A Stronger, Fairer Economy
Building A Place Based Industrial Strategy
Contents
Foreword 3
Growing Productivity, Raising Living Standards: 4
The Core Cities Offer To The UK 4
Building A Place-Based Industrial Strategy 5
The 10 Pillars 7
Investing in science, research and innovation 8
Case study 9
Case study 11
Upgrading infrastructure 12
Case study 13
Supporting businesses to start and grow 14
Case study 14
Improving procurement 15
Case study 15
Encouraging trade and inward investment 17
Case study 17
Delivering affordable energy and clean growth 19
Case study 19
Cultivating world-leading sectors 20
Case study 20
Driving growth across the country 21
Case study 21
Creating the right institutions to bring together sectors and places 22
Case study 22
Appendix 1. Core Cities housing offer 22
Appendix Two: Core Cities Education, Skills and Employment Proposal 24
Foreword
I am delighted to be introducing the Core Cities collective response to the Industrial Strategy Green Paper consultation and the Core Cities welcome the opportunity to continue to engage with Government on the development of this very important policy area.
With the recent triggering of Article 50 whether we like it or not, the UK will be leaving the European Union in just under two years. This means the requirement for a sound industrial strategy, with buy-in from both central and local government, has never been greater. Post-Brexit it is vital that investment currently coming from the EU to Britain is maintained, that we address the skills shortages holding back the economy and the prospects of local people, and maintain investment in our transport infrastructure and new homes.
To achieve this it is important that strategic decisions are taken locally, at a level where councils and business leaders know what is best for their local communities and can react swiftly to trading opportunities as they arise. Devolution of budgets and powers from Whitehall has to be far more than just a sound-bite if this is to be achieved. Furthermore, I welcome the Green Paper’s recognition of the importance of individual councils and combined authorities as key local institutions but again this will require a stronger commitment to devolution to enable us to deliver.
The Government must ensure that governance at a local and regional level, whether through cities, combined authorities, local enterprise partnerships, or mayors, should be able to work with development bodies that can intervene more widely and strategically at a regional level, and do smart specialisation through regional level industrial policies.
On behalf of the Core Cities I look forward to developing the offer made jointly in this submission with Government over the coming months. This will ensure that our major cities are best placed to drive growth across the UK.
Councillor John Clancy
Leader, Birmingham City Council
Core Cities Cabinet Portfolio Holder for Industrial Strategy, Productivity, Innovation and Growth
Growing Productivity, Raising Living Standards:
The Core Cities Offer To The UK
The Core Cities offer to the UK is to close the productivity gap between their cities as a whole and the national average, which will put £66 billion a year more into the national economy. In doing so they will focus their efforts on creating Inclusive Growth and raising living standards to build a stronger, fairer economy that works for all their citizens. Outside London, the Core Cities are Britain’s best bet for securing economic success.
Core Cities are committed to making this process work, and propose an Urban Industrial Strategy Task and Finish Group, across relevant departments and with which we will work to take our proposals forward.
Unlocking Urban Productivity
The Core Cities make a massive contribution to the UK, delivering 25% of its economy from their urban areas. Yet the UK has the widest regional economic disparity in Western Europe, and UK urban productivity is low by international standards. Compared to the Core Cities’ average, productivity per person is 88% higher in Munich, 80.7% in Frankfurt, 42.8% in Rotterdam and 26.7% in Barcelona.
Just over 60% of this productivity gap is due to in-work factors like poor infrastructure and digital connections, skills in the labour market and joined-up support to grow business, R&D and commercialise innovation. However, almost 40% of that gap is due to high levels of deprivation, and because too many people are not properly engaged with the labour market. Therefore, low productivity cannot be solved by focusing on industry alone, and solutions to all these issues rely on high quality, sustainable public services working hand in hand with the private sector.
Key Components of the Core Cities Offer
Core Cities have the combined scale, capacity, institutions and local assets to create a step change in building the future UK economy, but require specific kinds of support from Government in order to achieve this potential. The investment flowing from the Industrial Strategy, including the future use of monies currently directed through the EU, is critical to this, but as we set out below, the solution is also often about freedoms and flexibilities, different more efficient ways of working and commissioning at the level of place.
Core Cities are able to make a unique offer to Government to add significant value to the delivery of the Industrial Strategy, including the following components which are set out in further detail under each of the ‘Ten Pillars’.
· Empowering local people. Continuing to devolve power to people who know their places best and that have voiced a desire for more control over their localities and their lives.
· A networked set of industry and labour market intelligence hubs. Utilising existing networks and institutions, joining up data and intelligence to support the Strategy.
· Bringing forward key projects and investable propositions. Collectively present the top proposals for economic projects that will make the greatest gains for employment and local economies.
· Increasing international investment. Work collectively to identify and bring forward the biggest opportunities, supported by co-design of an EU Funding successor programme,
· Growing the UK’s urban balance of trade, Post Brexit. A collective trade and investment model based on city-to city links, designed to support growth and the rebalancing of the national economy.
· Defining infrastructure needs. A collective vision of the infrastructure needs required to connect up cities and boost their economic flows, including Broadband and High Speed Rail.
· Place and sector deals. Working with industry on the development of ‘place and sector deals’ informed by a joint analysis of the sectoral strengths of Core Cities and their city-regions.
· Demand led, whole system skills and education. Developing a model for a systems wide approach to education and skills to be delivered at the local level.
· Housing Deals. Work together and with Government on bespoke Housing Deals with common core components to support housing and economic growth.
· Public Sector Reform. Implement Reform models embodying the principles of Whole Place leadership, for services that grow living standards and productivity, including Health and Social Care.
