Perspectives

Regions need proper industrial strategy to truly rebalance the economy

Areas outside of London need an industrial strategy which rebalances the economy and ensures the regions benefit from infrastructure investment, says Jason Millett.

At the beginning of the last Premier League football season, with title odds of 5000/1, Leicester City manager Claudio Ranieri faced an enormous challenge in delivering success from a promising, if disjointed group of players. The rest as we know, is history.     

The UK faces a similar quandary when it comes to improving our national economy and realising the economic potential of the regions outside of London. London dominates the UK, accounting for more than a fifth of our GVA (22%), more than the economies of the north west, Yorkshire and east Midlands combined. 

The UK has long been recognised as one of the most centralised countries in the world. For centuries, the vast majority of the UK’s public policy has been created in London and the capital also receives the bulk concentration of public and private sector investment. As a result, London also attracts many of the best workers from across Britain and across the world, creating a brain drain from the regions.

It is therefore not surprising that London is seven times stronger than the economy of Britain’s second most economically active city, Manchester. Imagine how much more powerful and internationally competitive and productive the UK economy could be if we were able to unlock the potential of all our major cities and create a national industrial strategy which drives regional growth and job creation?

As secretary of State for business, energy and industrial strategy Greg Clark said at the Institute of Directors annual conference in September, for too long the government’s industrial strategy has been top down treating vastly different areas of the UK as identical. If we want to maximise the output of the entire country we need to have an effective dialogue with businesses in the regions and then create an industrial strategy that works in each region. 

The £23bn National Productivity Fund, announced by the chancellor in the 2016 Autumn Statement, will go some way towards informing how an overarching UK industrial strategy should be delivered, especially if the fund remains committed to regional growth.      

Devolution will be key to this in order to improve connectivity, infrastructure and skills. For too long our regions have been fighting with one hand tied behind their back. The regions have not had the powers they need to manage their own income streams or the powers to determine where their money should best be spent. New powers granted to mayoral combined authorities, as well as funding for local enterprise partnerships, should make some difference. 

Yet the devolution of property tax revenues streams - including council tax, stamp duty, land tax and business rates - would provide stable and continuous funding to stimulate economic growth according to local needs.

With the approval of Hinkley Point C, Heathrow as well as HS2, HS3 and the trans-Pennine in the pipeline, the UK is entering a golden age of infrastructure investment in the UK. We need to make sure this once in a generation opportunity does not pass by our regional cities and that we maximise the benefits in terms of improving their connectivity.

Commissioning HS2 to increase capacity and slash journey times to Birmingham and London will bring enormous benefits to the regions. However, these will not be fully realised if we do not increase the capacity and efficiency of our existing infrastructure in the north.

Transport for the North is currently working with HS2 to prioritise and recommend infrastructure improvements which will enable the north to modify existing infrastructure so that the regions can maximise the benefits of the advent of high speed rail. The north also faces a challenge to close the skills gap to ensure they have access to the skills they need.

Greater Manchester, West Yorkshire, Sheffield, Cornwall, Tees Valley, the North East Combined Authority, the West Midlands Combined Authority and Liverpool city region have all been granted devolution deals which provide more control over skills.

This will help local authorities restructure their further education system and training provision to provide courses more in line with the needs of local employers. We must also ensure that our regional cities don’t miss out on resources or opportunities by competing against each other, rather than complementing each other’s strengths - London and the south east are already providing stiff competition without adding more into the mix. 

And as our cities and regions take on these newly devolved powers, we need to ensure that we have the right people with the right skillsets in place to deliver this much needed change. 

While it remains to be seen if Leicester City can ever repeat last year’s unprecedented success, the way in which they realised their full potential throughout last season is something our regions can certainly learn from.    

If we are to rebalance the economy and realise the economic potential of a United Kingdom then we need an industrial strategy and infrastructure investment which unleashes the potential of the whole of the UK. But we must be patient. Such seismic change will take time and we won’t see instant results, although HS2, Heathrow expansion and Hinkley Point C are good first steps.

While it might be called a national industrial strategy, the issues that hold back our cities are local and likewise the solutions can only be found locally too. London and the south east are already internationally competitive. Let’s now listen to the regions to see what they need to become internationally competitive too.

This was first published on Infrastructure Intelligence.

This opinion piece features in our Northern Powerhouse section.

Jason Millett, COO for Consultancy

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