Is the UK economy too reliant on London?

New mayor Sadiq Khan says tax figures underline the case for further devolution

Mayor of London Sadiq Khan
Mayor of London Sadiq Khan
(Image credit: Jack Taylor/Getty Images)

Britain's public finances are increasingly dependent on London, which generates nearly 30 per cent of the country's tax revenues, according to a think-tank.

Centre for Cities says the capital generates almost as much tax as the next 37 largest UK cities combined.

While the amount of duty collected in London increased by 25 per cent (£28bn) in real terms between 2004/5 and 2014/15, Manchester's intake grew by only one per cent. Birmingham, Glasgow and Leeds all saw significant decreases.

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The findings are likely to "intensify debate about government plans to devolve powers and public spending to regional centres based around cities in the Midlands, the north and the west", says The Guardian.

Is over-reliance a problem?

With the prospect of Brexit looming large, if London's economy takes a hit, says Centre for Cities' chief executive Alexandra Jones, the effect on the UK as a whole will be magnified.

The City could suffer a major blow if international banks decided to move their operations to the continent in the event of the UK's new deal with Europe failing to continue its privileged access to the European single market.

"The UK's growing reliance on London's taxes underlines the importance of ensuring that the capital prospers in a post-Brexit world, says Jones.

The potential economic impact of the vote to leave the EU has been underlined by recent French attempts to lure big businesses from London to Paris should Brexit occur.

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Is there a solution?

Jones calls for "more to be done to strengthen the economies and tax bases of other city regions such as Greater Manchester, the West Midlands and the North East".

Mayor Sadiq Khan says the findings prove the need for more devolution of financial powers from central government to all British cities.

"Further devolution, so that London and all our cities and neighbourhoods can take back control, is vital to unleash the energy and dynamism that this country needs in the light of its decision to leave the EU," he says.

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