North West slow to rebound from pandemic, but Manchester forecast to see fastest city growth by 2025, finds latest EY report

31st January 2022, 8:39 am

  • North West only recovered to 96.1% of its 2019 size by 2021, the second slowest regional recovery – but Manchester is forecast to be England’s fastest growing city between 2022 and 2025 with annual 3.2% GVA growth.
  • Eight out of nine English regions are expected to have returned to their pre-pandemic levels of output by the end of 2022.
  • Net Zero and a focus on the quality of life are key to the UK’s levelling up ambitions, report says.

North West, Monday 31 January 2022: The North West was among the regions most affected by the initial economic impact of the pandemic, according to EY’s latest Regional Economic Forecast.

By the end of 2021, the region’s economy, measured by Gross Value Added (GVA), had recovered to 96.1% of its 2019 size – the second slowest recovery, ahead of only the West Midlands (94.5%). By contrast, the UK’s GVA had recovered to 97% of its pre-pandemic size.

This trend is forecast to continue to 2025 with the North West’s GVA set to grow just 6.8% from its pre-pandemic size – behind the UK average of 8.3% and again only ahead of the West Midlands (5.3%). The region’s administrative services and hospitality sectors will be particularly slow to rebound.

North West major cities to bounce back after a slow start

The report also highlights the growing gap between the UK’s towns and cities. The North West is no exception to this trend with Manchester and Liverpool seeing their GVA fall by the equivalent of 1.5% and 1.1% per year from 2019-21 – while the region’s towns saw their GVA fall by 2.1% per year over the same period.

While the 2019-21 decline in Manchester’s GVA was among the most significant for any major city in the country, Manchester is expected to be the country’s fastest growing city between 2022 and 2025 with annual GVA growth of 3.2%.

Manchester’s favourable outlook is underpinned by a supportive mix of sectors and significant gains in the professional, scientific & technical and administrative & support service sectors. Liverpool is expected to grow by 2.8% per year, in line with the UK average.

The North West’s towns are likely to underperform the wider region. Only Warrington and Chorley will outpace the annual average regional (2.7%) and nationwide (2.8%) GVA growth, with both towns’ GVA expanding by 3% per year. Blackburn (with Darwen) is forecast to see the slowest GVA growth between 2022 and 2025 (2.3%), behind Rochdale and Wigan at 2.4%.

Stephen Church, North Market Leader and Manchester Office Managing Partner said: “With significant services and hospitality sectors, it’s not a surprise that the North West’s economy has had a challenging pandemic so far.

“However, the region is fortunate to boast two vibrant cities, Manchester and Liverpool, which are on track to eventually register a speedy recovery. Although they were particularly exposed to the initial economic impact of COVID-19, city-friendly sectors like digital, science and technology, and services will eventually bounce back, taking places like Liverpool and Manchester with them after a slow start.

“As restrictions ease and city footfall increases, the path to recovery will become visible – although action is needed to ensure the recovery is balanced. It’s important other parts of the country are not be left behind London once again, and action is taken to combat inequality – both between regions and within them.”

COVID-19 squeezes regional inequality – but only temporarily

The COVID-19 pandemic has helped to narrow the UK’s regional economic divide, but the gap between London and the rest of the country is set to grow again during the post-pandemic recovery, the report finds.

When measured by Gross Value Added (GVA), London’s economic activity dipped 3.6% from 2019 to 2021, compared to a slightly smaller 3% average decline for all UK regions. But, between 2021 and 2025, London’s GVA is forecast to grow by 3.1% per year compared to annual average growth of 2.8% across the UK. Only the East Midlands and South West are currently expected to gain any ground on London over the next three years compared to their pre-pandemic performance – although the capital is on course to pull ahead again after 2025.

