When it comes to GDP per capita, no country in the European Union displays such a wide range across its regions as the United Kingdom. The inequality between regions is striking, but attempts to rebalance the economy by divesting away from London are not necessarily the solution

When it comes to GDP per capita, no country in the European Union displays such a wide range across its regions as the United Kingdom. The inequality between regions is not only striking, but the UK is simultaneously home to both the wealthiest region in the EU, and among the poorest places in northern Europe.

Image: EUROSTAT

The red dots on the above chart though also tell the story of London’s competitive advantage compared to other capitals in the EU. A London-advantage that is quantifiable in more than 20% of Britain’s GDP.

The OECD Regional Outlook 2014 shows that the gap between London and the rest of the country isn’t only about inequality, but is also present when it comes to productivity.

Image: OECD

According to the OECD cities carry a “productivity premium” - productivity levels within a country tend to increase with the size of a city.

IMAGE: OECD

The OECD notes that London’s premium is larger than expected when compared to other countries.

IMAGE: OECD

Outside of London, productivity in the UK barely increases with city size. Furthermore, alongside human capital, proximity to London tends to impact several of the positive outliers.

What does this all mean?

While it is likely to feature in the manifesto of all political parties come next year’s general election, rebalancing the economy if intended as divesting away from London to focus elsewhere isn’t necessarily the solution. Or, looking at the numbers at hand, an option. Britain needs to recharge many other parts of the country, but it cannot afford to lose the London premium while doing so - and nor should it want to.