Our cities will save us

Like a magician George Osborne has pulled a rabbit out of the hat. Cities are the future!

Manchester is going to demonstrate a new approach to the health economy whilst other British cities will become the powerhouses we need to boost the economy. This is a turnaround from those who, in the bonfire of the quangos, rid us of the Regional Development Agencies. What is going on?

The Productivity Conundrum

The UK is wrestling with a productivity conundrum. Despite modest economic growth we are falling further behind the developed world. We are apparently 39% less productive than the US. Uncharacteristically economists are struggling to explain this – especially in traditional terms of UK supply and demand. Maybe this is because we have a complex regional problem? Compared to other successful economies – Germany for example – our economic activity is concentrated in two regions: London and the South East. The two charts below illustrate the challenge.[1]

[1] London’s Finances and Revenues: City of London Corporation / Oxford Economics, December 2012

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You don’t have to be an economist to wonder how the national economy can become highly productive when it is so lop-sided. The figures are a little old but the general picture remains.

I wonder whether structural changes in the labour market are also contributing to the lack of productivity. Our workforce is ageing. More people are staying in work because they can, many because they have to. This does not mean that they are going to work flat out. As this trend continues our workforce is likely to become less healthy and potentially less productive. We need to adapt to these changes in both workplace and city strategies. Health and wellbeing impacts on more than A&E waiting times and bed blocking – it affects the whole economy.

We have also seen a dramatic shift towards self-employment. Many more are counted as part of the labour force but not all of them are working all the time – some for lifestyle reasons, some because there isn’t the work. Are we planning with this in mind? Again this is impacting at both workplace and city scales.

We need to support our “No Collar” workers

Some, like John Neill of Unipart,[1] contend that our productivity problem is all about our poor management culture: “This isn’t a failure to invest in IT. It is about the attitude to change,” Others point to poor training in the relevant skills we need to support the economy. Talk by the government of “White Collar” and “Blue Collar” workers is a notion that belongs in an age of steam.  We need to support our “No Collar” workers. We need train, attract and retain who have the right skills to support our industries and services and who have broken free from the old ways of management. We are in a global economy and need to compete. How do our cities and regions help support this workforce? Do our workplaces support their needs?

Prospects for regional growth

So am I encouraged by the Chancellor’s swerve towards regional and city growth? Yes, but not without reservations. Chancellors love to pull rabbits out of hats but, like all magicians, they are masters of misdirection. There are regional problems to be solved, there are cities and city regions happy to take on the challenge. Once given the responsibility will cities also have the financial resources and the capacity to deliver? Central Government will be quick to blame cities that fail to deliver. Adequate funding will have to be redirected from the centre to the regions – a challenge at a time of budget cuts. Regional Development Agencies no longer exist and many cities are already stretched having to provide their statutory responsibilities on tight budgets. They need help to position themselves in a fast-changing global economy, make the most of an ageing, indirectly employed workforce and make choices about where best to invest limited resources.

A role for the centre?

The shift towards a more regionally focussed growth is good. However it cannot work without an integrated national infrastructure strategy. Our over-reliance on London and the South East is part of the productivity problem. We need a national infrastructure strategy that ensures that each of the cities and regions receives the support it needs to sustain economic growth. This strategy must also respond to the complex interdependencies between our regional economies.

 

 

 

[1] Financial Times: May 13, 2015 A UK productivity evangelist with eyes on £300bn prize