London’s forecasted dominance is even more apparent in the labour market, with the capital one of just four UK regions (out of 12) expected to see its working age population grow – by 4.7% – between 2021 and 2025. The North East, by contrast, is expected to see its working age population shrink by 2% over the same period. London is predicted to regain or exceed its pre-pandemic share of UK employment (30.9%) and GVA (39.1%) in 2025 too.

Rohan Malik, EY’s UK&I Managing Partner Markets & Accounts, says: “The structural forces driving UK regional economic inequality are deep-rooted and are unlikely to be reversed overnight. Long-term ambitions and sustained, coordinated action are needed to balance growth across the country while ensuring that ‘levelling up’ isn’t simply moving activity elsewhere at London’s expense. The right actions now will bear fruit eventually, but policymakers need to be in this for the long haul.

“Greater flexibility on where people work, aided by the pandemic, could help things. 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. Retaining young, aspirational talent matters: Manchester, for example, has one of the highest graduate retention rates of all UK cities – and it’s expected to be the UK’s fastest growing city between 2022 and 2025.

“As previous EY research has shown, the UK’s Net Zero and levelling up ambitions go hand-in-hand: the billions of pounds of investment required to reach Net Zero present a golden opportunity to transform not only the environmental sustainability of the UK economy, but its regional balance too. The manufacturing and utilities sectors, for example, are key to the Net Zero agenda – and they are vital to regional economies.”

East Midlands forecast to thrive, but the West Midlands recovery will be slower

All English regions are expected to have regained their pre-pandemic level of GVA by the end of 2023, with only the West Midlands still below its pre-pandemic size by the end of 2022. Twenty per cent of areas in England recovered to their pre-pandemic GVA levels by the end of 2021 – the fastest to do so being digital and science-friendly Reading (where GVA is already 4% above its 2019 level); manufacturing-reliant Solihull (where GVA is still 9% below its 2019 level) is farthest from its 2019 performance.

Relative to their pre-pandemic GVA levels, the East Midlands (up 9.5%), the South West (9%) and London (8.9%) are expected to grow the most by 2025. By contrast, the West Midlands (up 5.3%), North West (6.8%), and North East (7.9%) are expected to grow at the slowest pace.

According to EY’s analysis, together with the North West, the West Midlands, and London economies were the most affected by the initial impact of the pandemic, with 2021 seeing the West Midlands economy recover to just 94.5% of its 2019 size and London recovering to 96.4%. By contrast, the Yorkshire and the Humber economy had reached 98.8% of its pre-pandemic size by the end of 2021, while the North East was at 98.5%.

In a sign of the impact of the pandemic-driven acceleration of changes in the way consumers shop, Lichfield, despite its West Midlands location, is forecast to be England’s best-performing town between 2022 and 2025. From 2023, the town will be home to a new global fulfilment centre for an online retailer and is expected to see its GVA grow 3.6% per year.

Across the UK, service and city centre activities are expected to be the fastest growing between 2022 and 2025, with accommodation and food service expected to improve its GVA by 8.6% per year, followed by other services (up 6.7%), administrative and support services (up 5.5%), and arts and entertainment (up 5.4%). The transportation and storage sector is expected to grow 3.8% per year. By contrast, manufacturing is one of the sectors expected to undershoot the overall annual UK GVA growth (2.8%), with 1.7% growth forecast.

English regional GVA projections, ranked by 2025 performance (2019=100) Projected change in working age population, 2021-25
Region 2021 2025 Region % Change
East Midlands 98.28 109.45 London 4.7%
South West 97.53 108.95 East 1.6%
London 96.37 108.85 South East 1.1%
Yorkshire & the Humber 98.81 108.76 UK 0.4% (approx.)
East 97.16 108.53 East Midlands 0.1%
South East 96.86 108.50 South West -0.3%
UK 96.96 108.27 West Midlands -0.3%
North East 98.52 107.88 Yorkshire & the Humber -0.5%
North West 96.12 106.83 North West -0.6%
West Midlands 94.47 105.34 North East -2%


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