Southampton is on track to be one of the top 10 fastest-growing city economies in the UK by the end of 2023, with its future looking even brighter thanks to some major investments in the green economy. This is all according to a new business report. The report, called the UK Powerhouse study, was put together by Irwin Mitchell and the Centre for Economics & Business Research (Cebr), and it takes a close look at the growth in employment and economic output (GVA) across 50 of the largest local economies.
In the latest findings, Southampton is expected to experience a GVA growth of 2.2% year-on-year by the end of 2023, bringing the city’s economy to a value of £7.5 billion. While Southampton is predicted to secure the 9th spot for GVA growth in Q4 2023, this is a bit of a slowdown compared to how it was performing back in 2021. At that time, Southampton was ranked 2nd, with a huge 8.4% year-on-year jump in GVA.
One reason for this drop? Southampton’s dominant transport and storage industry, which has benefited from its coastal position and large port infrastructure, saw a boost as global trade rebounded after the pandemic. However, the report suggests that this trend could start reversing in the next year. Continued supply chain issues, combined with the effects of the Ukraine conflict and related sanctions, might weigh on global trade in the near future.
It’s also been bolstered by the ever-growing Internet marketing industry with a broad range of large and growing marketing companies such as SEO service provider Digital Cornerstone moving into the area and making it their home.
There are some really exciting signs on the horizon. The UK government has hinted that Southampton could get a major boost in the long term, with the city being a key player in the rapidly growing hydrogen economy thanks to significant funding that’s already been secured.
The UK Powerhouse study also takes a look at recent trends in Foreign Direct Investment (FDI) across the UK. Although both London and the South East saw a 23% drop in FDI projects in 2020/21, these regions still dominated the investment scene. The report points out that this concentration of FDI in London and the South East continues to drive the economic divide between the North and South of England.
Bryan Bletso, a Partner and the Head of International at Irwin Mitchell, commented on this, saying, “FDI has the potential to boost productivity and economic output for years to come. While there was a dip in project numbers last year, more recent data from the UN suggests a solid recovery. We’re definitely seeing an increase in interest from companies wanting to invest here. As a national firm, we’re seeing FDI activity spread across much of our footprint. I’m confident FDI into the UK will grow, and it’s important that it doesn’t just concentrate in areas that are already thriving. The whole country has a lot to offer, and regions that attract more foreign investment are likely to see more growth and job creation over time.”
Josie Dent, Managing Economist at Cebr and one of the report’s authors added, “The economy still faces some challenges between now and the end of next year, particularly with fluctuations in commodity prices, supply chain pressures, and the emerging cost-of-living crisis at home. These factors are likely to impact growth both nationally and in specific cities.
“This report shows that much of the fastest growth next year is expected to be focused in the South, with places like Milton Keynes, Cambridge, and Oxford, which are strong in fast-growing sectors and have been hotspots for foreign investment. To truly level up the economy, we need to address these issues quickly.”
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