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Midland families have less to spend as north-south divide and housing costs bite

Midland families have less to spend as north-south divide and housing costs bite

🕔03.Aug 2016

Households in the Midlands have significantly less money to spend each week than those in the south-east of the country, according to official figures that highlight the north-south economic divide.

And the gap between average family finances for those living in London and the Home Counties and those in the Midlands and the North has widened rather than narrowed over the past decade, defying Government attempts to revitalise regional economies.

A breakdown of wealth published by the Office for National Statistics looks at gross disposable household income (GDHI) for families living in the 39 Local Enterprise Partnership areas in England.

GDHI, the amount households have to spend or save after taking into account taxation and bills for mortgages or rent, is lower in the Black Country than anywhere else, at £13,707 against a national average of £18,315.

A Black Country family has about £100 a week less to spend than the average for an English household.

Stoke on Trent and Staffordshire LEP area has GDHI of £15,767, and the figure for the Greater Birmingham and Solihull LEP area is £15,789.

Families living in The Marches LEP area, which consists of Telford & Wrekin, Shropshire and Herefordshire, have GDHI of £16,744, while the figure for Coventry and Warwickshire is £16,859.

Households in Buckinghamshire and the Thames Valley sit firmly at the top of the wealth league with average disposable income of £23,788 a year, almost 30 per cent above the national average. London is in second place on £23,607.

The majority of LEPs had GDHI per head below the average for England in 2014. The LEPs with the lowest GDHI per head were generally based in the Midlands and the north of England.

Between 2009 and 2014, the LEPs with the highest average annual growth rate in total GDHI were London (3.9%), followed by West of England (3.4%). The lowest growth rate was in Lancashire (1.7%).

The figures suggest the wealth gap between the south and the rest of the country is widening despite the creation of the business-led LEPs which replaced regional development agencies in 2011.

During the period 2001 to 2014, GDHI in Greater Birmingham and Solihull rose by 37.5 per cent while the figure for the Black Country was 35.4 per cent, and 38.2 per cent for Coventry and Warwickshire.

By comparison, GDHI in Buckinghamshire and the Thames Valley rose by 39 per cent and by 51.2 per cent in London.

Some parts of the Midlands managed to buck the trend.

GDHI in The Marches was up by 49 per cent over the 13-year period and by 46 per cent in Worcestershire and 40 per cent in Stoke-on-Trent and Staffordshire.

The figures reflect an economic analysis published recently by the Greater Birmingham and Solihull LEP which demonstrates that the area continues to suffer from poor productivity and a low skills base.

GBSLEP set challenging targets six years ago to increase GVA, the Government’s preferred measure of the value of goods and services produced in an area, to at least the national average and to exceed the Core City average for NVQ3+ skills levels by 2020.

But the LEP’s latest draft Strategic Economic Plan admits there is not the slightest chance of either target being met.

The gap in GVA between Greater Birmingham and the national average has actually increased since 2010 by £443 per person, while the number of people without NVQ3+ skills has also increased, by half a per cent.

Although much of the West Midlands is experiencing an economic renaissance – from 2009 to 2014, Greater Birmingham saw a 16.3 per cent growth in its economy, the highest rate of growth of any UK city region outside London, and private sector job creation has risen by 85,200 since 2010, outperforming the national average – these positives are yet to feed through into disposable household income.

There are many parts of Birmingham and north Solihull where unemployment has persistently been above six per cent, way over the UK average, and some of Birmingham’s inner city wards suffer from unemployment rates above 25 per cent.

The gloomy news was underlined by a survey showing a double-digit fall in home ownership across the West Midlands metropolitan area since the early 2000s, and a doubling of the proportion of people renting privately.

Research by the Resolution Foundation suggests English home ownership has plummeted to levels last seen in 1986 with the West Midlands, Greater Manchester and Yorkshire particularly badly hit.

The Foundation says that the shift from home ownership to private renting – which is taking place throughout England, particularly among young people – is concerning for a number of reasons.

It notes that households in the private rented sector spend a far higher share of their income on housing than those who own with a mortgage, helping to explain the fact that the share of income that households spend on housing across the UK has increased by around a quarter since 2003.

Renters are also more likely to face the greater insecurity associated with short-term contracts, while the struggle to buy property makes it harder for people to accumulate wealth that they may rely on in later life.

The Foundation’s analysis follows an English Housing Survey report last week, which found that two–thirds of private and social renters cited affordability as a barrier to home ownership.

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