LIVERPOOL must be “realistic” about its potential for economic growth and accept it might have to shrink in the years ahead, according to a new report.

The Centre For Cities think-tank recommended focusing capital investment in the South, where it believes there is the more chance of generating private sector jobs.

Although it said “struggling cities should remain the focus of intensive government support”, the report’s authors argued the focus should be on improving quality of life rather than trying to expand.

Private Sector Cities: A New Geography Of Opportunity ranked Liverpool 43rd in its economic analysis of 56 cities, with Birkenhead 54th.

Its rankings were based on six factors, including private sector jobs growth, population change, unemployment rates and economic growth.

Most of the data related to the 10 years to 2008, when the recession started. The report’s authors, University of Liverpool graduate Chris Webber and Paul Swinney, argued the Government should “start making the case for major expansion” in England’s buoyant cities, and achieve that by prioritising strategic capital investment there, where there is “the most chance of generating jobs through their expansion”.

The nine buoyant cities identified, headed by London, Milton Keynes and Cambridge, are all in the south, although the report said “straightforward North-South interpretations of England’s private sector growth story are too simplistic”.

That is despite the fact only five cities in the North and Midlands are in the top half of the rankings – York is the highest in 14th place – while only two southern cities are in the bottom half.

It added: “England needs to create more private sector jobs. But in order to maximise growth and improve people’s access to opportunities, the coalition Government needs to adopt a new approach to growth across the country.

“There is currently too little recognition of the changes that have occurred in the geography of opportunity across our economy, which have made some cities much better suited to private sector jobs growth than others.”

Although Liverpool is not labelled as a struggling city, the report does suggest it is “close to being classified as struggling”.

The report stopped well short of a controversial study published in 2008 by the Policy Exchange, which said if Liverpudlians “wanted to be as prosperous as the average person in the UK, then they would have to move”.