· UniverCities project. Bring together policy and research capacity across all our Universities to solve specific real-time problems and improve the commercialisation of research.
· Air Quality. Core Cities have developed detailed proposals which have been submitted to DEFRA on a defining issue of our age which will impact on the future of our economy (see Annex 3).
The primary principle that underpins all the above proposals is that of developing a place-based Industrial Strategy, the case and components for which we set out below.
Building A Place-Based Industrial Strategy
A place-based Industrial Strategy is fundamental to the Government’s aim to grow and rebalance the national economy, delivering productivity and living standard gains. Previous approaches have had different impacts, but none have succeeded in fully tackling these issues, largely because they have not understood the different characteristics of each place. Understanding what connects businesses to places, and supports their mutual development is fundamental to sound public investment in industry. The green paper recognises that the Mayoral Combined Authorities (including four of the ten Core City regions plus two other areas) provide a strong institutional model for the delivery of place based industrial strategy and this is welcome. However, all the Core Cities and their city regions now have strong leadership in place and the development of the Industrial Strategy needs to be taken forward in parallel with the further development of governance and devolved powers in all of them.
A place-based industrial strategy must therefore be built in such a way as to maximise the potential of the assets of each place for job creation, to ensure that people have the skills to access those jobs, and that prosperity is leveraged to reduce long term and persistent deprivation in some areas. This needs to build on an assessment of the following.
Assets: How to exploit local assets, sectoral potential and anchor institutions, including Universities, to create economic and employment opportunity.
People: Understanding the skills requirements of business, creating a demand led skills system that strengthens the labour market and engages more people with it through learning.
Place: Ensuring that place-making, of which housing is a core component, happens in a way that matches local aspiration, creating liveable places where people want to remain.
The Core Cities consider cities and city-regions to be the most suitable level for implementing many aspects of the Industrial Strategy (although the role of Core Cities and their centres within regional economies is quite distinctive) as they offer the appropriate scale to undertake strategic interventions, and in many cases, we can work together across several or all of our cities at the same time. Furthermore, they represent functional economic market areas; this is of particular importance to successful delivery of the labour market and economic cluster related aspects of the Industrial Strategy. However, the diversity of sectors important to the local economies of individual members of the Core Cities also demonstrates why interventions cannot always be delivered at the national level[1]. Equally, each member’s city-region has different strengths and weaknesses that mean opportunities for future growth and the development of new and emerging sectors differ from place to place. This spatial diversity means that there are many cases where greater devolution of powers to a more local level would be beneficial to the success of the UK economy as it would allow locally appropriate responses to issues identified in the green paper. We have set out specific examples of these under the ‘Ten Pillars’.
The 10 Pillars
Overview
The Core Cities broadly welcome the proposals set out in the Building our Industrial Strategy green paper. In particular, the Government’s emphasis on the importance of place in delivering the national Industrial Strategy, which must be a core component. Likewise, the proposal to utilise investment in infrastructure to help rebalance the national economy is something Core Cities have long argued for. Disparities in infrastructure investment particularly between the regions and the South east have historically added to the unbalanced nature of the UK economy, and themselves need rebalancing going forward. This is not however as simple as a redistribution of ever-reducing resources, and should include local financial freedoms and innovative investment models like Tax Increment Financing and Land Value Capture, on which Core Cities have worked jointly with London over a number of years. It is not therefore a simple ‘either or’ argument that pits one part of the country against another, but a comprehensive and strategic approach to giving places the freedoms they need to level up, and benefit the whole of the UK.
Nevertheless, a number of important components are missing or given insufficient emphasis. Housing, Air Quality, the importance of public services in shaping local economies and labour markets, and the role of cities more broadly in the economy are all examples. The Core Cities collectively wish to help develop the Industrial Strategy with Government and are uniquely placed to drive growth in the nation’s productivity. Specifically, we believe that a closer working connection between the UK’s urban economic hubs is fundamental to a successful, place-based industrial strategy.
We are committed to putting effort and resource into getting this right, and propose a cross-departmental Urban Industrial Strategy Task and Finish Group with which we will work to implement our proposals.
As set out above, collectively the Core Cities and their wider city-regions account for a quarter of the national economy and are home to approximately 19 million people. They each act as large international business and trading hubs and have strong links with trading partners across the globe. However, overall the Core Cities underperform when compared to the UK national average in terms of productivity with the gap estimated to be worth £66 billion a year. Furthermore, comparisons with Germany and France show that rather than lagging behind the wider nation in terms of productivity regional cities can outperform the national average for productivity and boost the national economy. If the UK is take advantage of the opportunities created by Brexit and minimise the potential negative impacts our cities need to be empowered to support our nations industries. Cities drive economies for nations, not the other way around.
The following sections discuss each of the 10 pillars of the Industrial Strategy in turn and make suggestions where Core Cities feel improvements could be made to the proposals in the green paper. There are also case studies given of work undertaken by the members of the Core Cities which may be helpful to Government as it develops the Industrial Strategy further.
Investing in science, research and innovation
The commitments in the green paper to substantially increase R&D funding and the establishment of UKRI to develop and deliver a clear strategy to support research, development and innovation at all stages are welcomed. The Core Cities are particularly supportive of the proposal to capitalise on local strengths across the UK and the acknowledgment that the current Research Partnerships Investment Fund arrangements are restrictive in their operation. Collectively the Core Cities also support the establishment of the Industrial Strategy Challenge Fund and the criteria set out in the green paper for establishing the areas that the fund will focus upon. Finally, the announcement that Government will commission research into best practice around the growth and survival of university spin-outs is supported.