Northern Powerhouse won't be fully charged until 2020

The north's cities are yet to feel the effects of George Osborne's much-hyped pet project.

by Rebecca Smith
Last Updated: 19 Feb 2016

George Osborne has become a bit of a showman during his tenure as chancellor – he turned the previously unremarkable Autumn Statement into a political event with a flourish and he's also become quite fond of big declarations. Case in point his speech heralding the start of a 'devolution revolution' regarding business rates at the Conservative Party conference in October.

But even Osborne’s starry claims can’t detract from the current inertia of the Northern Powerhouse – a key pet project of his – according to a new report from EY. The Chancellor promised the initiative would see the north’s population of 15 million turned into a comparable force to that of London and the south east. When unveiling the plan he proclaimed it would be ‘a collection of northern cities sufficiently close to each other that combined they can take on the world’.

EY’s report shows that the vision may need a little while longer before it comes to fruition. As it stands London and the south east will drive UK growth over the next three years, with the capital predicted to expand 3% per year between 2015 and 2018 in gross value added terms (measuring economic activity in terms of goods produced and services delivered). The UK average stands at 2.3%.

EY’s chief economist Mike Gregory also claimed that the effects of the Northern Powerhouse won’t be felt for a few years yet: ‘Our forecast predicts that the impact of the Northern Powerhouse and national infrastructure projects will only really start to be seen after 2020.’

The south east and east of England are projected to expand at faster rates than average at 2.5% and 2.4%, while the north east is expected to grow by 1.6% a year over the same period, as government spending cuts continue to have a knock-on effect on growth. The north west meanwhile, will grow at 2% a year – falling below London, the south east, the east of England, the south west and the east midlands.

Despite all the talk, the reality was that the north-south divide widened last year – according to official data. Londoners contributed an average of £42,666 each to the UK economy in 2014 – an increase of 5.3% on 2014. Those in the north east and north west supplied averages of £18,216 and £21,011 respectively – up by 2.9% and 2.7%.

The gap may be tackled more effectively if regional expansion is addressed more seriously at national policy level. But HS2 isn’t due to reach completion for another decade and the effects of devolution of powers to the likes of Liverpool and Manchester are still to be felt. So either way, it’ll be a predictable slow-burner.

Little wonder then, that a BBC survey last month found that two-thirds of those in the North had never heard of or knew nothing about the Northern Powerhouse project. Osborne will want to readdress that sharpish.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

What happens to your business if you get COVID-19?

Four bosses who caught coronavirus share their tips.

NextGen winners: The firms that will lead Britain's recovery

Agility, impact and vision define our next generation of great companies.

Furlough and bias: An open letter to business leaders facing tough decisions

In moments of stress, business leaders default to autopilot behaviours, with social structural prejudices baked...

The ‘cakeable’ offence: A short case study in morale-sapping management

Seemingly trivial decisions can have a knock-on effect.

Customer service in a pandemic: The great, the good and the downright terrible ...

As these examples show, the best businesses put humanity first.

How D&I can help firms grow during a crisis

Many D&I initiatives will be deprioritised, postponed or cancelled altogether in the next three months....