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Driving Economic Recovery: the Core Cities – a New Partnership with Government 1

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Driving Economic Recovery: the Core Cities – a New Partnership with Government 1 Driving economic recovery: The Core Cities – A new partnership with government 1. Introduction Contents This report explores the economic challenges 1. Introduction 2 facing the UK over the next decade. It assesses how the UK can respond to these challenges to 2. Why the Core Cities 3 generate economic growth and employment and it demonstrates how England’s eight Core Cities and their city regions can play a critical role in driving this 3. The four key challenges growth. However, for them to play this role, it will be facing the UK 4 necessary to devolve more powers and responsibilities to them. 3.1 Adapting to Long Term The report considers three possible futures for Structural Economic Change 4 jobs and economic output in the Core Cities and their city regions, examining worst case, medium 3.2 Addressing Low Skills and and best case scenarios for levels of investment, High Unemployment 6 infrastructure, sustainability and skills in local labour 3.3 Creating A Low markets. This gives three different outcomes for jobs and economic growth over the next decade. Analysis Carbon Society 7 of the difference between the lowest and highest 3.4 Driving efficiency and scenarios between 2009 and 2021 shows that, in a managing public best case scenario, England’s Core City Regions could expenditure constraints 8 support higher levels of economic growth and create: ■ 752,500 more jobs. 4. Future scenarios: the ■ 98,500 fewer unemployed; and next decade 10 ■ £33.5bn more GVA.1 The report sets out what is needed to ensure 5. Core Cities: Achieving the the UK, its Core Cities and their city regions best case scenario 11 achieve the high scenario and avoid a return to urban decline or jobless growth for a decade to come. It concludes by setting out the policy shifts that 6. Moving Forward: will generate higher levels of investment, skills and a new partnership sustainability, leading to more jobs and growth, greater with Government 12 economic inclusion and poverty reduction, and more effective use of public investment. 7. Delivering change: principles 1 Scenarios developed by Oxford Economics for this report for the new partnership 15 2 Core Cities – Driving Economic Recovery 2. Why the Core Cities? Yet, today, the Core City Regions face serious barriers to improving their economic performance. England’s Core Cities – Birmingham; Bristol; Leeds; In particular, low skill levels, widespread deprivation Liverpool; Manchester; Newcastle; Nottingham; and and weak transport infrastructure already inhibit Sheffield – and their city regions, underpin England’s performance and will, in due course, constrain growth. economy. The lack of freedoms and flexibilities to invest to The Core Cities’ own analysis highlights that mitigate these challenges creates further difficulties. England’s eight Core City Regions2: Core Cities only directly control about 5% of the ■ are home to 16 million people, almost a third of the total taxation raised within their boundaries5 but population. they are competing in a global marketplace against ■ generate 27% of England’s wealth, more than international cities with far greater control over finance London3. and investment. This leaves the Core Cities and their ■ have half of the country’s leading research city regions less able to enhance their competitiveness universities; and by addressing their distinctive challenges.6 ■ contain 28% of highly skilled workers (graduate With 27%7 of the nation’s wealth at stake, these level or above). constraints must be addressed to ensure that the In regions with Core Cities, economic performance Core City Regions make the maximum contribution to tends to rely heavily on the productivity of those cities driving the UK economy out of recession in a global and their city regions because of the concentrations marketplace. of infrastructure, assets, high-value business and jobs Over the past decade, the Core Cities have been they contain. For example, Birmingham City Region working together to demonstrate their importance and Tyne and Wear city region produce more than half to the UK economy – providing opportunities not of their entire region’s economic output, while Leeds problems – and this report proposes how best to and Sheffield City Regions combined account for more realise these opportunities. than two-thirds of Yorkshire’s economic output.4 2 As defined geographically by the Core Cities group in 2005. 3 GVA figures for the Core City Regions are approximated using NUTS 2 5 Core Cities (2008) Core Cities Annual Review 2007-08 geographies. Note that the Core Cities research cited includes the Three Cities definition of Nottingham City Region. 