Manchester Independent Economic Review
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MANCHESTER INDEPENDENT ECONOmiC REVIEW Reviewers’ report About the Review The Manchester Independent Economic Review provides a detailed and rigorous assessment of the current state and future potential of Manchester’s economy. It contains a rich seam of evidence to inform the actions of public and private sector decision-makers so that Manchester can achieve long-term sustainable economic growth and boost the performance of the national economy. Completely independent of local and national government, the Review is led by a panel of five prominent economists and business leaders: Sir Tom McKillop: Chairman, Manchester Independent Economic Review Diane Coyle: Managing Director, Enlightenment Economics Ed Glaeser: Professor of Economics, Harvard University Jonathan Kestenbaum: Chief Executive, NESTA Jim O’Neill: Chief Economist and Head of Global Economic Research, Goldman Sachs The Review Panel commissioned seven world-class organisations to work on seven strands of analysis which provide a deep and cutting-edge analysis of the economics of the Manchester City Region: the way businesses and people interact in terms of trade and skills, the causes and impact of innovation, how investment comes about and the effect it has, and why, despite all this economic activity and growth, stubborn pockets of deprivation still persist. An ambitious agenda-setting report pulls together the seven strands of analysis, output from the comprehensive economic baseline study, as well as incorporating the extensive intelligence gathered from a year long consultation across the public, private and voluntary sector, which will be the foundation of an ambitious economic strategy so that the world-class research the Review has produced is used to drive Manchester’s aspirations forward. The Review has been funded by the Manchester Innovation Investment Fund, which is supported by both the Northwest Regional Development Agency and the National Endowment for Science Technology and Arts, separately by the Northwest Regional Development Agency, by the Learning and Skills Council and by the North West Improvement Network. The Review is also funded, supported and underwritten by the Association of Greater Manchester Authorities. FOREWORD 5 FOREWORD MANCHESTER INDEPENDENT ECONOmiC REVIEW The crisis overlays existing structural The challenges we raise are not all for Manchester is a distinctive changes in the global economy which Manchester and its regional partners, were already weakening the UK’s as one of the questions we were asked relative economic position as new major to address concerns the city’s role in city and one which has inspired economies emerge. The challenge of a national context. This review raises climate change will become ever more questions for all levels of government, pressing. Action on this front is necessary which need to be addressed in a less each of us in different ways. now to secure a sustainable future. compartmentalised way than is often But we do not fall into the trap – for that the case. Manchester’s size and potential is what it is – of believing that the state makes it pre-eminent amongst the cities We were delighted to be asked to itself can create or sustain successful of the North and a natural complement economies. That is the role of people to the Southeastern power house of and of businesses, supported by good the UK economy. It has essential economic undertake this innovative review governance, of which we have seen a assets: scale, connectivity and, in the great deal in Manchester in recent years. University of Manchester, an international 1 Here we try to set out for businesses, seat of learning of the highest quality. of the city’s economy. as well as for policymakers at all levels, Whilst London will remain the UK’s what we believe are the choices which largest regional economy, the UK is going will drive long term growth. Happily, to need all the areas of growth possible many of them are also good for short in the coming period. The evidence we term growth. have presented in this report suggests City and regional leaders approached us Nor does the report advocate a focus 1 Exactly what the term that, if the recommendations we make “Manchester” refers to is a to do so and backed their request with on particular sectors. Although it point of discussion. We use it, But it is more, not less, important to set are followed, Manchester does have a the necessary resources. It has been an considers Manchester’s leading and as well as the term the right strategic goals at a time of crisis. route to long-term growth that would “Manchester City Region” and independent process. The conclusions and emerging sectors and also paints “MCR”, to refer loosely to the However the global economic crisis make a meaningful difference to the Manchester City Region, recommendations are based on evidence, a picture of traditional industries, unless otherwise indicated. We develops, there will be a severe squeeze UK as a whole – not least as an exemplar and on rigorous research, analysis and including manufacturing, in a far more also sometimes talk about MCR on public spending, whoever is in power. for other agglomerations with effective as a “region” and the “city”. modelling techniques. robust shape than many might expect, So this report is a guide to how sensible governance frameworks and the size, we think asking which industries policy choices, regulatory changes and potential and single-mindedness to drive As a panel of business people and Manchester should support is the wrong prioritisation can help ensure that the forward their own economic growth. economists, our task has been to make kind of question. On the basis of the city is stronger at the end of it, offering recommendations based on this evidence presented in this review, greater opportunities to its people. Manchester is probably the UK city evidence to those responsible for leading conventional sector-based policies seem So although this report is not a guide outside London most likely to be able Manchester. We believe the existence not to add value. to responding to the recession, it is to increase its long term growth rate, of this review is a signal of the city’s relevant to that response. The sooner to access international networks ambition and seriousness of intent. We Our recommendations focus instead on Manchester succeeds more in raising and enjoy strong connections to the rest have tried to be as plain as possible about the resources available in Manchester, skills and improving education, the lower of the world. However, it is currently the conclusions to which the evidence above all skills. We have tried to identify the personal costs of worklessness, the punching below its weight given its size. points. This is our report. It will be for the choices which have to be made to greater the labour market attachment, We believe this is an opportunity: the city those who commissioned the review in ensure the city’s businesses and people |and the better the chances of breaking has the potential to grow faster and to Manchester, the Northwest and the UK can invest, trade and create value. the stubborn cycle of intergenerational continue to reinvent itself and regain its to decide what to do with it. deprivation in parts of the city. historical dynamism. These are not stable economic times. It may well help then, to be clear what the In the period since this review was report is not. This report is not a blueprint. commissioned, the global economy has Even in the most stable times, generating plunged into the most serious downturn economic growth is not the product of a for decades. As the scale of the fiscal, simple recipe that allows anyone to “pick monetary and regulatory interventions winners”. This approach does not deliver of the world’s governments and central sustainable economic growth. banks increases, and new waves of creative destruction wash over our cities and regions, it is appropriate to reconsider conventional approaches. 6 7 FOREWORD MANCHESTER INDEPENDENT ECONOmiC REVIEW This review contains the elements that Box 1: Manchester’s productivity Competition and trade and in Employment and skills have been we believe, long-term, are Manchester’s particular strong international positively affected by the upturn way to emerge from recession in the best Higher productivity means higher trading links, have both direct and in the city region’s population since possible shape – by addressing areas wages, higher profits and better indirect productivity benefits, as both the turn of the millennium which of structural weakness and enhancing public services. MIER provides a exporters and foreign investors tend now totals 3.2m residents, driven future opportunities. new analysis of the productivity to have higher productivity levels. by growth in the number of working performance of MCR, with special Further benefits stem from increased age residents through natural The evidence presented here suggests that reference to the phenomenon of competition and the ability to share increase and by international Manchester’s size and potential make it agglomeration economies. Even the knowledge that drives innovation. migration. The conurbation’s the leading candidate amongst provincial though MCR has an employment MIER research provides an insight population growth of over 50,000 city regions in terms of its potential density higher than the national into MCR firms’ trade linkages, since 2000 reflects the attractiveness long-term growth rate. Box 1 sets out the average, it does not display a identifying that the six sectors of of economic opportunities within situation in Manchester on Productivity, corresponding productivity premium. focus (Engineering and Textiles, MCR. Over a quarter (27%) of the whilst Box 2 provides a snapshot of Financial and Professional Services, working-age population holds employment in the city region. Enterprise is the seizing of new ICT Digital/Communications, post/graduate level qualifications.