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. business opportunities by start-ups Creative/Digital/New Media, Life MCR’s core employment draws on In comparative terms, both historically and existing firms, an important Sciences and Hospitality/Tourism) a pool of Higher Managerial and and geographically, Manchester’s source of productivity growth. are all strongly linked to the local Professional people second in the UK economy is now diversified. It has assets Enterprise increases productivity as economy, but show a tendency to be only to London. However, large net vital to growth. Its governance, though firms introduce new technology and inward facing. graduate outflows to London and the still evolving, gives grounds for working practices to compete more Southeast continue. Two-fifths (40%) encouragement. The city is asking itself effectively, as well as raising average Innovation, a key driver of of MCR’s resident population hold the hard questions about its future with productivity by helping drive productivity, is the successful either NVQ Level 2 or 3 equivalent a confidence which seems to us a fitting inefficient firms out of the market. exploitation of new ideas, qualifications. However, the existence modern response to the world-beating A more entrepreneurial, knowledge- encompassing the implementation of high proportions of the workforce dynamism of Manchester’s Victorian based economy, creates more of new or significantly improved with no qualifications remains a founding fathers. favourable conditions for start-ups, products, processes, marketing persistent challenge: 16%, and higher which help bring innovation, enhance and organisational changes that for the unemployed (32%) and In presenting this report, we very much local supply chains and increase contribute to increased productivity economically inactive (34%), as well hope that it will be a call to action for competition. MCR has over 92,000 and competitiveness. Innovative as over 400,000 residents with poor Manchester as a who le: for its business VAT registered businesses, a growth firms tend to concentrate in urban literacy or numeracy skills. leaders as much as its civic ones. This is a of some 17.2% since 1996, higher areas able to combine a strong local report which is designed to be implemented. than its city region peers, although knowledge capital base with high We very much hope it will be. below national average and less than levels of connectivity to the global half the rate of inner London. economy. The Review work points to a lack of ‘innovation endowments’ Investment in physical capital raises in MCR relative to the most labour productivity directly, by productive parts of the UK, providing the equipment and capital underlined by limited private sector used by workers (deepening), and R&D specific firms and limited does so indirectly by helping to non-university public sector research introduce new technology and thus and development capacity in the city implementing product and process region, as well as to a lack of internal innovation. The Cushman & linkages which allow innovation to Wakefield UK Cities Monitor ranks spread across and become Manchester as the 2nd city in the “domesticated” within the city. UK, and first as a place to locate new headquarters and for office space. Over 50% of the Northwest’s Top 500 companies operate within the city region, although only one FTSE 100 company is located there.

8 9 FOREWORD Manchester Independent Economic Review

Box 2: A snapshot of employment in MCR ICT Digital/Communications: Manufacturing: MCR’s history Structure of this document including computer engineering, means the area still has a large Employment in MCR remains more hardware and software consultancy and diverse Manufacturing base, This Review starts with a broad concentrated in medium and and telecommunications, with representing around 184,700 introduction to the approach we have large-size workplaces (those with 50 around 57,400 MCR employees. employees (around 12% of the total taken to the research. The second section or more employees) than the national Growth is particularly concentrated workforce). There is enduring contains a brief overview of the Review’s average. This is pa rticularly the case along the M56 and M62 corridors, strength in traditional findings, organised by common themes, in the public sector, financial and Manchester, Trafford and manufacturing industries including to set the stage for our recommendations. professional services, and logistics Warrington, and also increasingly food and drink (centred on Bolton, These draw in particular on the overview sectors, reflecting the city region’s found in out of town locations, Tameside, Trafford and Wigan) and of agglomeration economies in MCR key role as an administrative centre, such as within Stockport and Bury, mechanical & electrical engineering which was carried out by the research corporate service centre and as entrepreneurs establish (Oldham, Rochdale, Salford, team at the London School of Economics distribution hub. Although large independent ‘lifestyle’ businesses, Tameside and Wigan) and high- (LSE), as well as on the other individual workplaces represent less than one which remain connected to the main value niche specialisms have been reports. These cover: investment; percent of all workplaces, they still urban business opportunities in the developed in knowledge intensive employment and skills; innovation, trade support nearly a third of all jobs regional centre. manufacturing, such as: automotive and connectivity; the future of Daresbury and remain a significant driver of engineering-supply chain (Bolton and big science-led innovation; and investment within MCR’s economy. Life Science Industries: and Trafford); electronics and deprivation and sustainable communities. MCR employment patterns are set including healthcare, medicine communications equipment (Bolton, Short summaries of the individual out below: and pharmaceuticals, accounting Oldham, Stockport and Tameside); reports are also to be found at the end of for 199,000 employees in MCR. and advanced materials (reflecting this document, but the full detail can be Creative, Digital/New Media: Linked with the internationally university specialisms at Bolton and found in each of those separate documents, including digital media and renowned academic facilities, Manchester as well as key employers most already published. broadcasting, creative and cultural e.g. the University of Manchester based in Rochdale and Tameside). industries, entertainment and Faculty of Medical and Human Our main conclusions and recommend- publishing, representing 84,900 Sciences, which is home to over Manchester Airport: the largest in ations follow, on what policies should – employees (broad definition) in 7,000 undergraduates, 2,000 the country outside the Southeast, and should not – be followed in order to MCR, and forming part of a growing postgraduates and 1,700 academic carrying some 9.4% of the UK total, improve productivity and living standards hub for media businesses centred staff. Major health services, and 58% of passengers from in Manchester as a whole. Some parts of around MediaCityUK (a major research and teaching facilities are northern England. MCR is also the policy agenda are obvious but difficult development acting as a catalyst for found in the regional centre, home to concentrations of activity to implement, especially given the limited regeneration in Salford and expected as well as pharmaceuticals firms in in Logistics due to proximity levers available at the regional or sub- to add £1.5bn to the regional Macclesfield and Vale Royal and to key logistics locations on the M6 regional level. Others overturn some long- economy, providing employment for firms at the vanguard of technology (Wigan, Warrington and Trafford), standing pieces of conventional wisdom, 15,500 people), as well as growth in in the Science and Innovation M60 & M62 (Salford, Stockport or may run against particular interests. employment in the centre and fringes Campus at Daresbury. and Rochdale), and the West Coast of Manchester and in Trafford, Main-line and Transpennine rail The Review draws throughout on the Stockport and Macclesfield. Financial and Professional Services: routes. Construction is also a summary of the economic and social including banking, insurance, legal significant employer (in Stockport, context for all the results derived from services, real estate, management Warrington and Wigan in particular), its detailed baseline study of the city consultancy and architectural as is Engineering, reflecting a legacy region, which is available and updated and engineering services. These of industry and also a growing regularly on the Review’s website at: activities account for around one specialisation in the face of global sixth (239,500) of MCR employees, competition. Retail, Hospitality www.manchester-review.org.uk. reflecting the city region’s role & Tourism and Sports are also vital as one of the largest centres for such elements of Manchester’s economy services outside London. Particularly and also its image and branding. high growth concentrations are found in Manchester city centre and south, Salford Quays and Trafford Park, as well as growing satellites in and around Bolton, Stockport and Warrington.

