A couple of weeks ago, I met up with an old friend from my school years, Chris. He has moved out from London, where we grew up, and is now living in Sheffield. We had a conversation which went something like as followed:
“I forgot how expensive it is in London, you would never pay £5 for a pint in Sheffield!”
“I know it’s getting ridiculous, but the wages are generally higher in London to offset the cost”
“Well that just means that the cost of rent is so much higher”
“That is because people keep moving to London for the higher wages”
… And so on and so forth. But I couldn’t help but wonder, are you financially better off living in London or another city in the UK? So I collected some information around some of the largest cities in the UK and did the maths. The results surprised me.
Cost of Living
The first thing I found out was how much the basics would cost if I were to live in each city. This included my rent, utilities, internet, a monthly travel card and a gym membership. One thing to note is that the cost of rent for London is calculated based on a one-bedroom flat outside the city centre, whereas for the remainder of the cities the cost of rent is modelled on a one-bedroom flat in the city centre.
There aren’t too many surprises so far – we know that London, Cambridge and Oxford are expensive places to live. So how do these compare to the average wages in each city?
Adding the average income after tax into the picture starts to reveal a little more. I have only been able to access the average wages in 2013 from the Office for National Statistics, so I have adjusted these using the inflation rate to pro rata to 2015.
Interestingly, the average wages do not appear to correlate to the average cost of living for each city. Clearly the difference in income and cost of living in Edinburgh is higher than other cities, including London.
Cost of Leisure
Before we draw a conclusion, it’s worth noting disposable income will only get you so far depending on which city you are in. It’s rather like Chris’ comment about the price of beer in London. If I had £300 in London and £300 in, say, Glasgow, then you would expect that the £300 would go a lot further in Glasgow than in London.
To counteract this effect, I want to adjust the actual disposable income to reflect how much it is actually worth in the city you are living in.
I have done this by comparing the price of a three-course meal, four pints of beer and an adult cinema ticket in each city with the national average price. The average, by the way, is £43.11.
So in the chart above, the cost of a three-course meal, four pints of beer and a cinema ticket in London (£58) is 35% higher than the national average
We can use these percentages to adjust the disposable income for living in each city so that we can compare the cities on a truly like-for-like basis.
So we have found out the basic cost of living, the average income, the remaining disposable income and then adjusted that to reflect how much it costs to go out and do the things you enjoy in each city. Has my decision to live in London left me financially better off?
Well, it doesn’t appear so. By my calculations, I would be almost three times better off if I lived in Edinburgh, and nearly twice as well off if I lived in Cardiff, Sheffield or Belfast.
There are, of course, other factors to take into consideration. Unemployment levels in each city; the distribution of wealth in London; the immeasurable value of living in a city you love. I won’t be buying a one-way ticket to Edinburgh just yet but it has certainly given me food for thought.
As for my friend Chris, I probably won’t show him this blog. I was hoping to prove him wrong.
This blog has also been picked up in the UK media. Follow the links here:
Edinburgh vs Glasgow: cost of living comparison – The Scotsman
High Wages But High Rent: is London Worth The Trade-off? – The Londonist
What UK cities have the highest disposable income? Edinburgh, Cardiff and Sheffield beat London, but Birmingham comes last – City AM