Chancellor hints at new funding for northern infrastructure in autumn budget

However, Philip Hammond did not go as far as to commit to additional money for the so-called 'Northern Powerhouse' during a meeting with regional mayors in the north of England this week, according to the Financial Times (registration required), which reported the comments.

Business leaders have recently urged the government to re-commit to a high speed rail link between the cities of the north of England, as first announced by then chancellor George Osborne as part of his March 2016 Budget speech. They did so after Chris Grayling, the transport secretary, appeared to back a new Crossrail 2 line across London shortly after putting electrification of the Transpennine route between Manchester, Leeds and York under review.

Hammond met the three 'metro mayors' in the north of England to discuss boosting growth and productivity in the region: greater Manchester mayor Andy Burnham; Liverpool City Region mayor Steve Rotheram; and Tees Valley mayor Ben Houchen. Together, these three areas have a population of around five million and a combined economy worth more than £102 billion, according to government figures.

Productivity in the north of England is around 15% below the UK average, although employment in the region is currently at a record high of 73.8%, according to the government. The government is hoping to raise productivity through investment in transport, innovation and skills, and will shortly be announcing further funding to improve the region's roads, Hammond said.

"Boosting productivity in the north is at the very heart of the government's ambition to build an economy that works for everyone," he said.

"As we prepare to leave the European Union it is even more important that we support the 'Northern Powerhouse' to reach its full potential. That's why we are investing record amounts in infrastructure, and working with metro mayors to encourage growth and create opportunities throughout the north," he said.

Newcastle recorded the biggest year on year increase in gross domestic product (GDP) per head of local population across the whole of the UK last year, at 4.4% against a UK average of 1.8%, according to new data collected by Barclays Wealth Management. The same study found that house prices in Manchester rose by 7% over the same period, just below the 8% increase recorded in Birmingham and considerably higher than the 3% increase recorded in London.

However, Dena Brumpton of Barclays warned that in many cases, cities were becoming "islands of growth" in wider regions facing economic challenges. For example, average earnings in Newcastle increased by 6.3% last year, the greatest increase of any major UK city, while average earnings in the wider north east region actually decreased by 0.3%, she said.

"It's encouraging to see that people across the country are benefiting from higher earnings and the momentum created by greater GDP per capita ... but if the current trend of high prosperity growth in cities continues, regions risk being left behind by their flourishing centres," she said.

"The challenge for businesses and policymakers is to find new ways of bridging this gap and ensuring greater balance in how each part of the UK is sharing in the country's prosperity," she said.