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Skills and jobs drive a decade of recovery in Scotland – PwC’s Good Growth for Cities Index

Posted: 1st November 2018

● Decade of data shows Glasgow and Edinburgh growth outpacing UK city average

● Data for 2015-17 sees Aberdeen return to top 10 alongside Edinburgh

Edinburgh and Aberdeen are among the UK’s Top-10 UK cities in which to live and work, according to the latest Demos-PwC Good Growth for Cities Index.

New businesses, job creation, skills development and work-life balance have been the key long-term drivers of growth in Scotland’s largest cities since the financial crisis, while Glasgow, 25th on the 2018 Index, boasts job-creation, skills and work-life balance as above average as compared to the rest of the 42 UK cities in the index.

This year’s index shows a continuing gap between the highest performing cities of Oxford and Reading and the lowest ranking, Swansea and Sunderland. However, even the cities towards the bottom of the Index have improved significantly with Swansea, for example, demonstrating the greatest improvements in employment and environmental factors.

Published today, the seventh annual Good Growth for Cities 2018 index sets out to show that there’s more to life, work and general well-being than just measuring GDP. The index measures the performance of 42 of the UK’s largest cities, England’s Local Enterprise Partnerships (LEPs) and the nine Combined Authorities, against a basket of ten indicators based on the views of the public as to what is key to economic success and wellbeing.

These include employment, health, income and skills – the most important factors as judged by the public – while housing affordability, commuting times, environmental factors and income inequality are also included, as is the number of new business start-ups.

The Granite City is sixth on the list of top-performing cities, helping it climb from 11 to nine in the overall rankings. Glasgow has also moved up the table of 42 UK cities, however it remains in the bottom half of the list, climbing two places to 25.

Edinburgh has slipped from fourth to sixth as housing affordability becomes more challenging for residents of the nation’s Capital.

Once again, Scotland’s poorest performing variable is health, with all cities at or below the UK average. However there has been an improvement in work-life balance, as defined by the percentage working more than 45 hours per week, and a strong performance in skills improvements across all Scottish cities.

Nevertheless, the latest edition shows that all three main Scottish cities are outperforming the UK in terms of jobs, skills, income and environment – four of the ten economic and social factors which combine to make the Good Growth for Cities Index.

Commenting on the index, David Brown, Head of Government & Public Sector for PwC in Scotland, said:

“Scotland’s cities are in a stronger position today than prior to the financial downturn, and that is thanks to the country having continued to invest in jobs and skills. This leaves our cities better-placed to benefit from the increases in large-scale investment as Scottish and UK government initiatives, such as City Deals, continue to roll out across the country.

“There remain challenges in our cities, however. There is a widening gap between earnings and house prices, which keeps owner occupier rates down. And Scotland continues to score either at or below average when it comes to health. These indicators are a reminder that to enjoy ‘good growth’ we need to focus on alleviating long-terms sickness as well as job creation and new business formation.

“To secure further growth, the public sector, business and the higher education institutions must collaborate effectively, to ensure our cities are ‘investor ready’, while focusing on achieving good and inclusive growth.”

A decade of good growth

Now with 10 years of data to draw upon, Good Growth for Cities Index can chart a decade of changes across Scotland’s cities since the global economic downturn.

Across the UK, overall employment levels have merely returned to their pre-crash levels – despite a recent torrent of new job creation. The main drivers of good growth are skills – specifically amongst 16-24 year-olds, new business formation and environmental improvements

The index suggests that improving skills and new business formation have been long-term drivers of city growth, with  the average UK city significantly  improving its good growth score over 10 years to 2015-17, and has now more than recovered from the downturn triggered by the global financial crisis.

John Hawksworth, chief economist at PwC, commented:

“Almost all UK cities have seen improved good growth scores in recent years, driven primarily by cyclical falls in unemployment rates that have now rippled out from the South East of England to regions like the North East that were previously lagging behind.

“But the more interesting perspective is provided when we look at the whole decade from 2005-7 to 2015-17, which covers a full economic cycle and therefore allows us to identify deeper structural trends. The good news here is that successive cohorts of young workers have higher average skill levels, which is pushing up index scores together with rising rates of new business creation in most cities.

“But the flip side of this success has been worsening housing affordability and consequent falls in home ownership rates precisely for those young people who have invested in acquiring new skills. As they are pushed further from city centres to afford a place to buy or even rent, average commuting times have also risen. Having largely recovered from the financial crisis, addressing the housing and infrastructure supply constraints that drive these negative trends will be key challenges for the next decade for both central and local government, looking beyond the immediate issues around Brexit.”

Edinburgh and Glasgow have increased their index scores by 0.31 and 0.45 respectively since 2005-07, well ahead of the UK average increase of 0.29. This has been driven by an improvement in skills among 25-64 year olds. Glasgow has seen a strong improvement in the new businesses variable (1.11 compared to the index average of 0.89), alongside improvements in jobs and health (risks of 0.32 and 1.13 respectively). Edinburgh has also seen a large improvement in new businesses compared with 2005-07, however the city has seen a widening of the gap between house prices and earnings.

Lindsay Gardiner, regional chairman, PwC Scotland, said:

“Edinburgh remains one of the best cities in the UK in which to live and do business. The recent announcement of the £1.3 billion City Deal for the region will only help the city futureproof itself in a world being rapidly altered by technology.

“While Edinburgh continues to perform above average in fields like jobs, income and skills, this year’s Good Growth for Cities Index highlights some challenges, not least of which is housing affordability. This provides evidence that Edinburgh is paying the price of its success.”

Kevin Reynard, office senior partner for PwC in Aberdeen, said:

“There has been much talk about Aberdeen’s recovery from the downturn in the oil and gas industry, which began in 2014, and this year’s Good Growth for Cities Index reinforces that this recovery is gaining momentum.

“In our Aberdeen office we’ve seen an increased appetite for deals in the city and expect this to continue as we are now beginning to see the positive effects of the higher range of oil prices.

“What is even more encouraging is to see Aberdeen return to the top ten cities in the UK. With the city the best performing in Scotland in six of 12 measures used in the Good Growth index, it is clear Aberdeen is a fantastic city with much to offer.”

Kenny Wilson, office senior partner, Glasgow, at PwC, said:

“Glasgow has made enormous strides over the last decade and is viewed as a progressive, modern European city. That is evident in this year’s Good Growth for Cities index, which shows the city performing above average in jobs and skills, but also in work-life balance.

“The creation of new businesses has been integral to this progress, however there is always more work to be done in harnessing the entrepreneurial spirit of Glaswegians and making the most of the great opportunities for new businesses in the city.

“Glasgow’s main challenge remains in reducing the number of people economically inactive due to long-term sickness, while the city also scores below average on owner occupancy in the housing market.”

Business Comment

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