LONDON — Nearly half of households in Britain live in places where economic growth is not feeding through to better living standards, according to a new PwC report that points to a sharp divide between the North and South.
The consultancy said 12.5 million households, or 46%, were in areas where rising output and business activity had not translated into greater spending power. It found every region in the north of England, the Midlands and Wales was below the national average, while London and the South East were comfortably above it.
The findings land as the Prime Minister, Andy Burnham, has promised to reduce regional inequalities and lift living standards across the country. But questions remain over how far his plans can go, with higher government borrowing costs expected to limit room for manoeuvre ahead of October’s Budget.
Where households are best and worst off on disposable income
PwC said spending power, measured after tax and housing costs and adjusted for household size, gives a clearer picture of whether growth is improving everyday life. On that measure, the north east of England was 6.6% below the UK average, the equivalent of £1,542 less a year.
The North West was £1,493 below average, while Yorkshire and the Humber came out worst among the English regions, with spending power £1,917 lower. By contrast, households in the South East were 9% above the national average, worth an extra £2,154 a year, with London also well ahead.
The report said this showed growth is often discussed in terms of investment and jobs, but that only a fraction of a rise in gross domestic product usually reaches household budgets. In practice, the benefits can take time to appear and do not reach everyone in the same way.
London and the South East still contain major internal gaps
PwC also said the divide is not only between regions. There were large differences within places usually seen as prosperous, including London and the South East, where high housing costs are partly offset by stronger earnings.
The clearest example was Richmond, which had the highest average annual disposable income in London at £35,448. That was almost double the £18,384 recorded in neighbouring Hammersmith and Fulham, showing how uneven prosperity can be even across adjacent areas.
Rachel Taylor, PwC’s government and health industries leader, said the research showed how differently prosperity is experienced across the UK, with big variations not just between regions but “on each other’s doorstep”. The firm said the cost of housing in southern England drags on spending power, but on average that is softened by higher incomes, leaving the regional gap intact.
PwC says devolution should keep more local growth revenues
The report argued that the next stage of devolution should give local areas more of the revenues generated by growth, along with greater freedom to decide how resources are spent. It said success should not be judged only by whether local economies expand, but by whether people see better lives, wider opportunity and stronger communities.
Scotland and the south west of England were described as exceptions to the broader pattern. PwC said lower housing costs and smaller households helped push spending power slightly above the national average in those areas.
The government said its growth mission included creating No10 North, which it said would change how the country is run. A spokesperson said ministers had already announced unprecedented financial powers for English mayors, including a share of income tax revenues to support local economies and public services. Conservative leader Kemi Badenoch dismissed Burnham’s approach as wrong and called No10 North a gimmick.
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