10 11 1.0 INTRODUCTION

13 1. INTRODUCTION Before turning to Manchester in particular, it is important to set out why we believe that an exercise like this Review can make a difference, or in other words, why it makes sense to develop an active city regional economic policy to boost productivity and growth.

Economic activity is unevenly spread There are also increasing costs to this in every country. The explanation for concentration, such as congestion and this lies in the benefits of concentrating higher house prices, as cities grow. business and jobs in certain places The balance of these costs and benefits for reasons which might often have determines which regions are rich and a particular geographical or historical poor, which grow rapidly or more slowly, explanation (such as a natural port or and so shapes the uneven geographical easy access to resources in the past) but pattern we see in the economy. which gradually become self-fulfilling. The context for our exploration of these There are favourable knock on effects economic benefits and costs prevalent or spillovers between businesses and in MCR is the extremely uneven individuals, which over time reinforce geographical spread of economic activity the advantages of these centres of in the UK. London and the Southeast economic activity. Economists call these are dominant in terms of productivity ‘agglomeration economies’. These benefits and GDP per capita, to an almost unique to the geographic concentration of economic degree amongst the advanced economies. activity are often self-reinforcing, creating All of the UK’s other city regions lag well a virtuous cycle over time. behind the capital.

14 1. INTRODUCTION

Does this matter for MCR and if so what A small improvement in the balance of can be done about it? benefits and costs can potentially have a big impact on growth, productivity and If this question means, can and should living standards, as both capital and 2.0 we seek to increase productivity in MCR, labour are very mobile within the UK. the answer is yes, because this will translate into increased living standards So the payoff to the policies we for the people who live in the region, and recommend below could be substantial. will also boost UK growth. This, in turn, Key Findings may increase migration to MCR from Implicit in this Review is a sense that within the UK, as people tend to move despite the considerable efforts that have to places with good jobs and a relatively gone into developing regional and city strong rate of growth. economic strategies so far, their impact is not as clear as might have been hoped. However, we do not believe that MCR’s This is confirmed by the evidence improved growth needs to come at the presented in some of the Review’s expense of London and the Southeast, individual reports. We believe, from which after all would tend to reduce our assessment of the detailed studies, average UK productivity. Rather, this that MCR can implement policies increased growth can and should narrow which would change this for the better. the gap in GDP and productivity between the greater Southeast and the rest of the The effective collaboration between country, and it will thereby raise the UK’s its component units gives MCR a GDP and productivity in a way that is tremendous advantage in addressing the complementary to London doing the same. policy challenge. Uniquely, the ten local However, the primary aim of this Review authorities within Greater Manchester is to seek to increase productivity, efficiency determine policy with majority voting and living standards in MCR. A faster- and have a set of strategic commissions to growing, more productive city region which they will begin to delegate strategic will be a better place to live, with more authority. We note that more than half of dynamism and innovation in the good the members of the Board of one of those times and more resilience in the bad times. (the Economic Commission) come from the private sector. This structure reflects Broadly speaking there are two ways the priority given to effective governance, to bring about this increase in GDP a reason to be optimistic about MCR’s and productivity. One is to enhance capacity to realise its full future potential. the benefits of agglomeration – to make However, as shown by the failure to agree it more attractive for businesses on a package of massive investment to invest and people to move into MCR. in its public transport infrastructure The other is to reduce the costs of (the Transport Innovation Fund, or TIF, agglomeration, including housing, bid), its decision-making process has transport and congestion costs. weaknesses too. We return below to the decision-making framework in MCR as it is important for the sometimes difficult policy choices we set out here that the city’s governance is as effective as possible.

16 2. KEY FINDINGS Before moving on to our recommendations, we set out in this section a brief summary of the key findings from the empirical research.

One of the features of a highly centralised 3. Manchester punching below its weight. country like the UK is that there is a There is evidence that although relative paucity of data and empirical MCR is characterised by relatively research on the performance of its major high agglomeration economies, cities and regions. This Review’s studies firms in the region do not exploit these have started to fill this gap for MCR. as effectively as firms elsewhere Here we list the most important findings in the UK. Their productivity is lower of the research, and in particular those than we should expect given the size emerging from the overview report. of MCR’s economy, and the region is Some confirm earlier impressions, while therefore punching below its weight others are more surprising. in terms of productivity.

1. MCR’s potential. 4. Agglomeration economies exist arising Outside London, MCR is the city region from a large, diverse urban region. which, given its scale and potential for There is no evidence that the clustering improving productivity, is best placed of particular sectors, with one or two to take advantage of the benefits of exceptions, is important for productivity. agglomeration and increase its growth. On the contrary, the agglomeration economies available relate to the 2. Productivity rankings in the UK. benefits of being in a large and diverse London and the Southeast has the urban environment. Firms’ productivity, highest productivity in the UK. In the investment spillovers and innovation North, Manchester, Leeds-Bradford all depend on the rest of the supply and Liverpool have higher productivity chain, rather than on competitor firms than other cities, and firms in in the same sector. Manchester have significantly higher productivity than firms outside these 5. Explanations for productivity differences. city regions elsewhere in the North. The productivity differences are largely explained by the extent of agglomeration economies, skills, and to a lesser extent access to transport within the city region.

18 2. KEY FINDINGS

6. Importance of skills. 9. No rationale for redistributing economic Skills are a large part of the explanation activity from south to north. for the productivity gap between This will seem too obvious to be the Southeast and the rest. Manchester worth stating, but we include it 3.0 does well in terms of skills compared as a counter to the rhetoric which to other cities in the North, but not occasionally emerges. There is no compared to the Southeast and Bristol; rationale for supporting policies and the productivity of its skilled which try to redistribute activity in workers is lower than that of skilled some places at the expense of others Our workers in the latter two comparators. which are more productive.

