Expected growth in business investment characterises widespread local economic growth potential, according to new data

• Data revealed as part of new Local Business Pulse Index (LBPI), which uses AI to categorise places based on common economic strengths
• Seven new economic ‘clusters’ categorise 363 areas across England, Scotland and Wales
• According to the data, the LBPI shows that ‘High Investment’ is the most common attribute, driving expected growth in the largest cluster for Q3 2023.

More than a fifth (22%) of local areas across England, Scotland and Wales have been identified as High Investment Areas – places which share an expected high rate of growth in business investment, according to new figures from KPMG UK and the University of Nottingham.

The data comes from the new Local Business Pulse Index (LBPI), which uses AI technologies to pinpoint what is influencing economic activity across the UK’s regions and devolved nations by using seven ‘clusters’ to characterise potential growth.

Created by the professional services firm and university, the aim is for businesses and local government leaders to use the LBPI to prioritise what type of investment is needed and where it should go.

Using AI technology, the seven clusters have been derived from the geographic, sub-national data covering businesses, employees, and consumers. These clusters include Business Creation; Sales Growth; High Investment; Employment Growth; Research and Development; Consumption Growth; and High Productivity.

Out of the 363 areas across England, Scotland and Wales, the LBPI reveals the following cluster breakdown:

• 22% of areas are in the High Investment cluster, with high expectations of growth in business investment, and firms facilitating flexible working with new digital infrastructure;
• 19% of areas are in the Business Creation cluster, with the highest start-up rates, combined with high expectations on investment growth;
• 14% of areas are in the Sales Growth cluster, with strong sales forecasts, combined with strong expectations on employment growth as firms expand to meet demand;
• 12% of areas are in the Employment Growth cluster, with high expected growth in future hirings combined with strong performance in new job openings;
• 17% of areas are in the Consumption Growth cluster, with high household credit scores, supporting the local consumer and leisure-focused economy;
• 11% of areas are in the High Productivity cluster, with leading productivity hotspots with the highest rates of hybrid working;
• 6% of areas are in the Research and Innovation cluster, with the strongest growth in venture capital investment and R&D expenditure.

The live tool includes an interactive map of Scotland, England and Wales, with navigable local and regional business growth perspectives and detailed snapshots of individual areas.

Key insights

• Start-up boom: According to the data, Wales, Northern England, Scotland, East Anglia and the North East are experiencing the fastest rates of new business creation.

• Digitalisation and remote working leaders: Meanwhile, in the Midlands and cities in the North, the data show increased investments in digital and remote working practices. 

• Job creators: New job openings and employment growth are strongest in London and the South East of England, with these regions showing the highest expected growth rates in employment in the coming year.

• R&D and venture capital hotspots: the data also reveals that the highest rates of growth around spend on research and development and venture capital investment is happening in Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester.

The LBPI will be updated each quarter, presenting a current and forward-looking view across each locality. Users will also be able to see where local areas have moved from one cluster to another, reflecting changes in the local business cycle.

Karl P Edge, Head of KPMG Private Enterprise in the UK, said: “As the economy continues through a challenging period, there’s growing emphasis on local authorities to define their economic strategies and leverage profile of their business community.

“That’s why we’ve created the Local Business Pulse Index to help pinpoint the growth opportunities across England, Scotland and Wales. From the data, we can see there are distinct hubs for job creation, use of technology when working remotely, and investment. While we’ve experienced significant economic challenges over the past few years, it’s encouraging to see high investment levels come out on top, reassurance that growth and confidence are headed in the right direction for local areas.

“The need to understand local economies is crucial in prioritising investment and informing wider policy and with this tool, we can start to map out where our priorities should lie.”

Professor John Gathergood, at the University of Nottingham School of Economics, said: “We are delighted to bring together the latest economic data, together with artificial intelligence technologies, to create this exciting new product with KPMG. It will support businesses and governments to help make better decisions about localities across Great Britain.” 

Justine Andrew, Head of KPMG’s University Partnerships office, said: “The LBPI gives an emerging view of the markers and characteristics of the new post-pandemic economy.

“It provides a complementary, and critically objective, analysis for local leadership, investors, and businesses alike. Giving real time insight like this can help focus investment and strategic decisions based on real time data. For example, High Investment Areas show high rates of working from home, so investment in new digital infrastructure may be a priority alongside business parks or other physical assets.

“The data also shows us how local areas compare to others, if goals are being achieved, and importantly, where there may be gaps.  For example, while business creation in the East Midlands is driving growth, it also flags that more can be done to encourage greater investment in research and innovation.

“The LBPI is an incredibly useful tool that will help drive focused interventions and support as each place fuses its strategy around its own strengths and defining characteristics.”