Southampton has been confirmed as a “city of great opportunity and growth” after coming near the top of a national league table.

The Demos-PwC Good Growth for Cities Index, which considers wellbeing as well as economic success, ranked the city as the UK’s number three.

It said Southampton had fared better than other cities in the pandemic – but would also be slower to recover.

The report estimated the city’s economy shrank by 9.9 per cent last year, against a UK average of 11 per cent.

“Southampton is in third place in the latest Good Growth for Cities Index, yet it continues to face economic challenges,” it said.

The city saw its number of new businesses rise from 5,360 in 2016 to 6,280 in 2019. There was a big improvement in the skills of its workforce, with 64 per cent of over-25s qualified to at least NVQ level three, compared with 61 per cent in 2016.

“However, alongside these improvements, Southampton experienced a greater decline in its health, income distribution and the skills of 16-24 year-olds relative to the index average,” the report said.

“Southampton’s economy is expected to be less impacted by Covid-19 than the average UK city, but also to recover less strongly in 2021.”

The city’s economy is expected to grow by 4.2 per cent this year, compared with an average of 4.8 per cent. Its recovery will be slowed by its reliance on industries that have been hard hit by the pandemic.

Transport and storage, which includes the cruise industry, makes up 9.1 per cent of the city’s economy. It contracted by 22.9 per cent in 2020 and is predicted to grow by only 4.1 per cent this year.

The report highlights local initiatives including the planned extension of Southampton Airport’s runway, the application for freeport status, the City of Culture bid, the Fawley Waterside development and ABP’s £55m plan for a new cruise terminal.

Peter Taylor, chairman of Southampton Chamber of Commerce and director at Hampshire Chamber of Commerce, said: “It is excellent to see Southampton recognised as a city of great opportunity and growth in PWC’s independent, comprehensive and objective report.

“The city has been and will continue to be strategically important both for the region and the UK.

“We have the opportunity to build on the strengths and assets in the city, to develop an environment in which those who live and work both now and in the future can have pride and thrive.”

Southampton City Council leader Cllr Christopher Hammond said: “To see Southampton ranked once again in the top three cities for good growth in the UK is testimony to the ingenuity, hard-work and resilience of our businesses and economic opportunities.

“Despite the pandemic and the economic challenges, over half a billion pounds of public and private investment are proposed in schemes such as the council’s home build programme, Leisure World and the Bargate Quarter.

“This, coupled with the recent announcement of a fifth cruise terminal pioneering the use of green technology, shows demonstrable confidence in the city’s growth prospects and its vital economic assets such as the port.”