7. Transport links. 10. Neighbourhood outcomes are Inadequate transport networks increasingly polarised. within MCR are an important cost All local authority districts in MCR recom- of increasing the size of the city, have seen rates of worklessness reduce and improvements would provide the until the very recent past, but with largest economic payoff. There may increasingly polarised neighbourhood be net economic benefits to investment outcomes. in some external links to other cities mendations such as Leeds which could become 11. Deprivation arises at individual level, more connected to the MCR economy, not neighbourhoods. but a rigorous analysis of such proposals It is impossible to disentangle the was beyond the scope of this Review. causes from the consequences of economic and social deprivation 8. Housing. at the neighbourhood level, as This is the other main cost of increasing neighbourhoods are a very imperfect agglomeration, and the evidence from indicator of the characteristics of the house prices is that there is an avoidable individuals living in them. The data mismatch between supply and demand. do not exist to analyse the causality In other words, there are not enough at individual level. However, from houses in the places people want to live. an extremely large and growing body of other research on relative deprivation, we know that individuals’ life chances are largely determined at the pre-school and primary stages.2 2 A UK example is provided by James Heckman, in New Wealth for Old Nations, ed Coyle, Alexander, Ashcroft, 2005.

20 21 3. OUR RECOMMENDATIONS Manchester Independent Economic Review

The work on employment and skills led This is particularly so in the context of by the University of Manchester showed the evidence that some neighbourhoods The headline findings described that employers do not report skill in MCR are lagging further behind the shortages given the existing skill and rest even though until recently levels above and set out in more detail productivity levels of their businesses. of worklessness and other indicators of To do better, Manchester will need to deprivation have improved. The research address simultaneously both the supply by Amion indicates that the operation elsewhere steer us to a set of of skilled workers, and the demand from of both housing markets and education are employers to use more skilled workers important characteristics in explaining and to use them more effectively in high this, but the direction of causality and the policy recommendations which value added activities. interactions between the different causes of deprivation are impossible to untangle. In the short term, the only option to address either the benefit or increase supply is to attract more Policy has tended to focus on skilled labour to migrate to MCR from neighbourhood and physical interventions elsewhere. MCR is already relatively because the most disaggregated the cost side of the balance successful in attracting people from available data apply to neighbourhoods. within the Northwest, and in retaining To the extent that these policies can determining regional growth. students from the region. It has the increase benefits of agglomeration and second-biggest higher managerial and reduce costs for their residents, they professional workforce in England are desirable. This can include improved already. Increasing the attractiveness amenities, and a higher quality, lower of MCR as a location for mobile skilled cost housing stock. However, as the LSE There are two dimensions to the Skills workers, compared with their other paper notes, there have been extremely challenge of raising long term growth. alternatives, requires improvements in high housing price increases in poorer as One is the need to boost productivity We put the highest priority on improving housing and transport – we return to well as richer neighbourhoods, so that the growth rate increases; skills. This is a national challenge these below. an indication of a set of serious supply the other is to ensure that all parts of but will also shape Manchester’s future. side failures in MCR’s housing stock. the city region and all its people Skills matter for both overall growth Longer term, the challenge is to increase Given the existence of multiple policies enjoy improved opportunities as a of the economy and for individual the skill level of those already resident operating at different spatial levels, result of a stronger economy. Taking opportunity. The former aspect leads in MCR. This is also absolutely vital for better co-ordination seems essential. these into account leads us to focus to an emphasis on high skills, the latter sustainability and the future prospects our recommendations under some on improving skills on a broad basis. of those parts of the city region which are However, the key lies at the level of the overarching and inter-related headings: relatively deprived. Low skills levels, individual residents, and enhancing their skills; housing; transport; planning; and The single most important benefit especially in older urban areas, form a opportunities as well as – to the highest finally governance, the framework of which distinguishes higher from lower serious challenge around the nation, and extent possible – their capabilities and collective decision-making within which productivity city regions, is the presence much has been written about it elsewhere. skills. It is also important to be realistic other policies have to be implemented. of a large pool of adequately skilled It is clear that this needs to start with about the timescale involved as it is labour. However, the level of skills in children in their early years, when their intervention in infancy and childhood the city region is the outcome of a range cognitive and non-cognitive abilities are which raises skill levels in adulthood, so of influences. The further difficulty for mainly being shaped. there is no quick fix on the development policy makers in the region is that they of skills in these neighbourhoods. have relatively few policy levers with Under current policy arrangements, which to address the challenge of there is a limited role for local and increasing the availability, to both regional authorities, which are mainly employers and potential employers, of required to implement national policies. skills. This deficit of control over policy However, we believe it is vital to and financial resources means it is not remember the importance of effective possible for Manchester to allocate interventions in the early years, especially resources to its own economic priorities in the context of economic debates which in this respect, which might not always be naturally focus on people who are already completely aligned with national initiatives. highly skilled, and on higher education.

22 23 Manchester Independent Economic Review

Recommendation 1 Manchester has a record of effective We recommend sustained efforts to planning policies, with a high degree improve the very early years experience of co-ordination. However, existing of all young people in MCR, including MCR housing plans appear to put too at school, especially in socially isolated much emphasis on the planning of neighbourhoods, and a review of school mixed communities as a primary aim admissions policies to test the extent to rather than a beneficial side-effect of which existing catchment areas do indeed other policies. In the context of what reinforce social disparities. the Review identifies as deprived communities, our evidence shows that This is a controversial area nationally areas with high social housing and locally. However, regardless of where concentrations are much less likely to competences nominally sit, policymakers improve and more likely to decline. should consider further city region level Thus, measures which could result in a action to meet the objective of embedding diversification of tenures are desirable – educational improvement across the city not least because, when their own region. circumstances permit it, the majority of residents should be able to move Such policies to enhance the level of skills up to better housing within their own and opportunities across the board are community should they not wish to leave. a long haul and difficult challenge. In the shorter term, to attract an increased The ladder of opportunity may or may supply of highly skilled labour, it will be not lead out of a particular community. necessary to reduce the costs of living in MCR, probably a more powerful lever However, in the context of attracting than further improvements in civic and retaining the highly-skilled, there amenities, although these will play a role. is no evidence to suggest that such mixing This takes us on to issues of housing and is widely desired, and plentiful evidence transport in turn. that a limited supply of the desired kinds of housing has, until recently, led to steep house price rises. As the LSE overview Housing report notes, this kind of policy: “Makes it more difficult for cities to attract and As noted above, the availability of retain those firms and individuals who do housing is an important element of the not want to locate in mixed communities.” attractiveness of MCR as a place to This has led to an over-supply of small live. Two points have arisen from the flats in the urban core and too few larger evidence we have gathered. The first is properties in the southern suburbs. the vital role housing plays in ensuring opportunities in the more deprived It has also resulted in an under-supply parts of MCR. The second is the cost of land overall, as the planning gain is in terms of attracting skilled labour used to finance development. As the LSE of a shortage of the kind of housing paper notes, this is inherently contradictory. high-skilled and professional workers demand in the places where they need Integrated planning is essential, and it. This is increasingly in the south of Manchester should build on its the city and North Cheshire, although achievements in co-ordination but revisit of course there are popular residential the current plan to make it more responsive areas throughout MCR. to market signals of where people want to live. Manchester offers a high quality of life, but nevertheless needs to improve its housing offer further in order to attract more skilled people from elsewhere.

