A third of UK tax comes from London, report says

Manchester's tax intake grew by 1 per cent in the period while tax generated in Birmingham, Glasgow and Leeds declined

Sadiq Khan, the mayor of London, highlighted the importance of more balanced growth across the entire UK (PA)

The UK has become increasingly reliant on London for tax revenue since the financial crisis, taking almost 30 per cent of total tax revenue from the capital.

The figures from a Centres for Cities report highlights the drastic effect that a slowdown in London's economy could have on the rest of the UK.

The amount of tax generated in London increased by 25 per cent, or £28bn, between 2004-5 and 2014-15, while the share of tax generated in the other cities remained flat or fell.

Manchester's tax intake grew by 1 per cent in the period while tax intake in Birmingham, Glasgow and Leeds declined.

The findings have been taken as a warning that the UK must do more to rebalance its economy.

Sadiq Khan, the mayor of London, said the report was further evidence of how the capital had become the main tax generator for the whole country and highlighted the importance of more balanced growth across the entire UK.

“Further devolution, so that London and all our cities and neighbourhoods can take back control, is vital to unleash the energy and dynamism that this country needs in the light of its decision to leave the EU,” he said.

The report emphasised the importance of using devolution powers to give regions better control in the face of Britain's increasingly uncertain economic future.

"In the face of political and economic uncertainty and potential shocks to the economy, the growing reliance on fewer places – and London in particular – to generate more revenues is a risky situation for the exchequer to be in compared to one where more cities are making a positive contribution to the national tax pot,” it said.

The Centre for Cities report analyses "economy taxes", which include taxes depending on the growth of the economy, such as income tax, VAT, corporation tax and land tax.

The disparity is even more stark for tax that comes from work, such as national insurance and personal income tax. London generated £91bn in work taxes, more than the next 60 cities combined.

London is one of the few cities to recover from the recession, the report shows. More than three quarters of UK cities generate less tax now than they did at their pre-recession peak.

Wages have also dropped. Most cities are home to more jobs than 10 years ago, but the average pay packet has decreased in more than two thirds of UK cities in that period.