A distinctive earnings advantage: Drivers of the West of England’s wage premium

Workers in the West of England earn, on average, higher wages than their counterparts across Great Britain (excluding London), enjoying a baseline wage premium of around 6% (see Table 1). This drops slightly, to 5.4%, once differences in the sectoral makeup of the region’s economy is taken into account, indicating that the concentration of high-paying priority sectors in the West of England explains part, but not all, of the advantage.

We can attempt to further isolate the effect of place on pay using regression analysis by including other observable factors in the model that influence wages – including individual characteristics, occupations, firms, time and regional effects – this then provides a clearer picture of whether working in a particular area is associated with higher or lower pay, and by how much.

Adding these additional controls suggests that while workforce and employer composition account for a substantial share of the observed wage boost, location itself continues to matter. At the same time, it is important to note that some of the remaining premium is likely to reflect unobserved factors such as capital intensity, agglomeration effects (the benefits of multiple firms in the same location), and management quality. Accordingly, the precise estimates of the regional wage premium should be interpreted with caution and viewed as indicative.

Taken together, however, these results indicate a genuine but conditional regional pay premium.

Table 1: West of England pay premium:

Source: Authors' calculation based on Annual Survey of Hours and Earnings, 2008-2024

Note: This was a pooled regression for all years (2008-2024) using time dummies to account for time-specific influences on pay, such as economic conditions, policy changes, and other macroeconomic factors. Details of the underlying wage regressions are given at the bottom of this post. Results for wages show statistically significant differences in log wages compared with a national average, excluding London. This is approximately equal to the percentage difference in wages. Where the cell is populated by a hyphen (-), this highlight results which are not statistically significant from national averages.

Wage variation within the West of England

There are marked differences in wage outcomes across the West of England’s local authorities. Bristol consistently exhibits the strongest wage premium compared with the national average (excluding London), even after accounting for all observable characteristics (see row three of Table 1). This signals a persistent city-level advantage.

South Gloucestershire’s pay premium becomes more pronounced when we adjust for differences in jobs, workers and other observable factors. This indicates that wages in the area are stronger than the headline averages alone would suggest. By contrast, the wage premium in Bath and North East Somerset falls almost by half after controlling for observable characteristics. This indicates that part of the area’s higher wage reflects the characteristics of its workforce alongside with their jobs characteristics, and employment structure, rather than solely a local labour market effect. North Somerset initially shows a 2% wage penalty compared with the national average (excluding London), but when accounting for the composition of the population and types of employment this disappears, with wage levels reported as being broadly in line with national comparators.

Pay premium in priority sectors

Workers in the West of England earn significantly higher wages than those employed in the same sectors elsewhere in Great Britain (excluding London), as shown in Table 2. The scale of the premium is positive even after accounting for all observable factors (i.e. individual, firm, occupation, region and time effects), but variations do emerge between each sector.

Advanced manufacturing and engineering, as well as the digital technologies sector show particularly strong wage performance, consistent with the region’s concentration of high-productivity firms and skilled labour. There are also clear pay advantages in the creative industries and environmental goods and services, while the everyday economy records more modest but positive differentials relative to national sectoral averages. The everyday economy includes foundational services such as health and social care, childcare, education, hospitality, and retail.

Overall, these findings highlight the role of the region’s priority sectors in supporting higher wages and living standards.

Table 2: West of England priority sector pay premium

Source: Authors' calculation based on Annual Survey of Hours and Earnings, 2008-2024

Note: Details of the underlying wage regressions are given in the table at the bottom of this post. Results for wages show statistically significant differences in log wages compared with a national average, excluding London. This is approximately equal to the percentage difference in wages. Where the cell is populated by a hyphen (-), this highlight results which are not statistically significant from national averages.

Sectoral performance across local authorities

Sector-specific wage advantages are unevenly distributed across the region. Bristol’s relative strengths are most evident in digital technologies and creative industries, while South Gloucestershire stands out in advanced manufacturing and engineering, and digital technologies. Bath and North East Somerset shows particular strength in environmental goods and services, and North Somerset show a strong advantage in advanced manufacturing and engineering.

Overall, the findings reinforce the view that the region’s economic strengths are spatially differentiated and that policy interventions to support sectoral growth and inclusive wage progression should be tailored to local industrial profiles. What’s more, this spatial differentiation highlights the importance of recognising the local industrial landscape when designing economic and skills policy.

Conclusion

he West of England has a spatially differentiated but complementary regional economy. Bristol anchors high-value creative and digital activities; South Gloucestershire specialises in advanced manufacturing and digital technologies; Bath and North East Somerset contribute through green goods and services; and North Somerset excels in advanced manufacturing and engineering, while also providing a broader labour pool for both local and neighbouring economies.

This diversity across the local authorities is a source of regional resilience but also points to the need for place-sensitive policy interventions. Strategies that enhance innovation, skills, inter-area connectivity, workforce mobility, and inclusive access to high-value employment could help to ensure that wage gains are more evenly distributed across the combined authority.

References

Whittard, D., Bradley, P., Phan, V. and Ritchie, F., 2025. Working towards an environmentally sustainable and equitable future? New evidence on green jobs from linked administrative data in the UK. Journal of Cleaner Production, 494, p.145025.

Appendix - Underlying Wage Regressions

Determinants of Pay by Four Local Authority Areas within the West of England (OLS) for priority sectors (year 2008-2024)

Note: ***, **, * denote the statistical significance at 1%, 5%, and 10%, respectively.

The following reference groups apply: spatial – all other Great British regions except London; industry – all other industries except priority sectors.

To test the sensitivity of results we also restricted the sample period to 2014-2024 to exclude effects of the financial crisis – the results remained stable.