Wages outside of London and South East are worse now than in 2008 – can Labour turn things around?

For years, wage increases across the country have barely stayed ahead of cost of living increases and for some people they’ve fallen behind, making them worse off today than they were back in 2008. This points to structural problems with the way the country’s economy functions.  

The government was elected on a platform of change and its guiding mission is to achieve more and better economic growth to lift incomes across the country.  

The scale of the challenge facing the government is big. Wages are very uneven across the country. The average worker in London will have earned by August what it takes the average worker in Burnley or Middlesbrough all year to earn.  

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Out of the 63 largest towns and cities in the UK, nearly all those with above-average salaries for the UK are in the South East of England, including Reading and Milton Keynes. Only seven places in the rest of the country have salaries above the UK average – Leeds, Warrington, Derby, Swindon, Bristol, Aberdeen and Edinburgh. This is a big part of the national economy that is underperforming. 

Cities like London, Cambridge and Reading that have high wages have more than twice as many ‘cutting-edge’ firms – and three times as many cutting-edge jobs – as places with the lowest pay such as Middlesbrough, Burnley and Huddersfield. As Centre for Cities’ research shows, this is a big factor driving variation in average wages across the country.

Tackling the country’s stark pay divides will require a focus on growing the ‘cutting-edge’ parts of the economy that pay higher wages, and doing so in more places outside of the South East.  

So, what should the government do? In Cities Outlook 2025, Centre for Cities’ latest annual outlook for urban economies in the UK, we urge the government to follow through on its economic policy programme – including English devolution, the industrial strategy and planning reforms.

Government has also set out plans to extend devolution to more places in England. From housing and buses to innovation and skills, the government is committed to loosening its grip on policymaking and giving places the power and resources to make their own decisions. As the government goes through this process, retaining the emphasis on growth – rather than letting local politics result in us swapping one dysfunctional system for another – will be essential.

The government has equally promised to unveil its industrial strategy early this year. It will need to focuson the parts of the economy and the parts of the country that are best able to deliver growth. Making choices is always politically difficult because it excludes groups that want their sector given preferential treatment. The government does appear willing to make tough choices. But if this industrial strategy is to avoid ending up in the same place as the last two (the bin) then these choices need to be backed with investment in the spending review.

Implementing the proposed changes to the national planning system is also crucial to making housing delivery easier and quicker. Lowering housing costs is a challenge for many cities and large towns with high wages and large cutting-edge economies, including London and most places in the greater South East: half of the ten places with the highest average wages also rank in the ten least affordable housing markets. High housing costs eat into disposable incomes and raise barriers that prevent people moving to these areas to take advantage of the economic opportunities they offer.

Cities and towns where wages are low have to address the barriers to growth in cutting-edge parts of their economy. This will require honest assessments of the weaknesses in their local economies, prioritising supporting firms and jobs in high-skill rather than high-street activities, and investing in the fundamentals that make places attractive such as skills, transport and workspace.

Change won’t happen overnight but the sooner the government’s strategies and ambitions are turned into activity on the ground, the sooner the tangible benefits will be felt in places across the country.

The government has very little time: it needs to act now for the benefits to be felt before the public goes back to the polls in four years’ time. A gradual approach won’t be enough. 2025 has to be a year of bold and delivery.

Andrew Carter is chief executive of Centre for Cities.

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