25 3. OUR RECOMMENDATIONS Manchester Independent Economic Review

Box 3: Manchester Airport Recommendation 2 Of course, a significant agglomeration costs. Although the impact of transport We therefore recommend a review of cost arising from transportation within policy on attempts to reduce carbon According to the Review’s Economic housing strategy with an emphasis on the city region is congestion. It is an error emissions is beyond the scope of this Baseline, the airport carries over demand conditions and the easing to believe people can easily be enticed Review, clearly those latter costs appear 22 million passengers a year, of planning restrictions which restrict out of their cars and onto public transport. to be rapidly rising. including to Singapore, Islamabad, availability and increase housing costs On the contrary, it is a challenge, because Dubai and New York – although not for skilled workers. (up to a significant level of congestion) Recommendation 3 yet to China. These are exactly the even efficient and low-cost public We recommend a review of transport sort of places the Review would The current housing downturn perhaps transport involves an additional time cost. planning within Manchester from the encourage Manchester businesses to offers an opportunity to do so, before For skilled workers in particular, the time perspective of improving productivity and be thickening links to. On site the a return to rising house prices overall and convenience saving of car travel will the connection between those areas of the airport sustains 19,000 jobs, together makes it harder to achieve consensus often outweigh any potential reduction in city, including the regional centre, where with a further 16,000 indirectly. This on such a change. fares or route improvements. employment is concentrated, and others. translates to an income impact in the city region of around £800m, before We conclude that there is significant This review should take account of the taking into account the wider impact Transport evidence that congestion charging would need to reduce carbon emissions. Given on the regional economy. have brought large overall gains to MCR. the important role central government The other main cost which might While we acknowledge the referendum plays in most transport policy, there is The LSE’s agglomeration study outweigh the agglomeration defeat, we conclude that a strategy to a case for this review being conducted highlights the value of access to benefits and deter people from moving achieve economically realistic traffic jointly with central government. airports in driving up productivity. to MCR is transportation. management is needed, post-referendum. This is reinforced by several studies For the reasons set out above, the picked up in our Literature Review, Starting with national and international consequence of not changing current Planning which highlight the importance transport networks, nationally, the most travel patterns is likely to be increased of the airport for long-term economic important link is to London; congestion, imposing further economic Longer term, as the economy recovers, growth, in particular as a medium internationally, it is Manchester Airport. (and environmental) costs on the city. the challenge will be to ensure the for attracting investment and talent Its airport is one of Manchester’s key creation and expansion of businesses and through its wide regional supply differentiators from other comparator Furthermore, we would note that which use skilled labour. Transport chains. However, in comparison cities outside London and important in a referendum is a flawed means of taking will affect business location decisions, to other leading European airports, attracting investment (see Box 3). the decision on a congestion charge as well as the attractiveness of MCR the potential to maximise (and indeed on many planning policies), to individuals. The LSE report also opportunities for development, e.g. Turning to national links, in particular as a small number who will lose from identifies planning as an obstacle to the through exploiting and growing the high-speed train links, the LSE study the policy are highly vocal and organised, expansion of high value businesses. adjoining Manchester Business Park, contains strong evidence that the greatest while the much larger gains are widely has not been fulfilled – although this economic benefits are to be gained from spread. Given the clear economic benefits National government’s planning policy is clearly part of the thought process focus on improving transport within the of the scheme, and the city region’s focuses on brownfield sites, which behind the current ‘Airport City’ travel-to-work areas of cities themselves, own emphasis on the need for long-term businesses of this kind in general do not project. The Airport Academy and rather than between them – and this is economic growth, it is difficult not to see want, and on property-based technology the European Centre for Aerospace the case for Manchester. Thus, transport the city’s failure to seize the investment on or business incubators which are all too Training (ECAT) in Macclesfield are within MCR is the first and much more offer as a political failure. often in locations the businesses do not good examples of the kind of projects important priority. find desirable. to be supported. Clearly, transport Beyond the necessity for this strategic connectivity with the airport, and Proposals for expensive enhancements thinking, we note from the LSE paper the reliability of the services to it, to external links should undergo a that local transport planning treats car are big issues that need resolving. thorough benefit-cost analysis (including movements as a residual. Effective As with all airports, sustainability environmental costs). For additional planning and traffic management require is an ever-increasing issue that needs investments within the North of England serious consideration of what the demand clear strategic thought, particularly as a whole, including Leeds-Manchester, of residents and commuters actually given the crucial nature of the airport the case is stronger than for additional is (rather than what it ‘ought’ to be) and to the city region’s economy. investments on the route to London. how to reduce the cost of travel within the However, there still needs to be clarity city region whenever the private, social about the benefits and costs. and environmental benefits outweigh the

