Is the UK open for business? Or, struggling for business? As our competitors compete to out-do each other on ambitious industrial strategies to attract investment and deliver jobs in so-called ‘left behind’ areas, the UK economy continues to flounder and stagnate.
Private investment in local economies – in the form of physical infrastructure, technology, skills training and finance – drives productivity, growth and prosperity. But the UK has long failed to attract sufficient levels of it. The business investment we do attract tends to flow into already prosperous local economies – London and parts of the wider South East – because that is where market forces and policy choices have created opportunities for growth. A lack of skills, infrastructure and state investment in weaker local economies leaves many trapped in a vicious cycle, unable to attract the private capital needed to create good jobs and to foster growth. There are notable exceptions, with the likes of Legal and General and Lloyds leading an emerging pack of institutional investors taking a wider and longer-term view. Yet the economics mean that even these efforts are largely concentrated in our big cities.
However, new CPP analysis shows that innovation and investment need not be confined to our big cities.
Our analysis identifies 95 ‘pockets of potential’ in towns, small cities and rural and coastal areas: high-potential industries, that have demonstrated impressive productivity growth in recent years, based in otherwise underperforming local economies. Over 80% are in the North and Midlands, with manufacturing - the most predominate sector amongst them - represented in rural and coastal areas like Boston, Scarborough, and Stroud and former industrial heartlands like Newport and Burnley. Other sectors include professional scientific, and technical activities in the Scottish Borders, and information and communication in Stoke-on-Trent. These are the places and sectors that should be the focus of any government serious about delivering fairer growth. We estimate that if these 95 areas secured levels of business investment in line with their potential, it would attract £70.2bn into the UK economy - around 3.8% of national economic output.
So how can the Government make this happen, and what role can local government play? CPP proposes a new network of Regional Co-Investment Funds: a collaboration between local leaders, private financiers, the British Business Bank and UK Infrastructure Bank. Operating at the mayoral (or equivalent regional) level, these funds would seek to broaden access to private capital across places, catalyse investment in local industries, and crowd in private investment in regional development activities and infrastructure.
More effective devolution is also critical to increase access to private capital and reduce the structural barriers to local business investment, such as weak transport links and poor digital connectivity. For Regional Co-Investment Funds to succeed, the roll out of the mayoral model across England must be sped up with multi-year, long-term funding settlements for all Mayoral Combined Authorities as the norm, and appropriate similar action taken across the devolved nations. This will enable places to engage in strategic economic planning including supporting the pockets of potential our report identifies.
Given its prominence in the productivity hotspots we identify, central government must galvanise action around manufacturing with a new Manufacturing Mission to allow the sector to grow as a share of both GDP and employment by the end of the next parliament. This would focus explicitly on driving up the adoption of digital technology and other productivity-enhancing products, supporting industrial decarbonisation and the adoption of green products, processes and practices by manufacturing firms.
CPP also recommends establishing a formal Prime Ministerial target to address the UK’s chronic underperformance in adult education. A target to raise participation to 30% by the end of the next parliament could be delivered through a major expansion of further education, modular learning and short training courses, so that everybody has access to a broad range of opportunities within a 45-minute commute as well as a Learners' Living Allowance.
Potential investors watching the weekend’s coronation concert would have seen the UK is more than our capital city and its outreaches in the South East. Vivid images of hope, power and prosperity beamed from Edinburgh, Belfast, Newcastle and Gateshead, Blackpool, Cardiff, Cornwall and Dover. The right policy interventions could allow the places CPP identifies – and those beyond – to become the driving force behind the revitalisation of their local economies and to fulfil the productivity potential of the UK economy at large.
Charlotte Alldritt is chief executive of the Centre for Progressive Policy
@CentreProPolicy
