The UK regions running deficits worse than Greece in 2009
Key Points
- North East, Northern Ireland, Wales and West Midlands deficits exceed Greece's 2009 crisis level relative to output
- London exported a record £49 billion fiscal surplus in 2024/25, £5,400 per Londoner
- London raises nearly double the tax per worker of other large UK cities
- Greater Manchester trails London on productivity by 35%
- Analysis says spending cuts alone cannot close the gap
Four UK regions – the North East, Northern Ireland, Wales and the West Midlands – are running fiscal deficits larger, relative to the size of their economies, than Greece recorded at the height of its 2009 sovereign debt crisis, new analysis of ONS regional public finance data shows.
The analysis, which was conducted by Paul Swinney of the Economic Observatory, shows that every UK region outside London and the South East posted a deficit above the national average in 2024/25, according to the figures, which compare taxes raised in each region against public money spent there.
The gap is covered automatically through national borrowing and transfers from London, meaning taxpayers in the capital and the wider South East are underwriting spending on schools, hospitals and benefits across the rest of the country.
London’s subsidy to the rest of the UK is now the largest on record relative to its own economy. The capital exported a fiscal surplus worth 8% of its output in 2024/25 – £49 billion, or roughly £5,400 for every Londoner – to the rest of the country.
The analysis attributes the shortfall to the underperformance of Britain’s big cities outside the capital.
Estimates from the Centre for Cities show large city regions including Greater Manchester and the West Midlands run deficits before their wider regions are counted, not because they overspend – London’s per-head spending is the third highest of any large city region – but because they raise too little tax. London raised close to double the tax per worker of other large UK cities.
The figures land as Andy Burnham prepares to enter Downing Street on a platform of greater devolution. The Conservatives have pledged £23 billion in annual spending cuts and Reform says it has identified £40 billion, but the analysis argues cuts alone cannot close deficits of this scale and that growth in the big cities is required.
It sets two targets for the incoming government:
- Closing the roughly 13% productivity gap between the UK and France and Germany,
- Cutting the 35% productivity gap between Greater Manchester and London to 20% – the distance between Lyon and Paris, France’s two largest cities.
Recommended measures include fiscal devolution for the biggest city regions, allocating economic development funding by how far a place trails comparable cities in other G7 countries, and building more homes around commuter stations.
The analysis also calls for the ONS to be funded to produce tax and spending figures at combined authority level, which do not currently exist.
The November 2025 Budget increased investment spending, though the analysis notes international evidence suggests current plans will not be enough.