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Recommendation 4 Recommendation 5 What we do not recommend. including the labour skills available, and We recommend that planning policy We therefore recommend that Manchester we noted above that MCR does have should be reviewed to acknowledge the moves as quickly as possible to a unified By this stage, it will be clear that some specialisms and emerging specialisms. reality of economic demand and permit regime for planning, regeneration there are some notable absences from more expansion of suitable business and neighbourhood renewal. The precise our recommendations. However, policy should address these premises in those parts of the city region balance of local and city-wide roles benefits and costs at a general level rather where demand is strongest. Broadly, this should be the subject of further review. We do not advocate sector-based than sector by sector. As discussed above, demand seems to be stronger in the south, clustering policies. As the Nobel-winning the exception is when certain sectors although such locations are found Manchester’s future success will depend economist Paul Krugman noted require a large up-front investment or elsewhere in the city region. on growing a larger and single pool in a recent study on Scottish policies: infrastructure, in which case there is a of skilled labour, available to employers clear role for policy co-ordination and This is not to say that all of Manchester’s throughout the city region, and on making “External economies are hard to identify leadership. potential lies in its southern districts. it attractive to employers to invest more even after the fact, and harder still to Wigan is well placed on the M6 corridor, in Manchester. Making MCR more predict. Selective policies are all too often We do not advocate additional while Oldham and Rochdale occupy a attractive as a location for high value shaped by wishful thinking at best, investment policies geared specifically pivotal position between the Manchester businesses is what will raise employers’ undue influence at worst.” The evidence towards overseas investors or SMEs. and Leeds city regions. ambition to expand their demand for is clear that the agglomeration benefits There is clear evidence in the Aston study higher skilled workers in the long term. come from size and diversity. Investment, for this Review that investment by large Places like Rochdale Town Hall still In the short term, the creation of more innovation and productivity gains firms already in the region has the biggest bear strong testimony to past locational jobs for skilled workers is likely to rest are related to supply chains which cross impact on productivity and employment. advantages, and there may be future on (quasi) public sector jobs, including the sector (and geographical) boundaries opportunities arising from existing BBC at MediaCityUK and the expansion connections. Many of the city region’s of sites like the Daresbury Campus. Sector-based policies are very popular Governance town centres and their hinterlands clearly in the policy community, and of course have yet to find their distinctive place Recommendation 6 amongst the direct beneficiaries, but there As noted earlier, effective governance within the broader MCR economy. We recommend that Manchester, regional is no sign that they have delivered any is needed to make good policy choices However, the evidence from the research and national government partners benefits. The exception, as identified possible. There is widespread agreement underlying this Review is that a plan-led undertake further detailed studies in the LSE paper, is when a sector depends that good governance is linked to approach which is not responsive to what to identity whether there are potential on expensive infrastructure investments, economic performance. We make here individuals and businesses actually government investments in science and even this should not be exaggerated. some recommendations which concern want to do, will fail. Planning policy must and elsewhere in the non-traded sector, the implementation of those already set not be restrictive in ways which serve to including universities and other In MCR, Daresbury, the airport and out above. increase cost and reduce net investment. publicly funded research, in MCR which MediaCityUK are good examples would be productivity enhancing for the of sectors for which public sector The MIER’s Economic Baseline confirms Planning policies certainly need to be UK as a whole. co-ordination and investment does have that the city region is a highly-coherent well-integrated but also need to respond a part to play. The evidence for MCR single economic geography, with to market signals to avoid empty sites and It will be important to ensure that suggests that the region does have an substantial travel across local authority wasted money in some areas while costs inward and other investors are aware emerging relative specialism in the boundaries for work, education, and are driven up by shortages of appropriate of any such investments, which could act creative industries and ICT, and is leisure. Many constituent districts and homes and business premises elsewhere. as a focal point for the private sector. relatively specialised too in professional towns continue, thankfully, to have a Public subsidy will only have a role MCR should therefore work closely with services and some parts of strong and distinctive sense of place. at the margins, and should be prioritised relevant government agencies to ensure manufacturing. However, with the Economically though, the city region’s according to objective criteria and work that the UK is prioritising all of its exception of any future need for internal administrative boundaries are with the grain of what businesses actually key strategic assets in its international infrastructure investments, these largely irrelevant (see Box 4). want to do. Similarly, money spent on business marketing. specialisms do not point to the need for neighbourhood renewal will achieve little sector-based policy interventions, which However, strong collaboration and a without serious attempts to focus on will always have an opportunity cost. shared sense of purpose will be needed individuals within those neighbourhoods to take the sometimes difficult decisions – their skills, their ambitions. Many of This implies that policy should not be arising from this review. Manchester’s these residents will need to travel to work concerned about the overall specific governance structures will need to elsewhere in Manchester to realise their sector composition of the MCR economy. become much more robust still, and the potential; and the realisation of that This will be an outcome of the assessment division of decision-making labour potential will benefit the areas in which by different kinds of firms of the benefits between different administrative levels they live, through the improvement of and costs of locating in the region, will need greater clarity. housing alongside the organic development of local businesses.

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Box 4: MCR as a single economic Figure 2 highlights the substantial Figure 1: MCR’s districts and transport infrastructure geography cross-boundary commuter flows across the city region. On average, The Manchester city region is made across the area, just 60% of residents up of multiple administrative units live and work in the same borough, characterised by a core city defined but over 90% live and work by employment concentration in the city region. This means that and a hinterland broadly containing over 690,000 people regularly cross a common labour force. It is a highly the city region’s administrative coherent economic geography, boundaries to access work. The area with substantial travel across local is also a coherent travel to learn authority boundaries for work, geography: within Greater Manchester education, and recreation. only 71% of 16 to 18 year olds live The regional core contains parts of and study in the same borough, the cities of Manchester and Salford, but the figure is 96% if looking at plus of the adjoining boroughs of Greater Manchester as a whole. Stockport, Tameside and Trafford. Manchester’s businesses compete Figure 1 shows the fifteen local nationally and internationally and authorities which make up the city have national and international region. The area has extensive supply chains. However, the area public transport, road and motorway has a distinct and coherent business networks which provide a high level environment, with between 35% of connectivity between the local and 45% of city region business authorities and allow significant purchases made from the city region cross boundary travel which make itself, and over 60% of sales made the administrative boundaries to the city region for some key largely academic. sectors. Retail spending patterns are extreme: 98% of purchases by Greater Manchester residents take place in Greater Manchester.

Key: Manchester City Region Urban area Manchester City Region MCR Districts north West Districts Motorway Major A Road rail, Light Rail or Metrolink airport Major Towns/Cities

Map data: Crown Copyright Crown Copyright material is reproduced with the permission of the controller of HMSO and the Queen’s Printer for Scotland

30 31 3. OUR RECOMMENDATIONS Manchester Independent Economic Review

Figure 2: Net commuting flows in to Manchester and within MCR districts (excluding out of Manchester), 2001

ROCHDALE

BURY

BOLTON

WIGAN OLDHAM MANCHESTER TAMESIDE SALFORD

TRAFFORD STOCKPORT

WARRINGTON HIGH PEAK

MACCLESFIELD

VALE ROYAL CONGLETON

Source: ONS, Census 2001 Origin-Destination Commuting tables Footnote: This is a graphical representation of selected travel-to-work flows and not all travel-to-work flows for the MCR are depicted here. 32 33 3. OUR RECOMMENDATIONS Manchester Independent Economic Review

