Photo credit: Joe Cleary
The U.K.’s new Prime Minister Andy Burnham, former mayor of Manchester, believes that the city can serve as a role model for the U.K. economy. And he is probably right. Greater Manchester has been one of the rare economic bright spots in the U.K., with the metropolitan area being the one place rivaling London in terms of growth and job creation.
But what exactly is Manchester’s success built on? It is crucial to draw the right lessons from the city’s growth and not be misled by false narratives that are not borne out by reality. Specifically, the nostalgia for manufacturing jobs as a source of strength rests on a faulty belief about the sector’s importance. Instead, Manchester has thrived thanks to professional business services, which are today’s main driver of economic growth.
Manufacturing is not making a comeback
Even today, a widely shared belief persists that manufacturing jobs could return if only sufficient public support were provided. Alas, nothing could be further from the truth! While politicians can score cheap points by protecting certain well-paid manufacturing jobs, the industries in question are simply not that important anymore. Manufacturing’s employment share in the economy has fallen from 30% in the 1970s to less than 8% today. Outsourcing to where production is cheaper — Southeast Asia — has certainly played a role, but the bigger contributor has been technological change. The sector has enjoyed high productivity growth for decades, with automation on assembly lines being the biggest culprit of labor displacement.
Instead, service industries have taken over as the engine of job creation across advanced economies. Technology, professional business services, finance, and real estate have been the key wealth creators for decades, providing workers with well-paid jobs, for the most part.
That is not to say that some regions haven’t suffered disproportionately from the decline of industrial production. Workers in the Midlands, with Birmingham once at the heart of the Industrial Revolution, have seen their employment prospects deteriorate as manufacturing jobs disappeared. But the clock cannot be turned back. It’s better to focus on the sectors creating wealth today rather than to dwell on the past.
Manchester’s success story
Data from the Office for National Statistics (ONS) shows a clear pattern of regional disparities within the U.K. Economic activity in London has grown significantly faster than in most other large metropolitan areas over the last two decades — and it isn’t even close. There is but one exception: Manchester’s economy has grown even faster.
When we look at payroll job growth since 2015, roughly when the data started, Manchester comes out as the clear winner again. Local payroll employment has grown by a stunning 30% over the last decade, more than 2.5 times the national average. London’s growth, constrained by the local housing market, has only been 15%, with many other British cities performing similarly or worse.
What sectors have created jobs?
Which sectors have contributed to Greater Manchester’s success story? The ONS regional employment statistics tell a similar story. Manufacturing jobs continue to dwindle, with employment down by about 10% since 2015. The two industries driving job growth are the tech sector (up by about 25%) and professional business services (up by 55%). Those two sectors now employ about 60,000 and 160,000 workers, respectively, compared with 96,000 in manufacturing. Finance accounts for another 45,000 jobs, but its growth has been more muted.
Like it or not, professional business services are the real engine of wealth creation in today’s economy. With its English-speaking, highly skilled workforce, the U.K. has a comparative advantage in service exports — consulting work, tech, and financial services provided to customers abroad. In fact, the U.K.’s services share of exports, at about 59%, is roughly twice as high as that of most other advanced economies. It is no exaggeration to say that the U.K. is a service export superpower, with those sectors driving economic growth.
Manchester is well placed to benefit from the boom. It has good universities and a large skilled workforce, more competitive wages than London, and an office and housing boom that accommodates rather than constrains the local economy. Big employers are taking notice. The global bank BNY plans to expand its office in the city where it already employs 2,000 people. And it is not just finance and tech. International law firms are also increasing their footprint. Lightcast data shows how Manchester’s employment for four different white-collar occupations — lawyers, financial analysts, software developers, and recruiters — is far higher than the national average. The gap has widened over time and is projected to grow further by 2030.
The creation of the Manchester Digital Campus, a government hub with a focus on digital work, together with Burnham’s decision to create a regional office for the Prime Minister (“No. 10 North”), should help solidify the city’s appeal as an attractive alternative to London.
What about housing?
Manchester’s economic growth has been made possible by faster housing construction. Data from the ONS shows that housing completions in what I will call “Inner Manchester” — the boroughs of Manchester, Salford, and Trafford — rose almost fourfold between 2015 and 2021, from around 1,500 homes a year to 5,600, before falling back sharply. Housing completions in the 12 inner boroughs of London, on the other hand, have steadily declined over the last decade.
The difference is even starker when adjusting for population levels. Housing completions per 1,000 residents in Inner Manchester peaked at 5.3 in 2021/22, while in Inner London they have hovered between 2 and 3. But the chart below also illustrates something else. Manchester’s growth story is very much contained in the city center. Housing completions in Greater Manchester (10 boroughs) have not exceeded those of Greater London (33 boroughs). Burnham can rightly speak about his city’s success in building housing. However, construction in the greater metropolitan area has been just as weak as in the rest of England. And last decade’s boom in the city center has now also come to a stop. The combination of high interest rates, surging construction costs, and regulatory overdrive has hammered housing development.
What does this mean for recruiters?
Contrary to the popular narrative, Manchester’s economic success proves two things. First, building plenty of houses is key for a city to prosper. And no, England is not running out of room anytime soon. Second, the city’s growth has been fueled by professional business services — tech, consulting, law, and finance jobs — rather than blue-collar work. Many companies are eyeing the North as a viable alternative to costly London. Greater Manchester has a deep labor market with plenty of skilled workers. For recruiters, this means that talent attraction could become both easier and cheaper: being in London is no longer necessary for companies to thrive in the U.K. Burnham seems to agree.