The UK is the most ‘geographically unbalanced’ economy in Europe, think tank says after council chiefs warn of stalled devolution agenda.

A new report from IPPR has found 40% of the UK’s output is produced in London and the South East. It also found average incomes in the North West, South West, West Midlands and Wales are more than 30% lower than in the capital.

The report follows a call from council chiefs for the Government to reignite its ‘stalled’ devolution plans.

The Local Government Association (LGA) last Monday expressed concerns that no new devolution deals had been announced since March 2016, a fact that the think tank Localis warned was a particular problem in light of Brexit.

'Given the economic urgency of Brexit, all parts of England - from major cities to small towns - deserve new powers to revive moribund local economies and with it the opportunity to help themselves,’ said Localis chief executive Liam Booth-Smith.

IPPR, a progressive think tank, called for ‘much greater economic power’ for the UK’s nations and regions, including greater ‘fiscal devolution’ and regional banks to support local economies.

In other findings, IPPR’s research revealed the UK was the most unequal of western European countries, with nearly a third of children living in poverty. More of the poor now live in working households (54%) than in non-working households (46%).

On top of this, the report, which was produced by the progressive think tank’s Commission on Economic Justice, warned the UK economy no longer translated economic growth into rising earnings.

Though GDP per head has risen by 12% since 2010, average earnings per employee have fallen by 6%, they said.

Since the 1970s the share of national income which has gone to wages has gradually declined, from 80% to 73%, while the share going to profits has increased. The wage share is now the lowest it has been since WWII.

‘The British economy needs fundamental reform. We don’t have a British economic model. We have an economic muddle,’ said Tom Kibasi, IPPR director and chair of the Commission on Economic Justice.

‘The persistent economic problems we have experienced since the 2008 financial crash won’t be fixed with a bit of tinkering.

‘There is a growing consensus across business, trade unions and civil society that a radical new approach is now needed.

‘Change should be guided by a new vision for the economy, where long-term prosperity is joined with justice for all. We want to see the widest public debate possible on our analysis and proposals.’

The Archbishop of Canterbury, the Rt Rev Justin Welby, who was a member of the commission, commented: ‘Our economic model is broken. Britain stands at a watershed moment where we need to make fundamental choices about the sort of economy we need.

‘We are failing those who will grow up into a world where the gap between the richest and poorest parts of the country is significant and destabilising.