YORK'S economy faces significant challenges with the city set to produce relatively slow growth over the next 12 months, according to a new report.

The UK Powerhouse study, produced by Irwin Mitchell and the Centre for Economics and Business Research (Cebr), analyses 50 of the largest local economies by employment and GVA growth.

Its latest report shows York is expected to see the size of its economy grow by just 2.2 per cent by the end of 2022, placing it in the bottom 10.

York Press:

GVA growth (year-on-year) Q4 2022. Comparison of York to the five fastest growing economies (Source: UK Powerhouse)

The rate is more than a full percentage point behind hotspots in the south including Reading, Oxford, Cambridge and Milton Keynes.

The report states that York’s employment levels are estimated to increase by five per cent in Quarter four of 2021, compared with the previous year.

But those levels are expected to increase by just 1.8 per cent next year which is also far lower than the locations in the south.

The historic city’s labour market is dominated by the hospitality industry, with accommodation and food services employing 10.3 per cent of the city’s working population.

This sector has seen the largest growth rates throughout 2021, after being one of the hardest hit by lockdown measures.

Meanwhile, Yorkshire and the Humber is the region with the highest share of businesses (29 per cent) that say reducing costs per unit is a key driving force for their innovation.

The report highlights the unprecedented disruptions over the past 12 months, including fuel shortages, labour and supply chain problems, and notes that many are likely to remain in 2022 and beyond.

Hannah Clipston, partner at Irwin Mitchell, said: “The UK’s economy has undergone significant change over the last two years and this report highlights that the recovery is unlikely to be linear or even uniform.

“Over the next 12 months our report predicts that manufacturing’s output will grow by 3.5 per cent while for hospitality it will grow by 35 per cent.

"This has a huge impact on the variations that we are seeing in terms of growth in different locations and should be considered by the government as it looks to level up and tackle the north-south divide.”

Irwin Mitchell’s report also examines to what extent disruption in the economy leads to innovation.

The study reveals that the south west and the south east have the largest share of businesses engaged in innovative activity.

According to the study, 41 per cent of businesses in the south west are defined as innovative, which is marginally ahead of Yorkshire and the Humber at 40 per cent.

Hannah added: “Businesses have been incredibly resilient over the last couple of years and have faced many disruptors including Covid, labour shortages, supply chain issues and high fuel costs.

“Our latest study recommends that irrespective of the sector they’re in, organisations should be adopting technology more quickly and adapting to the UK’s new status after Brexit.

“All of this will require a shift in approach and for innovation to be celebrated and nurtured more than it is currently. It’s vital that businesses are encouraged to follow this path and receive the right level of support in order to help them succeed.”

About the report

Official economic data sources for the UK’s cities are often dated and fail to provide a reliable snapshot of the UK’s localised economies.

To give a more accurate estimate of current economic activity, Cebr uses timely indicators to create a nowcast of gross value added (GVA) and employment indicators for the 50 UK locations with the largest GVA. Cebr also models these cities' economies to produce a forecast of their performance a year ahead.

The analysis of this data provides a picture of how the UK’s regional economies performed in Q4 2021 and what is expected in Q4 2022.