Recommendation 7 Recommendation 8 The aim of this approach is to ensure a There is no reason the city region cannot MCR’s failure to deliver the TIF package In addition, we recommend the development good balance between local leadership regain and surpass its former glories – suggests there is room for improvement of a more effective system of programme on important issues and evidence-based an important message at a time when in developing robust governance. and project evaluation. We suggest that consideration of genuinely cross- the national and global economic context We therefore recommend that the city region housing, economic development, boundary projects. is dire. However, to achieve this goal, looks again at how it takes major decisions regeneration, skills and other policy areas Manchester needs to be equipped with of the kind this report highlights in join transport priorities in being evaluated Policy makers have an important more policy tools. It lacks the powers order to ensure that the difficult decisions rigorously on a city region-wide basis, co-ordinating role to ensure that businesses available in London, let alone the direct needed to promote sustainable growth are through a process which could include: can operate productively, and individuals fiscal and policy levers available to considered effectively. can make choices about work and comparable city regions in Europe • a “Green Book” style appraisal for all residence which improve their livelihoods. and North America. For example, local significant projects3; 3 The Treasury’s “Green Book” is Policy leaders also have an important role governments in the UK typically spend a well-regarded methodology for making an objective in shaping expectations about the future around 25% of public expenditure, • rigorous appraisal of the use of public economic assessment of the of the city region, thereby influencing compared to 70% in France, 42% in the social costs and benefits of investment, including analysis of the new policies, projects and investment choices by firms and residents. US and 35% in Germany. Alongside this programmes, designed with opportunity cost in a city region context public sector spending and fiscal pattern, there is a greater of any proposed subsidies; investment in mind. Furthermore, a dynamic city region also concentration of economic activity around typically requires the commitment by the the capital in the UK than in most other • prioritisation based on productivity leaders of its most important institutions developed countries. enhancement at the city region level; to take decisions and actions which make a contribution to the community as • the use of city region-wide expert teams a whole, as well as their own institutions. in making appraisals; and In other words, a visible commitment to civic purposes and ambition is important • discussion of project proposals by the newly as a symbol and as a means of bringing established Commissions. about greater dynamism.

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Recommendation 9 Recommendation 10 We therefore recommend that Manchester In respect of trading links and skills and central Government explore fully in particular, we recommend that the evidence about the costs and benefits the response to this review should be led 4.0 of, and the potential for delegation by the private sector. and devolution of some decision-making powers, including funding. There is no reason the city cannot in future join the ranks of dynamic global The ambitions of MCR should be at least cities. We hope that the potential we The as high as they were in its previous have identified for MCR to grow in the industrial heyday. Invention and innovation long term will encourage the relevant once marked out Manchester as the place individuals and agencies to reach a around which the world revolved. This shared sense of purpose about the direction city saw the world’s first factory, its first of policy. It is also our hope that this reports steam mill and the world’s first passenger Review will create the opportunity for railway station and first stored computer. MCR to set out an appropriate strategic It was where Rutherford did the work framework for the everyday economic that first split the atom, and the first city governance across the city region which to set up a free library. can act as a benchmark against which important decisions can be measured. Manchester was also once the home of free trade. Despite this legacy the major survey carried out for this Review found that a striking number of MCR firms have no international trading links and are surprisingly unambitious in this respect. Yet such links are essential to increase access to innovative ideas as well as market opportunities. It is important in this respect to acknowledge the changing shape of the world economy with the growth of the BRICs.4 4 An acronym for the emerging markets, typified by Brazil, Manchester has a strong Chamber Russia, India and China, first of Commerce, a Business Leadership coined by one the Reviewers. Council and a range of other private sector led organisations. They need not just to respond to our challenges, but to lead the response, taking the leadership to their members whilst also holding the public sector to account.

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Summary of investment report We drew a number of lessons from the We turn now to the (Aston University Business School) work by Aston Business School. Inward foreign investment into the region First, that policy support should not be detailed findings and policy does not ‘crowd out’ local investment geared disproportionately either towards and does not need subsidy to attract it. overseas investors or towards SMEs, In contrast to other regions of the UK, both conventionally considered to be the conclusions emerging from in MCR it is associated with increased most important targets for support. investment by domestic firms which Investment by large domestic firms in supply the inward investor. Moreover, the region will have the biggest impact the individual reports. in another contrast with other parts on both productivity and employment. of the country, both inward and domestic investment in MCR uses and generates Secondly, attracting overseas investors Summary of overview Despite this, there is some evidence that skilled labour rather than substituting for will have beneficial spillovers on the (London School of Economics – LSE) MCR productivity is lower than might labour. Collectively, increased investment productivity of some domestic firms, be expected given its size. by both overseas and UK investors can and on employment; but it should not be The LSE report finds that the city region increase employment. attracted on the basis of subsidies as the with the highest productivity outside of • Skills are important for understanding a evidence is that this displaces domestic London is Bristol. In the North, a group large part of the productivity gap with the The research shows that large domestic investment. of three city regions – Leeds-Bradford, Southeast. This conclusion holds generally, companies are the most likely to carry Liverpool and Manchester – have higher although MCR’s skills gap is less than for out investment. This finding is good Thirdly, one of the key aspects MCR productivity than other northern some other Northern cities. news for MCR, especially at a time when needs to attract foreign investors, locations; and firms in MCR (just pipping cross-border investment flows are is a large pool of skilled labour. This is Liverpool) have higher productivity than • Only a small part of the productivity gap with declining. It means that large businesses a better inducement to potential overseas firms elsewhere in the Northwest region. the Southeast can be explained by access to already within the region are its main businesses looking for UK locations than external transport networks. Equally, it engine of investment and ultimately the conventional range of policy options These rankings point to the potential might provide a small part of the explanation productivity. Inward investment has a intended to boost inward investment. for Manchester ahead of all other cities for MCR’s higher productivity with respect to positive impact on jobs too, and some outside London (due to Bristol’s small locations elsewhere in the Northwest region. positive productivity spillovers, but more It is important to encourage the size and peripheral location) to take We do not directly assess the role of investment is domestically-generated. development of supply chains which link advantages of the benefits of transport within the city region, but there is overseas investors with domestic firms. agglomeration and increase its growth. evidence that this – in contrast to transport The negative finding is that inward Not only will this encourage positive between cities – is a very important issue for investment taken as a whole does not productivity spillovers, it will also induce Overall, there is evidence that growth in Manchester’s economy. have a positive effect on the productivity additional investment by the local firms. Manchester is the most realistic way to of domestic firms operating in the same raise overall economic growth in the • At the aggregate level, we find no evidence sector in MCR. However, there is a Finally, there is a serious threat to North and, provided it is achieved in the that the clustering of specific industries positive effect on the productivity of firms investment in MCR from the drying up of way set out in this review, such growth improves productivity. Clustering can bring in downstream sectors, i.e. those which credit, given that firms in the city region would be good for the UK economy. positive productivity benefits for individual are buying from the overseas investors. seem unusually reliant on debt finance. sectors, although the effect is nearly always An assessment of this threat and possible Access to economic mass, to skills and to outweighed by the importance of being in a This positive spillover is most pronounced remedies should be undertaken urgently. transport within the city all have a role to large urban environment. in textiles and clothing, computing and play in explaining productivity differences precision instruments; it is weaker in at the firm level. For differences between • The impact on economic and social transportation, which has seen significant regions and city regions, variation in the deprivation of future growth will depend inward investment; it is absent in access to a large economy and to skills how this is achieved. The most direct impact engineering and life sciences. are much more important than variations will come from policies that specifically in access to the external transport target the most deprived individuals. In network. A larger economy increases contrast, policies that achieve MCR growth productivity because it allows firms and through attracting or retaining an increasing workers to benefit from agglomeration. number of skilled workers may have some indirect benefits, but they will also generate Agglomeration economies are important other costs in terms of, for example, rising for understanding why firms in MCR housing costs. have higher productivity than firms elsewhere in the Northwest region.

