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www.psrc.pwc.com Good growth for cities A report on urban economic wellbeing from PwC and Demos November 2013 Contents Summary 2 Introduction 6 Key findings 10 Implications 20 Agenda for action 30 Appendices 32 About the authors 34 About PwC and Demos 36 1 Summary Key findings The Demos-PwC Good Growth for Cities Index measures the current performance of a range of the largest UK cities against a basket of ten categories defined, through engagement with the public and business, as key to economic success and wellbeing. Employment, health, income and the new There have been encouraging measure of providing for the future – skills – are the most important of these signs recently that the UK factors, as judged by the public. economy is picking up, but there is some way to go yet Using these measures, Table A shows the highest and lowest ranking cities in our before the recovery becomes index based on the latest available data. fully sustainable. The highest ranking cities in our index tend to do relatively well on jobs, income Fiscal austerity will still need to and skills. There is, however, a price for continue well into the next Parliament. their success seen in relatively low scores Further growth, job creation and the for housing affordability. In contrast, with associated tax revenues will be critical the important exception of London as both to paying down our debts as well discussed below, cities which rank lower as funding our public services. down in our index score relatively less well for jobs and income as well as skills. And cities have a key role to play in this Their brighter spots tend to be housing drive to achieve sustainable long term affordability and work-life balance. growth and so reduce the structural deficit. But how do we define economic London is an exception in many ways. success at city level? It has the highest income levels in the country and scores well in international To address this question in the context of surveys of what makes for a great ‘world the government’s localism agenda and a city’,3 but has a relatively low ranking in wider drive to decentralise and rebalance our index. This is because success can the economy spatially, in 2012 PwC and have its own costs: the issues associated Demos refined our original Good Growth with living in a large urban area (such as Index1 to focus on cities.2 Our aim was to the lack of affordable or suitable housing, shift the debate on local economic congestion and long working hours) are development from a narrow focus on sufficiently prevalent in London to more 1 ‘Good Growth: a Demos and PwC report on ‘Gross Value Added’ (GVA) to a more than offset many of the benefits of high economic wellbeing’, Demos, 2011. holistic measure, understanding the income levels in the overall index. www.pwc.co.uk/government-public-sector/ publications/good-growth-index-how-gov-can-kick- wider impacts that are associated with start.jhtml economic success in a city. Looking at the cities in the devolved 2 ‘Good growth for cities: A report on urban economic administrations, it is notable that wellbeing from PwC and Demos’, November 2012. www.pwc.co.uk/government-public-sector/ Our 2013 report takes this agenda two Scottish cities – Aberdeen and good-growth/index.jhtml. forward with an updated methodology Edinburgh – are in the top 5 highest 3 For example, ‘Cities of Opportunity’, New York City that for the first time includes skills. ranking cities in Table A. Partnership/PwC, October, 2012. 2 Table A: Highest and lowest ranking cities (by TTWA) on Demos-PwC Good Growth Index4 No LEP No LEP Highest Ranking Cities Index Score, Lowest Ranking Cities Index Score, 1 North Eastern 20 Greater Cambridge & above average below average 2 Cumbria Greater Peterborough 3 Tees Valley 21 New Anglia Reading & Bracknell 0.63 Middlesbrough & Stockton -0.52 4 York, North Yorkshire 22 Coventry and 5 Lancashire Warwickshire Aberdeen 0.59 Wakefield & Castleford -0.52 6 Leeds City Region 23 Worcestershire 7 Liverpool City Region 24 South East Midlands Edinburgh 0.57 London -0.36 8 Greater Manchester 25 Gloucestershire 9 Humber & East Riding 26 Hertfordshire Southampton 0.44 Newcastle & Durham -0.34 10 Sheffield City Region 27 Buckinghamshire 11 Cheshire & Warrington Thames Valley Cambridge 0.38 Swansea Bay -0.32 12 Derby, Derbyshire, 28 Oxfordshire Nottingham & 29 London Nottinghamshire 30 Thames Valley Berkshire Source: PwC analysis. Scores are relative to a UK average score set to zero. City definitions are based on Travel To Work Areas (TTWAs). 