6 ODPM (2006) State of the English Cities 4 68.1 per cent of regional GVA 7 Using NUTS 2 geographies Birmingham Professional and financial services firms located in Birmingham generate £3.7 billion a year.1 Birmingham is one of the UK’s foremost conference destinations: the National Exhibition Centre (NEC) Group attracts more than 4 million visitors a year: 42% of the UK’s total exhibition trade and major conferences.2 In the wider City Region there is significant employment in transport technologies.3 1 www.locatebirmingham.com 2 ibid 3 ibid Core Cities – Driving Economic Recovery 3 3. The four key challenges added (see Figure A, below). Between 1995 and 2005, 12 new jobs were created in knowledge- facing the UK intensive services8 for every one new job created In struggling to return to sustainable economic growth, in other industries. By 2007, nearly half of all UK the UK faces four key challenges: employment was in knowledge-intensive industries9. 1. Adapting to long term structural economic ■ A blurring of the boundaries between change: managing the UK’s transition to a more manufacturing and services, with knowledge- diversified and innovative “knowledge economy”. intensive manufacturing companies increasingly 2. Addressing low skill levels and high generating value from its services as well as unemployment: avoiding the prospects of a decade innovative products10. of “jobless growth”. ■ Innovation becoming increasingly important to 3. Creating a low carbon society: making essential competitive advantage in all sectors, reflected by investments in infrastructure and the built environment business investment in intangible knowledge-based to adapt to climate change; and assets (assets and factors which support knowledge- 4. Driving efficiency and managing public intensive work)11 tripling between 1970 and 2004.12 expenditure constraints: devising new instruments 8 Based on the Eurostat definition and including financial services, to fund essential investments. professional services, high tech manufacturing, education and healthcare 9 Brinkley, I (2006) Defining the Knowledge Economy: knowledge economy 3.1 Adapting to Long Term programme report, The Work Foundation Structural Economic Change 10 Brinkley, I. (2009) Manufacturing and the Knowledge Economy: The Work Foundation The recession has accelerated the long term shift in the 11 Including Research & Development, software, design, brand equity, as UK towards a service-based, more knowledge-intensive well as human and organisational capital and skills-hungry economy. This move towards a 12 In 1970 firms invested just £4 on ‘intangible’ investments – research and development, software, marketing, training and design – for every “knowledge economy” has been characterised by: £10 on traditional investment in ‘tangible’ machines, tools, computers and ■ buildings. By 2004, for every £10 that firms invested in traditional tangibles, Knowledge-intensive services becoming they invested £13 on the intangible investments like R&D and workforce the major creators of new jobs and value skills to foster innovation and help create comparative advantage 50 45 40 35 30 25 20 15 Knowledge economy services 10 All other services Share of employee emploment (%) 5 Manufacturing 0 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Figure A: Knowledge-intensive services generated the most new jobs 1978 – 2007 Knowledge Economy services are based on WF estimates from Office for National Statistics figures based on OECD definitions and including communications, financial services, business services, education and health but excluding creative industries (part of Eurostat definition). All other services category includes retail, hospitality, transport, public administration and other community, social and personal services. Manufacturing includes both knowledge-based and other sectors. 4 Core Cities – Driving Economic Recovery ■ Cities becoming increasingly attractive business locations for knowledge businesses wishing to capitalise upon access to consumers, skills and infrastructure, as well as to work in environments that help to “hothouse” new thinking and exchange ideas. 89% of private sector knowledge-intensive jobs are in urban areas in England and Wales13 and growth in knowledge-intensive industries have made a significant contribution to increases in productivity in the Core City Regions over the last decade.14 ■ ideas. 89% of private sector knowledge-intensive jobs are in urban areas in England and Wales15 and growth in knowledge-intensive industries have made a significant contribution to increases in productivity in the Core Cities over the last decade.16 In the recession, it is knowledge-intensive industries which have been affected least, with job losses primarily concentrated in places with high
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