Beyond the square mile: Is hybrid work reshaping London’s job landscape?

Written by Helena Saenz de Juano Ribes (Research Economist), IES.

London has historically been the beating heart of the UK, serving as its capital and largest city for centuries. With a population exceeding 10 million, London dwarfs the next two largest cities, Birmingham and Manchester, which each of them has about 2.5 million residents. However, when it comes to job opportunities, the disparity between London and these cities is even more stark.

Despite numerous efforts to decentralize the UK economy, London remains the epicentre of job creation and economic activity. A 2021 report on the health of British microbusinesses finds not only that London is at the centre of UK’s business activity, but also that the areas within close proximity to London also show some of the greatest microbusiness density, suggesting the benefits spillover from their proximity to London. The Adzuna intelligence portal data illustrates the total job demand in London, Birmingham and Manchester during the last Financial Year of 2023-2024. Notably, it highlights the job demand imbalance across the cities, with London exceeding Birmingham and Manchester by nearly tenfold across top 5 key industries such as professional scientific and technical activities, financial and insurance activities, wholesale and retail trade, accommodation and food services, and finally, information and communication. The city’s demand for roles in professional, scientific, and technical fields is particularly striking. Financial and insurance activities, another hallmark of London’s economy, similarly far outstrip demand in Birmingham and Manchester.

Moreover, using the Adzuna intelligence portal we calculate the gross salaries in the three biggest cities of UK: London, Birmingham and Manchester. Not surprisingly, the offered median salaries being higher in the capital for these most demanded industries. 

These facts have significant implications for the UK’s economy and society. London’s dominance in high-paying and high-skilled industries means it attracts talented individuals from across the UK, often at the expense of other regions. Despite these industries being central to the UK’s global competitiveness, they end up largely being concentrated in the capital, leaving other cities with fewer opportunities for growth.

Furthermore, the overwhelming concentration of jobs in London brings both benefits and challenges. While London drives much of the UK’s economic output, its magnetism exacerbates regional disparities. Skilled workers flock to the city, creating a brain drain in other regions, which struggle to attract investment or retain talent.

This concentration also has profound implications for London itself. The city’s infrastructure is under immense strain, with overcrowded public transport systems, sky-high housing costs, and rising inequality. Lower-income workers, essential to the city’s functioning, often find themselves priced out of decent housing and commuting long distances just to make ends meet. Meanwhile, London’s dominance leaves the UK economy overly reliant on a single city, making it vulnerable to economic shocks.

With the rise of remote working and shifting business practices, there is an unprecedented opportunity to rebalance the UK economy. Encouraging businesses to establish offices in cities like Birmingham and Manchester could provide a much-needed boost to these regions. Investments in transport connectivity, such as high-speed rail links, would make it easier for businesses and workers to thrive outside London. Furthermore, decentralizing government functions and incentivizing private companies to move their operations could create a more equitable distribution of opportunities. 

IES is an independent, apolitical, international centre of research and consultancy in public employment policy and HR management. It works closely with employers in all sectors, government departments, agencies, professional bodies and associations. IES is a focus of knowledge and practical experience in employment and training policy, the operation of labour markets, and HR planning and development. IES is a not-for-profit organisation.