Southampton is shaping up to be one of the UK’s top 10 fastest-growing city economies by the end of 2023, with a lot of optimism around its future, thanks to big investments in the green economy. A new business report backs this up. The UK Powerhouse study, produced by Irwin Mitchell and the Centre for Economics & Business Research (Cebr), takes a deep dive into the employment rates and GVA (Gross Value Added) growth of 50 of the largest local economies in the country.
According to the latest data, Southampton’s economy is expected to grow by 2.2% year-on-year by the last quarter of 2023, pushing its total value up to £7.5 billion. Although Southampton’s projected 9th place for GVA growth in Q4 2023 is still impressive, it’s a bit of a cool-down compared to 2021. Back then, the city was in second place, riding a wave of 8.4% GVA growth year-on-year.
What’s behind this change? A lot of it has to do with Southampton’s key industries—transport and storage—which thrived as the world started trading more after the pandemic lockdowns. Its strategic location by the coast, coupled with its massive port infrastructure, played a big role in this recovery. However, that growth might hit a bump in the road. The report warns that ongoing global supply chain issues and the ripple effects of the Ukraine war, including sanctions, could slow things down again.
But it’s not all bad news. There’s a silver lining for the future. Recent government announcements suggest Southampton could get another big push in the coming years, especially with the city being positioned to lead in the hydrogen economy, thanks to significant funding that’s already in place.
There’s also its growing marketing centre in Ocean Village which is in the beating heart of the city. Its a place where SEO marketing companies like Digital Cornerstone have set up their home and are providing invaluable services to the local businesses.
The report doesn’t just focus on Southampton, though. It also tracks Foreign Direct Investment (FDI) trends across the UK. Even though London and the South East saw a 23% drop in FDI projects in 2020/21, these regions are still magnets for international investment. And that’s part of the reason why the economic gap between the North and South of England continues to grow.
Bryan Bletso, Partner and Head of International at Irwin Mitchell, shared his thoughts on the FDI landscape: “FDI has the potential to drive up productivity and boost economic growth for many years. Even though the number of projects dropped last year, recent data from the UN suggests we’re seeing a strong recovery. We’ve noticed a surge in interest from businesses looking to invest in the UK. As a national firm, we’re also seeing FDI activity spread out across the country. I’m confident that FDI into the UK will keep increasing, and it’s essential that this doesn’t just benefit the already booming regions. The whole UK has so much to offer, and areas that attract foreign investment are set to see more growth and job opportunities.”
Josie Dent, Managing Economist at Cebr and co-author of the report, added: “While the economy faces some uncertainty over the next year, with commodity price swings, ongoing supply chain pressures, and the rising cost-of-living crisis, these factors will affect growth, both at the national level and in individual cities.
“The report shows that the fastest-growing areas next year will likely be in the South, like Milton Keynes, Cambridge, and Oxford. These cities have strong high-growth industries and have been magnets for overseas investment. To truly address economic imbalances, we need to recognize and tackle these issues head-on.”
