THE BLOG

Could London Inadvertently Help Bring About the Northern Powerhouse?

28/07/2015 15:39 BST | Updated 27/07/2016 10:59 BST

The UK is the most centralised country within the Organisation for Economic Co-operation and Development (OECD). There is no other developed country which focuses so much energy through one focal point. London is the UK home of finance, politics and the arts.

New research from the Centre for Cities shows that the dominant position London enjoys vis a vis other cities across the UK has resulted in a situation where the total tax take of London equals £126bn, more than double the tax generated in all the cities that make up the Northern Powerhouse project.

On this basis the idea of a Northern Powerhouse sounds somewhat idealistic. London's position as a global city, however, creates its own set of challenges which are becoming more visible for city residents almost on a daily basis. These challenges, which largely revolve around housing and infrastructure, could actually help bring about a more sustainable solution to the geographic spread of the UK's economy.

In short, could London's structural problems help drive forward the Northern Powerhouse?

I recently asked a London urban planner how many houses he thought London needed to build over the next ten years to tackle the city's growing housing crisis. I was struck when he told me I was approaching the issue from the wrong direction. It isn't about how to deliver more houses in London, it's about how to persuade people that there are other opportunities outside of London to alleviate the existing pressure and utilise the abundance of space across the country.

Upon graduating from the University of Manchester, I too was guilty of making this North-South migration, along with countless others I know. The common complaint was that the opportunities that exist in London just aren't available outside of the M25.

The Northern Powerhouse, a pet-project of Chancellor George Osborne, is seeking to address this imbalance. But the imbalance is on such a scale that it will understandably take time to tackle through policy action. The current challenges facing London, though, could help speed up the process.

The housing situation in London is testing the limits of what people are willing to put up with in order to make ends meet. Moreover, PwC now estimates that the number of people renting by 2025 will equal, if not exceed, the number of homeowners. Figures from the Office for National Statistics show that in the year to June 2013, 58,000 people aged 30-39 left London, a record amount. Sadly, homeownership is becoming an aspiration out of reach for too many people in the capital.

The prospect of buying an affordable home is clearly attractive to prospective families and people looking for more space without having to stretch their finances to dangerous levels. But this desire for accommodation must also be matched by career opportunities.

Recently the Financial Times revealed that at least seven big companies are looking at opening a presence in Manchester, motivated in part because of the lower price of renting office space. If this trend continues, the next generation of graduates from Manchester may choose to look more seriously at opportunities locally, as opposed to London.

The price of land for commercial and residential purposes in London is approaching the point of acting as a drag on the city's development. How long before we start to hear common complaints that graduates are leaving London to start a career and family outside of the capital, resulting in a skills shortage which threatens London's reputation? It might be sooner than you think.