Articles From the Team
London and the South-East – a legal recruiters take on the UK Powerhouse Report by Irwin Mitchell and Cibr
Insider Media Limited posted an interesting article this month (Jan 2017) which brought to my attention a report produced by Irwin Mitchell and the leading economic think-tank Cebr (Centre for Economic and Business Research).
The annual UK Powerhouse Report is described by Irwin Mitchell as “an extensive business study”. “Incorporating a quarterly Powerhouse Tracker – a unique city-by-city forecast of the economic strength devised by Cebr – the study predicts that by 2026, the gap between London and the rest of the UK will get even wider.” The report allows the viewer to click on an interactive map and to download a 28 page summary report.
The Insider Media article used the Irwin Mitchell/Cebr report to analyse the economy in Oxford, stating that “Oxford’s economy is set to become the second fastest growing in the UK in 2017” and confirming that “by the end of 2017, [Oxford’s] economy will be worth £8.5bn, £127m higher than it was in the three months following the EU referendum”. The press article also comments that “Cambridge will be the fastest growing economy while Milton Keynes takes third spot. Belfast, Swansea and Middlesborough will be the slowest.”
Upon reading the Irwin Mitchell/Cebr report, one is told that Cambridge Milton Keynes and London are growing faster because “these economies have been supported by strong growth in sectors such as business services … and to varying extents, knowledge-based industries such as website/application developers and biotech research.” In other words, “London and the South-East have heavily benefitted from the boom in service sector activity.”
Reading further into the Irwin Mitchell/Cebr report itself, confirms what many people already know, that London and the South-East “provide the largest contribution to the UK economy of all the regions”, and “combined, London and the South-East account for more than a third of the total GVA [Gross Value Added] across the UK.” This isn’t just a case of a denser and more numerous population, the report also indicates that “economic activity per person is considerably higher in London compared with the rest of the UK”, in some cases as much as twice as much.
The knock on effect of these variances in economic performance is that employment prospects and household incomes also differ wildly. So, “whilst London doesn’t have the highest employment rate … the typical employee in London earned £30,338 in 2015, over 30% higher compared to the next highest region, the South-East, where the average worker earned £23,191. Outside London, the South-East, East of England and Scotland, earning were fairly even across the regions, with median pay around the £20,000 mark”.
The conclusion of the UK Powerhouse ‘summary report’ is that there are “huge haps in economic performance across the UK”. “London’s economy is currently around six times the size of Greater Manchester, whilst Inner London alone is just under 10 times the size of Birmingham”.
Despite the above, the report goes on to say that “London is in many ways becoming a victim of its massive success. The high demand to live and work in London has pushed up house prices to such an extent that it is harming business performance by squeezing consumer spending and making it harder to attract and retain talent”. BCL Legal – comment:
Operating in the South-East region (Home Counties), as one of BCL Legal’s specialist in-house legal recruitment consultants, I am well aware of the trends in the UK Powerhouse Report, particularly the findings on average earnings and the fastest growing regions.
It is perhaps not well known or understood, but the difference in salary between London and the Home Counties (wider South-East) is very significant – London earnings are 30% more on average according to the report. With such a disparity compared to locations that are only 10-50 miles away (e.g. Luton, Watford, Hemel, Oxford, Milton Keynes, Reading, Guildford, Chelmsford etc.) it is understandable why employers on the outskirts of London (outside the M25) and further into the Home Counties regularly face problems attracting talent.
Workers relocating from outside the South-East are typically attracted to work in London but may not be interested in relocating to other major towns in the South-East. Whilst the SE has earnings of circa £23k, the cost of living is still higher than other regions, and the average earnings are not significantly greater than they can earn where they currently live – e.g. Greater Manchester has average earnings of circa £20k but lower living costs. For individuals already in the South-East (particularly within 10-30 miles of London), the extra 30%+ in earnings is often worth the additional travel time and expense of commuting into London, certainly while they are young and/or without a family.
I regularly assist companies in Milton Keynes, Bedford, Luton, Hemel, Reading, Oxford and beyond, and the findings on earnings are definitely borne out in reality. Companies in Luton pay a salary much more in line with Milton Keynes and indeed Birmingham and Manchester, as opposed to London. Thus, in-house legal departments in these locations typically attract talent from their immediate area or commutable regions further away from London – i.e. Milton Keynes will attract talent from North Buckinghamshire, Bedfordshire, Northamptonshire.
Linking back to another element of the UK Powerhouse Report, it was also interesting to read that Milton Keynes, Oxford and Cambridge are likely to be some of the fastest growing regions in the UK. This is great news for my clients and I however I do believe that salaries will need to rise in these regions to ensure that talent is attracted and productivity is maintained, and indeed to provide stiffer competition to London for talent relocating to the South-East.
Despite the above, it is not all doom and gloom for companies operating in the Home Counties and beyond. The cost of living in London is outstripping the higher average earnings and consequently there is a steady trickle of individuals looking to live and work outside of the capital. A modest increase in salaries within the Home Counties would most certainly ensure that those growing regions (Cambridge, Oxford and Milton Keynes) can fuel their growth with quality talent. If you would like to read the original Insider Media article about the report, please follow this link: https://www.insidermedia.com/insider/southeast/oxford-economy-set-for-127m-boost-irwin-mitchell?utm_source=southeast_newsletter&utm_campaign=southeast_news_tracker&utm_medium=business_article
For a related study, which I mentioned in an earlier blog, please click on this link: https://www.bcllegal.com/knowledge-base/from-the-team/creative-clusters-in-the-uk-and-the-demand-for-in-house-lawyers