The recent news that thirty-somethings are leaving London in record numbers was greeted with shock-horror headlines. For instance, the Guardian ran a piece entitled ‘Young Londoners flee capital for the regions’ – as if a refugee crisis were underway.
The coverage in the Economist was more measured in tone:
“According to the Office of National Statistics, a record number of 30- to 39-year-olds left the capital in the year to June 2013: a net outflow of nearly 22,000 (and a 25% increase on 2010). They have settled in Birmingham, which attracted the largest number, as well as Manchester, Bristol and Oxford.”
The primary cause of the outflow is not hard to discern:
“London has long shed people in their 30s. Mainly they want bigger, cheaper living-space for their children. London’s soaring house prices have exacerbated the trend: the city’s average property price rose by 19% in the past year. It now stands at £402,800 – in Birmingham it is £133,700.”
Far from being some catastrophe, the big move north is a perfectly sensible market response. Of course, one could argue that the planning laws prevent an alternative market response – building more houses.
Clearly, more construction is required, but there are good ways and bad ways of bringing it about. One also has to question whether a building boom on any sustainable scale could substantially narrow the price gap between London and our other cities.
In any case, what’s so bad about young Londoners moving north? Unlike the big ‘provincial’ centres in comparable countries, most of England’s eight Core Cities under-perform the national average on key economic indicators. An important part of the reason why is that they don’t have enough of the young professionals and entrepreneurs whose dynamism is an important driver of local economic growth.
Migration from London is therefore an opportunity to rebalance the British economy:
“Those fleeing London are often moving jobs, too. Statistics from the Institute for Fiscal Studies suggest the fraction of London’s workers aged 30-39 who commute has not increased in the past few years. Centre for Cities, a think-tank, points out that they are also prepared to take a pay cut. In Milton Keynes, a town just north of the capital, the average wage is £28,600, while London’s is £33,000.”
Lower wages might seem like bad news, but substantially lower housing costs have a powerful compensatory effect on living standards. There are quality of life advantages, too – such as the shorter commute times that can have a huge effect on wellbeing.
Inevitably, there are downsides:
“As people move out of the capital, earning smaller amounts… this will hit the country’s GDP. A 2014 study by economist Enrico Moretti at the University of California, Berkeley, showed that a lack of affordable houses in America’s strongest performing cities between 1964 and 2009 cost national output 13%.”
One would also expect to see an impact on average earnings figures – not to mention those elusive income tax revenues.
Then again, if people are happier, with higher disposable incomes and room to settle down and start a family, then perhaps the loss of ‘wealth’ as recorded in the GDP figures is illusory. One might also regard the (non-illusory) lower tax take as an effective tax cut; and, moreover, one that delivers the greatest benefit to the cities of the Midlands and the North.