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Summary of Daresbury report (PWC) However, in big science funding, as in Thirdly, Daresbury will not be able to Summary of labour markets, skills and other areas of flagship public spending, articulate and implement a sufficiently talent report (University of Manchester The report on the future of Daresbury government decisions have in the past ambitious scientific vision without the and Regeneris) identifies its positive potential. The favoured the south and east. This means active support and engagement of the benefits of a thriving centre for big science that the favoured one or two centres universities which will use its facilities. The research on MCR’s high-skilled at Daresbury will be immense for the pull further and further ahead of any If they are sceptical or semi-detached labour markets led by the University UK as a whole, as well as for the regional other contenders. about its future, they will undermine of Manchester team uncovered some economy. However, without a serious big it, thereby losing an opportunity to achievements, but also some significant science base, which requires government The resulting imbalance has created shape a resource for the benefit of their challenges for MCR. bringing major scientific investment constraints (such as onerous planning own scientists. to Daresbury, its offer is unlikely to be restrictions) which are inhibiting the The region contains a higher concentration complete and its attractiveness to a range future performance of the well-established The universities of the Northwest of jobs in key knowledge-based industries of partners, particularly in MCR, will be centres in the south and east. Only certainly need to rise to this challenge, (KBIs) than any of the comparator city very much weaker. government intervention can ensure and their proximity makes it easier for regions bar London, and has access to a a proper balance. Symbolically-important them to be engaged; but so do leading larger highly-skilled residential population The Manchester City Region and the big science investment in Daresbury – universities elsewhere in the UK. than the other provincial city regions. wider Northwest are a source of large provided the campus meets the numbers of skilled scientists; the organisational preconditions – is the litmus National resources ought to have Employment growth, particularly in the infrastructure exists to support the test of whether Whitehall is serious about representation and engagement from ICT and business services sectors, Science and Innovation Campus. its purported di-polar policy. all of the country’s leading universities has been strong. The pattern of skilled as well as a special relationship with employment within MCR is increasingly Realising Daresbury’s potential as a The report by PWC identifies the need neighbouring universities. In the future south-facing, with concentrations of KBI leading national centre of world-class for a clear overarching governance we envision for Daresbury, leading employment found mainly in southern research into the future would cement structure reflecting Daresbury’s national scientists from all over the UK and the parts of the city region and North in place a virtuous circle of scientific status; a clarity of scientific vision with a rest of the world will seek it out, and the Cheshire, which also contain the training and scientific discovery, to scientific advisory board as its champion; entire national scientific establishment residential areas that tend to be preferred the huge benefit of the universities of the and realistic financial planning. must be involved in delivering this by the most highly skilled workers. Northwest. It would continue to support world-class status. This pattern is relevant to the findings the creation of new businesses and jobs. Delivery on partnerships which will on social polarisation, discussed below. It would also start to redress the realise the promise of ‘open innovation’ extraordinary regional imbalance in the and ensure Daresbury’s future funding MCR performs reasonably well, compared national scientific framework which has needs is identified as a priority. This will to the other provincial city regions, in its occurred since the 1960s. require co-ordinated operational and ability to attract young migrants at an management structures and clear and early stage in their careers and workers However, the report identified a number accountable governance. in high status occupational groups; and of challenges in order for Daresbury to also compares well in retaining these realise its potential. An important key task for the short term groups. The region imports large numbers will be the appointment of a scientific of students from the rest of the Northwest, First, Daresbury’s future as a science champion, and the development of an the rest of the UK, and internationally. campus rests on its selection as the operating plan which amongst other things destination for major investments in big clarifies future funding requirements. However, MCR loses a substantial science. The government has made verbal proportion of its high skilled and mobile commitment to a di-polar approach young workers to London and the which envisions Daresbury as one of the Southeast. Moreover, despite the long leading UK scientific research facilities, expansion up to summer 2008, there and recent decisions on a £65m computer is no sign that growth in highly skilled sciences centre and a research facility for employment within MCR has reached detector systems are a good start. a critical ‘take-off point’, beyond which the creation of skilled jobs and the supply of skilled workers would enter a self-reinforcing virtuous circle.

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Most important of all, MCR’s performance In transport, there needs to be an increase in terms of highly skilled jobs and people in the ‘effective density’ of the highly is not matched by its productivity skilled labour pool, ensuring that an performance, which is comparatively employer in one location has realistic access modest. This is due to the relatively high to as many potential employees as possible. levels of people still lacking qualifications within MCR’s workforce as a whole, as This will require new public and private the productivity of the most skilled workers transport initiatives for the people that depends on the skills and productivity of work in the city region. those around them. In housing, there will need to be realism There are short term and longer term in planning policies about the desire policy challenges in these results. of most highly skilled workers to live in certain areas in the centre and south of In the short term, the recession threatens the city region. the positive picture of growth in skilled employment, especially in finance and However, the key lesson that we draw related services. It is important to ensure is that it is essential to improve skills that government assistance is appropriately across the board. The whole labour force directed to people unable to find work contributes to the productivity of the most across the skills spectrum, but also that highly skilled. High skilled niches cannot the opportunity is taken to enhance skills thrive in a sea of low skills and poverty. through high quality education and training schemes which are offered while There is a substantial body of economic the demand for labour is weak. research which demonstrates that aptitudes for education and skill are Longer term, the aim must be to continue set very early in life, many by the age to increase both the availability of highly of seven and all by the mid-teens. So skilled jobs and the supply of skills. while there is rightly a focus on MCR’s ability to attract and create graduates to The former will depend on a range of fill highly-skilled jobs, long-term success policies to encourage a resumption in building a high value, high-skill of growth in KBIs, and to build niche economy will also depend on pre- strengths which do not confine MCR to schooling and primary schooling and being a subsidiary of London. In order on transport and housing policies in all to grow the pool of skilled labour to the city region’s neighbourhoods. which employers in MCR will seek access in future a range of policies covering transport, housing, and social mobility will be required.

