covid-19, according to a new report.
Accountancy giant Ernst and Young (EY) has forecast the region’s economy, measured by the value of goods and services produced or Gross Value Added (GVA), to be 9% larger in 2025 than it was in 2019
This would give the South West the second-largest increase among English regions, behind only the East Midlands (9.5%) and ahead of London (8.9%).
The report said the rise was driven by Bristol, which was one of only two major cities – alongside Nottingham – to recover to pre-pandemic levels of economic activity by the end of 2021.
EY estimated in terms of GVA and employment the South West would have annual growth rates of 2.8% and 1% respectively from 2022 to 2025 - a similar pace to the rest of the country.
The region’s human health and social work sector was expected to post the largest increases in employment over the period.
The report said the South West’s economy had put in a “resilient performance”, during the initial stages of the pandemic, with GVA only 2.5% lower by the end of 2021 than in 2019. By contrast, the national GVA was 3% lower and London’s was 3.6% lower.
Bristol’s GVA was expected to expand by 3.1% per year between 2022 and 2025 - the fastest rate of growth in the region.
EY has said the expansion is set to be supported by GVA growth in the real estate and profession, scientific and technical sectors. Employment in the city is forecast to grow at an average of 1.4% per year between 2022 and 2025.
After Bristol, EY said the fastest-growing locations in the South West were expected to be Torbay (2.8%), Stroud (2.8%), Exeter (2.7%), Taunton Deane (2.6%), Plymouth (2.3%) and Swindon (1.9%).
Despite the South West’s strong performance, and research showing the pandemic had helped to narrow the UK’s regional economic divide, EY said it was expecting London to make up the ground lost to the rest of the country.
EY estimated the capital’s economy could also grow by just under 9% in terms of GVA by 2025 from 2019 levels, with a projected change in working-age population of +4.7%. The South West by comparison was projected to see a drop in its working-age population of -0.3%.
The report also predicted the economic gap between cities and towns could continue to widen, with England’s major cities expected to grow 2.9% per year by 2025, compared to forecast growth of 2.6% in towns.
Karen Kirkwood, office managing partner at EY in the South West, said while the pandemic had a "significant" economic impact on the region, its economy was “well placed” for a recovery.
Ms Kirkwood said: “Sectors in which the region excels, such as accommodation and food services and the arts, entertainment and recreation are set to see particularly rapid growth over the next few years.
“However, with the data showing London recovering from the pandemic more quickly than much of the rest of the of the country, action is needed to ensure the South West doesn’t get left behind in the long-term.
“Greater flexibility on where people work, aided by the pandemic, could help this. Focusing on what attracts people and businesses to a region, attracting the right mix of sectors and job opportunities, and tackling issues that affect quality of life will be key to taking advantage of this.”
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