Growing Cities, Growing Poverty

Why economic growth is no longer translating into poverty reduction 

UK cities have experienced significant growth in the past decade, with some experiencing a population increase of up to 22%, and increased investment, which has reinforced the idea that urban expansion leads to improved living standards. However, this narrative clashes with the persistent and sometimes worsening urban poverty. Despite the growth of local economies, many city dwellers continue to struggle with low wages, job insecurity, and rising living costs. This points to a deeper issue of how policy is designed.

The Limits of the “Trickle-Down” Approach 

 The UK’s approach to city growth is rooted in the theory that investment and job creation will reduce poverty and boost living standards over time, but evidence shows that economic growth alone is not enough to deal with the issues created by changes in the labour market and housing costs. UK urban policy has long been shaped by a relatively straightforward and traditional assumption: that if cities attract investment and create jobs, poverty will naturally decline as the benefits “trickle down” into improved living standards. This thinking draws on older theories of agglomeration, which suggest that firms and workers clustering together benefit the wider economy and households through boosts in productivity, wages, and overall economic output.  

Economic growth has increasingly produced jobs that fail to provide a route out of poverty. For many, employment doesn't ensure a stable income, which undermines the idea that job creation is enough to reduce poverty. Much of the recent job growth in UK cities has been concentrated in low-paid sectors such as hospitality, retail or care; all sectors that are characterised by low wages, zero-hour contracts and limited wage progression. 

In work, poverty has become a defining characteristic of the urban economy as many households continue to struggle while being employed. Even in successful cities such as London, weak wage growth against inflation has meant that these jobs are insufficient to meet the cost of living. Increased productivity associated with urban growth has not been redistributed evenly, which further weakens the link between economic growth and improved living standards. 

Policy Initiatives and Their Limits 

This approach has underpinned a range of government strategies, including the UK’s levelling up agenda and urban growth policy. The central idea of the Levelling Up White Paper was that if cities in the North and Midlands could attract greater investment and increase productivity, levels of poverty and deprivation would fall. As a result, the policy focus was on driving prosperity through large-scale investment in infrastructure and public services. Commitments included £5bn for gigabit broadband, a £96bn Integrated Rail Plan, a £5.7bn transport settlement, reforms to education and skills funding, alongside £3.8bn in skills investment. 

While these initiatives aimed to address regional inequalities and poverty and have contributed to improvements in employment outcomes, evidence increasingly suggests that economic growth alone does not automatically translate into poverty reduction. In several cities, economic growth has taken place without corresponding falls in poverty, and in some cases, poverty has remained stubbornly high or even increased. This raises a critical question for urban policy: if growth is not reducing poverty, what is missing from the current approach, and how should cities rethink the link between prosperity and living standards? 

Rethinking Urban Growth for Shared Prosperity 

If cities are to be engines of shared prosperity, growth must be designed around living standards, not assumed to improve them. Instead, poverty reduction should be a central objective of urban development strategies. This requires a shift in focus away from productivity and employment rates toward income security, housing affordability and access to essential services. 

A more inclusive approach to urban growth would prioritise the quality of jobs being created. Public investment and funding should be tied to job quality standards, such as being paid the real living wage, secure employment contracts and opportunities for career progression. Without these safeguards, investment risks reinforcing low-paid, insecure employment, undermining its potential to reduce poverty. 

Poverty and insecurity in the UK continue to grow, with no meaningful method of prevention. This has left local authorities with the responsibility of supporting those struggling. Many councils with high poverty rates do not have adequate strategies and structures to tackle poverty: less than 19% of councils currently have an anti-poverty strategy, and another 13% plan to introduce one within the next 12 months. In order to resolve this, long-term approaches must be implemented. 

Stronger national leadership is needed to support local efforts to tackle poverty. While cities and local authorities are increasingly tasked with addressing the consequences of poverty, they lack the power and resources to do so effectively. Aligning national welfare, housing and labour market policies with local growth strategies would help ensure that urban prosperity is more evenly shared. Without this shift, growing cities will continue to coexist with persistent and, in some cases, deepening poverty.