13 Greater Lincolnshire 31 West of England 14 Stoke-on-Trent & 32 Swindon & Wiltshire Staffordshire 33 Enterprise M3 15 Leicester & Leicestershire 34 South East 16 The Marches 35 Coast to Capital 18 Greater Birmingham & 36 Solent Solihull 37 Dorset 17 Black Country 38 Heart of the South West In fact, we find that the majority of the Figure A: Distribution 19 Northamptonshire 39 Cornwall & the Isles devolved administration cities perform of Demos-PwC Good of Scilly above average in work-life balance, Growth Index scores in transport, sector balance (e.g. the England by LEP size of the manufacturing sector) ●1 and income distribution, although their performance tends to be less ●2 3 strong on average in relation to health ● in particular. Key: ●4 l Below average relative to In 2013, we have also analysed our the index for all LEPs (<– -0.5) ●6 Around average (-0.49 – +0.49) index by Local Enterprise Partnership ●5 ●9 l l Above average (>– +0.5) (LEP) area in England. We found that ●8 7 most of the significantly above average ● ●10 scoring LEP areas (coloured green in ●11 Figure A) are located in a continuous ●13 ●12 bloc, ranging from Leicestershire ●14 18 across to the Welsh border and down ● ●15 21 to Solent, Dorset and Heart of the 17 19 ● 16 ● ● ● 20 South West on the South Coast. ● ●22 23 ● ●24 On the other hand, regions located in the North and East of England are much less likely ●25 26 ●28 ● to achieve significantly above average scores, ●27 ●29 ●34 with only the Cheshire and Warrington 30 ●31 ● and Cumbria LEPs bucking this trend. ●32 ●33 ●36 ●35 ●38 4 The Office for National Statistics defines Travel To ●37 Work Areas (TTWAs) as labour market areas where the bulk (75% or more) of the resident 39 economically active population work in the area ● Just over 10% of local authorities in England (38 of 326) are and also, of everyone working in the area, at least covered by multiple LEPs. To avoid having substantial areas of the map which are not assigned a colour, where LEPs do 75% actually live in the area. We recognise that overlap the relevant authority has been randomly assigned to TTWAs vary considerably depending on city one of the LEPs which it sits within. The precise index score characteristics and for different segments of the for each LEP, which accounts for all local authorities within it, population (e.g. wealthier commuters who may be can be seen in Figure 7 able to live outside standard TTWAs). 3 Implications Table B: Agenda for action Our 2013 findings indicate that for many Stakeholders Agenda for action cities there are important trade-offs to be made in achieving good growth. City leaders • Continue to balance between a necessary internal focus on efficiency, Congestion, pollution and high house and other local cost-cutting and reform with an external focus on good growth. prices are just some of the indicators of a public bodies • Create a platform for growth through a collaborative approach to rising price for success, as measured by including LEPs leadership across political/administrative boundaries (including conventional economic indicators such as Combined Authorities) and sectors of the local economy. incomes and jobs. And many of our large • Work together, and with businesses, universities, the third sector and urban centres are having to cope with the public to define the city’s vision – what city stakeholders want it these problems at a time when the to be famous for – based on analysis of the city’s strengths, using data funding needed to make the necessary analytics and documented in Growth Plans. investments to adapt and improve • Re-brand cities based on a clear vision for success linked to infrastructure is in short supply. good growth outcomes. • Use good growth outcomes to guide decisions when allocating This does, however, present opportunities resources, prioritising investments and re-investing the dividend of for those cities well placed in our index, public sector reforms. often mid-sized or with a mix of urban- rural topography, to increase their share • Develop an integrated programme of infrastructure investments to enhance quality of life and city competitiveness. of economic activity. But these cities need to have a clear vision of their assets and • Prioritise public spending on the levers important for good growth, identities and sell themselves better to the particularly skills and infrastructure (housing and transport). investor community, presenting ‘investor • Monitor and evaluate progress, building the evidence base to link ready’ opportunities. decisions and outcomes and using a placed-based approach to measuring and managing total impact (TIMM). The lesson arising from the big movers in our 2013 index, notwithstanding changes Central • As Growth Deals unfold, focus cities on unlocking their individual in methodology, is that jobs have a key government growth challenges in their Growth Plans linked to their distinctive local assets, rather than the standard menu of priorities e.g. green impact on position in the index, with jobs and digital hubs.