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London economy losing edge to Scottish cities. Oil ensures Aberdeen is only UK city where GVA grew faster this year than last.

London is losing its economic edge to regional capitals Edinburgh and Belfast, reveals research by UHY Hacker Young, the national accounting group.

UHY Hacker Young explains that London’s previously unassailable leadership as the UK’s strongest economic contributor has been eroded as the financial crisis hit the capital much harder than elsewhere in the UK. UHY Hacker Young’s analysis of official calculations of ‘Gross Value Added’ - the measure of a region’s contribution to the UK economy according to the value of the goods and services it produces - shows that Edinburgh and Belfast are fast closing the productivity gap.

Aberdeen only UK city where GVA grew faster this year than last year. Aberdeen is the only Top Ten UK city where GVA grew faster this year than last year, rising to 4.8% from 4.3%. Growth was also strong in Glasgow, which saw an increase of 4.4% in its GVA per head compared to the previous year. The British economy as a whole experienced a growth of just 2.8% in the year to 1st January 2009, down from 5.1% in the previous year. UHY Hacker Young explains that as the centre for the UK’s oil & gas industry, Aberdeen rode the wave of a 190% surge in oil prices between January 2007 and July 2008. The momentum is likely to continue with oil prices back over $100 a barrel.

Tom Faichnie, Partner at Campbell Dallas, the only Aberdeen member of UHY, said: “I’m not surprised that Aberdeen is the only top ten UK city where ‘gross value added’ grew faster this year than last. I predict this positive trend will continue throughout 2011 driven by the economic resolve and pioneering spirit of Aberdeen’s oil entrepreneurs.”

According to UHY Hacker Young, Londoners generated just £538 more wealth on average than residents of Edinburgh in the year to 1st January 2009, down from £708 in the previous year. Edinburgh has been the UK’s second strongest economic powerhouse after London for over five years, but since 2007, the gap has been closing. UHY Hacker Young says that if the trend continues, Edinburgh’s GVA would catch up with London’s in 2012. Londoners are still the biggest contributors to the UK economy, generating £35,100 per head in the year to 1st January 2009. Edinburgh residents came second, with an average contribution of £34,562 per head, up 4.5% year on year. Belfast takes third place with £32,264 per head per year, up by 4.4% compared to the previous year. The average Briton generates £21,103 per year. (See table below for the UK’s Top 50 towns and cities)

Comments Marc Waterman, Partner at UHY Hacker Young: “For years London was streets ahead of other UK towns and cities in generating wealth for the economy, driven by its huge financial services industry. But with the major restructuring that banks and financial services companies went through following the credit crunch crisis, London’s fire power has been weakened. Investment banking has recovered since then, but nobody now believes that this sector can continue to deliver exponential growth.” UHY Hacker Young says that although Edinburgh also has a large financial services sector, but it is less volatile compared to the City of London. Marc Waterman continues: “Edinburgh’s financial services sector is proportionately smaller than in London. The fact that there is less focus on investment banking in Edinburgh also spared it from the biggest blow.”