Levelling down London will hamstring the rest of the country, report warns

The levelling up agenda will hamstring the UK economy if it moves business outside of London, reveals a fresh study published today.

The government will fail in its ambition to narrow regional inequalities by pushing to stimulate economic activity across the UK “at London’s expense,” according to consultancy EY. 

Choking London’s contribution to the British economy would deliver a heavy blow to the UK’s recovery from the Covid-19 crisis.

Over the course of the next four years, the capital’s economy is forecast to grow 3.1 per cent each year, faster than the UK’s combined rate of growth, underlining the country’s reliance on London to generate output.

Experts warned the government’s levelling up plans will not succeed if they punish the capital by shifting activity to other regions.

“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,” Rohan Malik, a managing partner at EY, said.

The warning comes as the government is expected to publish the widely anticipated levelling up white paper this week.

London Mayor Sadiq Khan yesterday urged the government to avoid “levelling London down” to ensure meaningful economic change is delivered across the UK.

“London is the engine of the UK’s economy and plays a unique and vital role in driving growth and supporting jobs across the country,” he said.

“Done well, [levelling up] should harness the benefits of a thriving capital, grow the economy and ensure the whole country feels the benefit of recovery,” Muniya Barua, managing director at London First, the capital’s top business group, told City A.M.

EY’s findings illustrate London’s resiliency to the pandemic-induced shock to economic activity.

The capital’s output shrank 3.6 per cent during the Covid-19 crisis, a steeper fall compared to other regions.

However, London’s economy will be 8.9 per cent larger than it was before the pandemic in 2025. It is also forecast to regain or exceed its share of the country’s entire output by the same year.

The City’s world leading financial services industry will turbocharge London’s economy, cementing the capital as the country’s growth engine.

Peter Arnold, chief economist at EY UK, said: “City-friendly sectors like digital, science and technology, and services will eventually bounce back, taking places like London… with them.”