The Reality of Regional GDP Inequality: Inner West London vs Literally Everywhere Else

Anyone with even a vague interest in the UK economy knows that London outperforms the rest of the country. The taxes collected there partially subsidise the rest of the UK, but Londoners also benefit from massively disproportionate amounts of public spending. This is nothing new: the North-South divide has existed for almost as long as the UK has been a country, and shows no sign of going away any time soon.

Still, despite being aware of this, this fascinating article on CityMetric yesterday brought to my attention some pretty eye-watering regional inequalities in GDP across the UK. The author uses Eurostat data from 2000 to 2015 to show that – in relation to the EU average – South Yorkshire’s GDP per head is strikingly similar to Greece’s:

Given the consistent media furore over Greece’s “tanking” economy, you’d expect there to be similar levels of outrage for the plight of the residents of South Yorkshire, right?

Well, as you probably guessed, no one’s talking about it. This is most likely because the UK’s overall GDP per capita compares favourably to other Western European nations, and the media generally only focuses on GDP at the nation state level. This might make sense when talking about the whole world, but we can afford to get a bit more nuanced when just talking about the EU.

How bad are the UK’s regional GDP inequalities?

The author of the CityMetric article is the developer of a tool that allows you to compare various measures of GDP across all EU regions. I thought I’d play around with the data and see quite how bad the UK’s regional GDP inequalities are.

Before I go any further, here’s how the UK and Greece in comparison to the EU average:

How to read this: the number on the left represents the EU average for GDP per capita. The EU average is 100 on this scale. In 2015, the UK is at 108, and Greece is at 68. This makes it seem like the UK is doing reasonably well, whereas Greece is doing very poorly (already, however, you can see how this analysis doesn’t really paint an accurate picture of the reality of the situation: Greece and the UK both start and end this time period in a similar relative position, despite the Greek economy declining faster than the UK’s between 2009 and 2011).

Now we have the UK and Greece as a baseline of sorts, we can begin adding different regional datasets to the graph. Here’s what happens if you add London, the North West, the North East, and Yorkshire and the Humber:

This is, in effect, London vs the North, with Greece thrown in as a comparative measure. Notice how staggeringly high London is compared to the UK average (and, more importantly, compared to any of the UK regions)? The UK average is 108 compared to London at 184. It seems pretty clear already that London is propping up the UK average.

Next, I wondered what would happen if I removed London entirely, but included the rest of the UK regions:

Unsurprisingly, the South East is right out in front at 118, compared to Wales at 76. However, remember that London’s score was 184 (!!). This shows that the common perception of “London and the South East” being the economic powerhouse of the UK might be slightly incorrect; it’s just “London”.

Inner West London vs Everywhere Else

Only… well, it actually isn’t. I decided to delve a bit deeper into the regional subdivisions, and found something pretty spectacular:

Inner West London is absolutely crushing everywhere else.  Even Inner East London – substantially wealthier than the rest of the UK in its own right – is nothing compared to the staggering might of Inner West London. Notice how every Outer London borough is performing extremely similarly to both Greater Manchester and South Yorkshire? In fact, all of Outer London is below the EU average. South Outer London is on 94, and East/North East Outer London is on 78, making them far more similar to Greater Manchester (91) and South Yorkshire (75) than anywhere in Inner London.

So yeah, we don’t really have a North vs. South economic divide. We have an Inner West London vs. Literally Everywhere Else divide.

What about the rest of Europe?

There are no other countries in the EU with anything close to this level of GDP inequality. Here’s a chart with all the sub-regions of France, Belgium, and The Netherlands:

There is clear inequality here – Brussels and metro Paris are markedly ahead of all the other regions – but the level of inequality pales in comparison to the UK. In terms of GDP per capita inequalities, we are singular in the entirety of Europe.

I thought I’d end this article by visualising the five EU regions with the highest GDP per capita compared to the five EU regions with the lowest GDP per capita (using the data from this Eurostat document). Here’s the result:

Even the famously wealthy Luxembourg has been bludgeoned into second place by Inner West London.

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