Cities vs their wider urban areas: how does financial and related professional services employment differ?

Industry employment in England can look different depending on whether we consider cities or the wider Combined Authorities that the cities anchor.

One of our most recent reports, the 2023 edition of our annual economic research ‘Enabling growth across the UK’, quantifies the contribution the financial and related professional services industry makes in each UK region and nation by looking at industry employment and GVA.

Our report analyses data at the levels of region (eg, North East), town/city (eg, Newcastle) and constituency (eg, Newcastle upon Tyne East). Our data is based on data from Nomis and the Office for National Statistics (ONS), which provide official statistical designations of regions, towns and cities, and parliamentary constituencies. These geographical/statistical boundaries differ from other, more politically-oriented designations, such as Combined Authorities.

Defining geographical boundaries can be more complicated than one might imagine. The ONS explained to us that local authority geography represents the area of the district council area—an administrative area defined by the Local Government Boundary Commission. In contrast, ‘major towns and cities’ is a designation created by ONS to provide a more precise definition of the built-up extent of a town or city. The ONS notes:

"Existing analysis of towns and cities in England and Wales is often based on local authority district (LAD) data. While a LAD-based definition accurately captures some places, especially the larger cities, for other places it is less useful. For example, for many of the smaller cities and larger towns, the LAD definition includes a significant rural hinterland as well as the main urban settlement.[1]"

There are currently nine Combined Authorities in England under the jurisdiction of a Metro Mayor, and one without a directly elected mayor (North East Combined Authority). In order to deepen our understanding of financial and related professional services clusters in the UK, we have undertaken additional analysis since the publication of our recent report, looking at industry employment in the Combined Authorities to augment the city-focused data in the report.

We find that the Greater Manchester, West Midlands and West Yorkshire Combined Authorities had the highest levels of financial and related professional services employment in both 2022 and 2021. When looking at the wider conurbations, Greater Manchester registered more than 140,000 in industry employment in 2021 compared to the West Midlands’ 91,000 (the Combined Authority, not the region). In contrast, the city-level data featured in our report revealed Birmingham outpacing Manchester—just—with industry employment of around 59,000 compared to Manchester’s 52,795.

Data for 2022 (released after the publication of our report) for each Combined Authority, is shown in the chart below. Use the filter to show data for 2021 instead, or data for 2021 and 2022 in aggregate.

The segmentation by sector shows at a glance the different strengths the various Combined Authorities have within the industry. While in Greater Manchester accounting is by far the largest industry employer, in the West Midlands Combined Authority it is management consulting that dominates. West Yorkshire’s strength in banking, meanwhile, is reflected in the employment figures for the industry. In other Combined Authorities, like the West of England, employment is split much more equally across the sectors—except for fund management, which has a minimal employment presence in all parts of the UK except London; our recent report showed that in 2021, London accounted for 83% of fund management employment, with Scotland accounting for another 7%.

In 2022, financial and related professional services employment in Greater Manchester represented 10% of the total employment in this area, the highest percentage of contribution among the different Combined Authorities (the West of England and West Yorkshire followed, with 9% and 8%, respectively, of total employment contributed by financial and related professional services).

Comparing data over 2021-22, financial and related professional services employment declined in six out of the 10 Combined Authorities in 2022; the exceptions were Cambridgeshire and Peterborough, Greater Manchester, the West Midlands, and the West of England. In contrast, overall employment grew in all Combined Authorities except in Cambridgeshire and Peterborough, Liverpool City Region, North of Tyne and Tees Valley. This means that in four of the city regions, the year-on-year employment trend for overall employment and for financial and related professional services employment diverged. This is clear from the chart below:

North of Tyne, Sheffield City Region, and West Yorkshire saw financial and related professional services employment decline in 2022 even while overall employment rose. In the Cambridgeshire and Peterborough, the trend was reversed, with financial and related professional services employment rising while overall employment declined (modestly, at 0.5%).

Combined Authorities are politically-oriented geographical boundaries, linked to the ongoing process of devolution of political powers in England. According to the Local Government Association, “A combined authority (CA) is a legal body set up using national legislation that enables a group of two or more councils to collaborate and take /collective decisions across council boundaries…The creation of a CA means that member councils can be more ambitious in their joint working and can take advantage of powers and resources devolved to them from national government.”[2]

Our own research noted that “TheCityUK has long advocated for greater devolution to all parts of the UK, particularly the English regions”, and recommended “the UK government should continue to roll out the metro mayor and combined authority model to all English regions that want it, while simultaneously devolving greater powers for existing mayoral combined authorities.” In this context, a better understanding of employment trends at different levels of geographical disaggregation can only be beneficial.

[1] https://geoportal.statistics.gov.uk/documents/major-towns-and-cities-methodological-note-and-user-guidance-1/explore

[2] https://www.local.gov.uk/topics/devolution/devolution-online-hub/devolution-explained/combined-authorities