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Labor will have to focus heavily on developing services exports to achieve faster economic growth, according to an analysis that warns that the UK’s northern regions still lag far behind the more prosperous south-east.

The potential for increased productivity and wages is skewed heavily toward the Southeast, driven by export activity in high-value services such as information technology and finance, the Center for Cities think tank said Monday.

Andrew Carter, chief executive of the Center for Cities, said: “If we build more in London and the greater south-east, we know that will have a positive impact on growth, although politics make that difficult.”

He added that facilitating construction in existing prosperous areas is one of the fastest ways to grow.

Labor has pledged to invest in everyone regions As part of its upcoming industrial strategy, along with plans to expand English language transmission and empower local mayors.

The government’s industrial strategy green paper describes narrowing the gap between the south-east and other regions as a “key” to increasing growth overall, with advanced growth. manufacturing It has been identified as a target sector.

However, Tony Travers, professor of government at the London School of Economics, said Labor would need to make tough choices if it wanted to achieve rapid improvements in GDP.

The government has promoted itself on uncontrolled growth, but this analysis highlights how much it relies on London and the south-east to achieve this goal. The reality is that they have to decide to live with it, or try to change it and risk ending up with less growth.

The report highlighted the persistent north-south economic divide, with eight of the 10 cities with the highest average wages located in the greater South East region despite pledges by successive governments to reduce inequality.

The report said that since 1997, despite initiatives to narrow regional economic disparities in the UK such as the Northern Powerhouse and the Levelling Initiative, “there has been no change on the basis of wages”.

The study found that the average worker in London now earns £20,000 a year more than his counterpart in Burnley, the city with the lowest wages.

The report concluded that cities need to create the conditions “to attract more sophisticated companies if they are to be more prosperous,” regardless of the sectors in which companies operate.

Carter said the results highlighted the need to strengthen planning reforms and focus on industrial strategy in areas of the economy with the highest growth potential.

The ranking of cities by the number of “new economy” companies per head of population, working in areas such as artificial intelligence, advanced materials, fintech or life sciences, is heavily skewed towards London and the South East.

The top seven are all located in the south-east, while seven of the bottom ten cities are in the north of England.

The think tank also said the role of manufacturing should not be “overemphasized” in any drive to raise wages outside the South East, adding that the sector is set to play an “smaller than ever” role in the overall economy.

“Nowhere is likely to see a sustained improvement in the performance of its export base that is not led by high-value services activities,” she added.

The report also warned against over-reliance on one sector, for fear that it would decline, pointing to Aberdeen’s dependence on oil and gas exports, noting that when places have dominant industries, they must seek to diversify their economies.

The Treasury said it remains committed to regional growth, based on devolution, investment and regulatory reform.

A government spokesman added: “Growth is mission one of this government’s change agenda, and ensuring a sense of growth is felt in all regions of the UK is a key part of that.”