42 4. THE REPORTS Manchester Independent Economic Review

Summary of sustainable communities An important contribution of this report MCR has a significant number of isolate Summary of innovation, trade and report (Amion) is to explore the characteristics of the neighbourhoods, which has important connectivity report (Volterra, Burns most deprived neighbourhoods. It rightly policy consequences. The report identifies Owen Partnership and Experian) The range of indicators of deprivation in identifies that the movement of people the neighbourhoods which are at risk of MCR, tracked in this study, show an from and to deprived neighbourhoods entrapment or decline, especially as the Innovation is absolutely central to improvement in absolute terms across the can reveal that apparently similar economy weakens. economic growth and prosperity in the board, and a catch-up when considered at neighbourhoods have very different long term. The report, led by Volterra, the geographical level of districts – but a characteristics. Education and skills, linkages to the jobs confirms that MCR will face a period of further falling behind by the most deprived market, and housing tenure are the main great change in its industrial landscape areas when considered at the smaller The report identifies four types of avenues along which policy interventions going ahead, arising partly from its geographical level of neighbourhoods. neighbourhood, that fall within the might be effective. relative specialisation to date in financial worst fifth in terms of the Index of and professional services. There are therefore numerous Multiple Deprivation: Disparities in educational performance concentrations of considerable reflect and reinforce the geography of The study of how innovations are spread deprivation, particularly in MCR. The • Isolate areas are neighbourhoods whose social segregation. Narrowing the gap shows that thanks to the relationship of main concentrations are at the heart of households move between areas of similar in educational performance needs to be trust, innovations spread more easily the conurbation, in central and north or greater deprivation. Households in these a key priority if current levels of spatial within a supply chain with trading links Manchester and east Salford. Further neighbourhoods, which are characterised polarisation in MCR are to be reduced. than amongst a group of competitors. An clusters are found in the old industrial by concentrations of social housing, are in Intervention in the early years is required innovation can quickly cascade through districts of Wigan, Bolton, Rochdale effect trapped. to improve skill levels in adulthood. almost two thirds of a network of firms and Tameside, with deprivation largely Policies which impact upon the connected by supply chains. Mimicking concentrated in neighbourhoods • Transit areas are deprived neighbourhoods performance of schools serving the most innovations introduced by competitors is a immediately surrounding the respective in which most in-movers come from less- deprived areas and admissions policies very poor method for spreading new ideas. town centres. deprived areas and most out-movers go to generally will both have a critical role to less deprived areas. They are commonly play, given that admissions tend to The results for the MCR networks These areas in particular demonstrate chosen as a starting point on the housing reinforce social disparities rather than studied indicate that it takes a large persistently high levels of extreme ladder by young and newly-established narrowing them. number of firms to have adopted an worklessness, rates commonly in excess households from more ‘comfortable’ innovation before others will follow suit, of 75% above the MCR average. backgrounds. More effective policy co-ordination is so this is a slow process. Worklessness is a particularly significant desirable, especially policies across marker of deprivation as it signals social • Escalator areas receive in-movers from different spatial levels, although at any However, the report found that large isolation and a lack of opportunity, which equally or more deprived areas. The resident level the geography is a very imperfect numbers of firms in MCR identify is often passed down the generations. population is older than in transit areas indicator of the needs of individuals themselves as having no trading links On the other hand, Trafford, Stockport and is part of a continuous onwards and living within it. with other firms in MCR (particularly in and Bury have only small numbers of upward progression through the housing engineering and textiles, and the creative/ deprived neighbourhoods. and labour markets. Crucially, a long-term policy commitment digital/new media and ICT sectors). is required, with the evidence suggesting They are well-connected to firms outside • Gentrifier areas undergo a degree of social that even the 10-year time horizon of the the region, and these external links will improvement owing to the arrival of New Deal for Communities is insufficient. be highly beneficial in increasing access people coming from less deprived areas to innovative ideas. and the departing population going It might seem disheartening, as the onto similarly or more deprived areas. economy heads into a severe recession, These firms are an important conduit Sometimes gentrification results in the to discover that some neighbourhoods for innovations from elsewhere, but displacement of poorer households by in MCR have remained trapped in the flow to neighbouring firms within markedly richer households. deprivation during the good times. MCR is blocked. Their strong However, we should use the results of this connections to firms outside MCR means report to focus policies more effectively on that creative businesses have good access addressing high rates of worklessness. to innovative ideas.

44 45 However their lack of internal networks However, sector-based networks – the means the spread of these innovations conventional policymakers’ approach within MCR is limited. This suggests to networking – do not in fact represent that there may be large and immediate a useful route to building regional payoffs to MCR’s capacity to innovate if innovative capacity. Cross-sectoral creative firms can be better integrated into groups will perform better, and we would supply chain networks in the city region. recommend this approach. We would urge consideration of other routes as well. Another clear conclusion that follows One example is NESTA’s innovation from this is that there would be big voucher schemes, to stimulate new benefits in terms of MCR’s capacity to relationships between creative and innovate from incorporating the high non-creative businesses. proportion of firms with no trading links within the city region. ‘Just one Finally, we agree with Volterra that there link’, to use the phrase from Volterra’s is an important role for Manchester’s report, would have a large impact on universities to redouble their efforts in their the diffusion of innovations, especially historic role as important social institutions as many of these currently unlinked where ideas can be exchanged freely. firms are a good source of innovations Earlier conventional thinking about the from outside MCR. pre-eminence of spin-offs from university research is now seen as short-sighted. This suggests the support of business networks targeted at these firms or sectors Spin-offs by their nature guard their would be productive, although policy innovations very closely, in order to make makers cannot directly affect trading links. a financial return. The drive should be for This would be especially fruitful if it universities to act as a bridge connecting introduces large, possibly multinational, parts of MCR’s business community and companies to local supply chains. enhancing the region’s capacity to innovate.

Design & art direction by Music. www.designbymusic.com

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