Could these two trends save Britain?

Avis-à-vis London.

These data are encouraging for several reasons. Not only have Greater Manchester’s house prices followed the broader pattern of regional outperformance over London in recent years, but Manchester itself has been a pioneer in the “devolution revolution” (former Chancellor of the Exchequer George Osborne’s catchphrase for the delegation of greater policymaking power to local governments).

By the summer of 2024, seven (mostly urban) areas in northern England will have adopted the same basic mayoral structure as Greater Manchester. If they can match Greater Manchester’s reformist zeal, they, too, could start to share in these modestly hopeful trends toward greater regional convergence.

Now, as promising as these trends are, it remains to be seen if they will persist. The UK is nowhere close to solving its regional problems. Despite Greater Manchester’s somewhat better outlook, it is still home to some of the country’s most underperforming areas, and its overall productivity remains a whopping 40 percentage points below London’s. Moreover, if non-London house prices rise too much, that will simply bring new a ordability problems, especially if the higher costs are not accompanied by growth in productivity, real earnings, and living standards.

Still, for now, both trends merit far more attention and study. To be sure, the highest London house prices actually peaked before the 2016 Brexit referendum, because Prime Minister David Cameron’s government had adopted tax policies designed to discourage buy-to-rent house purchases (where were generally speculative bets by landlords on London property). But while urban house prices

By Jim O’Neill

in other parts of England had already begun to outperform those in London before the referendum, Brexit reinforced the trend. The top end of the London housing market was hit hard by the break from the European Union, while most other markets were hardly a ected.

Then came COVID-19, which ushered in the new era of remote work and radically increased the attractiveness of more a ordable locations outside London. And that was followed by Prime Minister Liz Truss’s policy ascos, which led to an abrupt spike in UK mortgage rates, making the London market even less a ordable for many aspiring homeowners.

Against this backdrop, a recent issue of The Sunday Times Property section caught my eye with a story about the number of houses in the UK worth more than £1 million ($1.2 million). It found that, in 2022, the number of such homes in the London metropolitan area grew by less than in any other region (though London still accounts for around 10% of the overall stock). Nor is this story con ned to the high end of the market. Delve deeper into the data and you will nd similar trends across many price ranges.

Notwithstanding the obvious impli cations for lower earners, this trend could point to a positive develop ment in the UK economy. It would be very good for regional produc tivity, social mobility, and the distri bution of wealth if Britons are beginning to recognize that there are more opportunities to succeed in places other than London. That brings us to the second under-noticed trend: the slow and steady success of devolution. Last year, for the rst time ever, the UK O ce of National Statistics reported productivity data at the level of individual boroughs. As expected, productivity growth was weak just about everywhere. Between 2004 and 2020, however, productivity rose by about 18% in Manchester, and by 21% in Greater Manchester, compared to just 15% in London. Moreover, if you strip out 2020 – the rst year of the pandemic – while Greater Manchester’s relative outperformance compared to Manchester recedes, it still persists vis-à-vis London. These data are encouraging for several reasons. Not only have Greater Manchester’s house prices followed the broader pattern of regional outperformance over London in recent years, but Manchester itself has been a pioneer in the “devolution revolution” (former Chancellor of the Exchequer George Osborne’s catchphrase for the delegation of greater policymaking power to local governments).

By the summer of 2024, seven (mostly urban) areas in northern England will have adopted the same basic mayoral structure as Greater Manchester. If they can match Greater Manchester’s reformist zeal, they, too, could start to share in these modestly hopeful trends toward greater regional convergence.

Now, as promising as these trends are, it remains to be seen if they will persist. The UK is nowhere close to solving its regional problems. Despite Greater Manchester’s somewhat better outlook, it is still home to some of the country’s most underperforming areas, and its overall productivity remains a whopping 40 percentage points below London’s. Moreover, if non-London house prices rise too much, that will simply bring new a ordability problems, especially if the higher costs are not accompanied by growth in productivity, real earnings, and living standards.