London accounted 32% of new jobs in England in the last decade between 2009 and 2019.
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If there’s one city that truly encapsulates a bubble of prosperity, it’s London. The U.K.’s capital is host to some 8.9 million people, and the city represents much of country’s diversity, culture and personality. But it is also home to significant economic inequality and a housing crisis that threatens to undermine the prosperity and futures of its residents.
Recent studies suggest that high house prices, steadily increasing rents, and low availability of affordable stock have proved a tipping point for many Londoners, many of whom are now vacating the capital to move north.
But does this mean that the North-South divide is going to flip as some suggest? Or will it continue to get worse as investment and jobs are pumped into the capital bubble?
With financial inequalities throughout the U.K. and particularly up and out of the capital, I believe that there might be a silver lining to this Northern migration that could promote economic growth and housing stability up and across the U.K.
What is the North-South divide?
The North-South divide refers to the economic inequality that exists mainly between the South East of the U.K. (including London) and the rest of the country. Such inequalities touch on almost every aspect of daily living from life expectancy, job opportunities, transport links, local economies and housing availability.
The U.K. now has some of the highest levels recorded levels of economic inequality in Europe. In fact, the economic divide is so severe that a report published in May 2019 by the former head of the Civil Service, Lord Bob Kerslake, for the UK2070 Commission compared the current state of the U.K.’s economic inequalities between North and South with those of Germany’s East and West after the fall of the Berlin Wall.
Another report published earlier this month by the Institute for Public Policy Research (IPPR) put forwards that the U.K. is comparatively the most regionally unequal country in the developed world; yet inner London remains one of the most productive areas in the whole of the EU.
All of which comes down to investment and job opportunities. London and the South East accounted for 47% of new jobs in England in the last decade between 2009 and 2019, according to the IPPR report, with London alone benefiting from a net increase of 1.2 million jobs – 32% of England’s total net increase of 3,850,822, despite having 16% of England’s population.
Compare this with the North East of England, which during the same period captured only a 1% increase in net jobs (38,727) despite a 5% grouping of England’s population, and it becomes clear that there’s a big issue of over-centralisation.
Such a demand for jobs in one place brings people from all over the U.K. to London, which in turn pushes up house prices and rental costs whilst supply is suffocated.
It’s little wonder that many are uprooting and moving north. And there have been calls (from the IPPR as an example) to decentralise power from London and extend devolution to other regions, towns and cities throughout the U.K. to reduce inequalities and to promote growth and opportunities.
North could be the new South
A recent study from estate agent Hamptons International found that London leavers in 2019 purchased 73,000 homes outside of the capital. This is 4% lower than the 2016 peak of 75,690, and most purchases were in the South-East of England, which last year took in 32% of London leavers.
But their data also found that record numbers of Londoners migrated from the capital to the North in 2019, with the number of people moving to the North hitting 13% – a figure that’s been on the up for the better part of the past decade.
Another key figure in this migration is age. The average age of Londoners exiting the capital has dropped from 49-years-old in 2009 to 37 in 2019.
And it’s not difficult to see why. London is expensive…
London properties currently average near half a million pounds, or to be more precise, £484,000 in December, according to the latest ONS House Price Index. Compare this with the rest of the U.K. – where the average house price sat at £235,000 in December, and it’s not surprising that Londoners are feeling the squeeze financially.
Similarly, rents in the capital are also extortionately high for many, with the latest Rightmove Rental Index putting average London rents at £2,119 per month in Q4 2019, compared with £817 in the same period for properties outside of London. And although the latest ONS Index of Private Housing Rental Prices showed that London prices increased 1.3% year on year in January, compared to 1.6% for the rentals outside of the capital, it’s of little meaning in the bigger picture where capital rentals are on average more than twice of their surrounding neighbours.
Now here’s where an interesting disparity comes into play, and it might help to explain why more Londoners are moving north, and at younger ages:
One the one hand you’ve got a heavy concentration of job opportunities in London, but on the other you’ve got the high costs of living pushing down any joy of actually living the capital.
According to data from Adzuna, the average Londoner is spending 53.03% of their income on rent. That’s a significant chunk of change.
And it’s not just London suffering, much of the South-East is the same. The Adzuna data also shows that ‘southern cities account for up to nine of the ten worst value cities for renters, with the commuter belt continuing to prove challenging when it comes to affordability.’
With the cost of living on the rise, and owners/renters looking for a better sense of wellbeing, it’s clear why many in London and the South East are looking to ‘escape the madness’ and move north.
This, along with the Hamptons International data, might also better explain why Halifax recently reported that the North-South divide for house price growth reversed for the first time in 2019, as the North becomes a more appealing place to live.
The first trickles of a migration
London’s housing market is steadily becoming unsustainable, with population outstripping job growth and a domino effect occurring on house prices and rent. The calls for the devolution of powers are growing stronger, and the government’s recently announced plans to ‘level up’ the North of England suggest that the regional inequalities might start to see some attention if more investment is used further north.
What is clear is that the over-centralisation of London and the South East is harmful to the country’s overall economic development. And that creating more jobs and building houses in the North of England will encourage people to move out of London and the South East, perhaps bringing with them their capital, skills and experience to help promote growth outside of the capital.
Some demographic groups are obviously already doing this in greater numbers, influenced perhaps by the pressure in the capital, but also by possibility of a more affordable housing market up north, with Leeds, Sheffield and Newcastle in particular attracting Londoners with multi-million pound makeovers and strong cultural scenes.
Whilst the affordability and stifled job market of London are significant issues, if more people move out it will take the pressure off an overburdened housing market in the capital – with less demand pushing up housing prices and rents, and with less competition for available jobs.
And for those who live up north and want to commute up to London, or vice-versa, the go-ahead of the HS2 railway line could help to bridge the North-South divide. At the very least it might encourage more investment in the North, as business owners may start seeing the real potential of the northern regions.
It’s not without its risks – HS2 and faster train routes in general will likely extend the London bubble further north and push up house prices as London workers start to see the long-term value of fast commuter links to the capital coupled with more affordable northern housing.
However, the migration of more people from London to the North will encourage local investments (especially in housing) to meet their needs.
As Jason Fowler, VP, HR Director for Fujitsu UK and Ireland, comments:
‘With the skills gap costing UK business £4.4bn a year, it is worrying to see such a significant regional divide when it comes to the creation of new jobs. It is time that organisations think more strategically about their future and shake up this London-centric thinking. The UK holds enormous potential and unlocking this with more jobs across the country is key to a healthy economic development.’
Final thoughts
The number of people moving north is slowly picking up pace, driven in part by supply exhaustion in London, and the desire for a better standard of living. But if even more people make the move, think of the powerhouse their combined capital and skills could be worth up north. It would not only help stimulate economic growth up in the Northern regions, but would also redistribute capital from London and the South East throughout the U.K., promoting new business growth and wider economic development that means more investment, more jobs, and more homes; all of which will be fairer and more affordable on a per-person basis.
For the property industry it means more homes built and sold, and more value to them, as the world outside of London starts to discover its worth.