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The Government’s recently launched industrial strategy could boost city economic growth across the UK, but it will not be a game-changer in terms of tackling the North-South divide.

Launched at the end of January 2017, the Government’s ‘Building our Industrial Strategy’ green paper proposes 10 pillars of economic growth including investing in science, research and innovation, upgrading infrastructure and cultivating world-leading sectors.

The plan aims to drive and ‘divide growth across the whole country’, and deliver this through investment, bolstered by regional growth funds. The strategy was discussed in a public consultation in April 2017. Our latest UK Powerhouse report, produced with the Centre for Economic and Business Research (Cebr), welcomes many of the proposals but raises concerns that not enough is being done to develop more balanced city economies across the UK.

To demonstrate that the North-South divide will be insufficiently addressed by the current round of policies and investment, we predict that not one city in the North or the Midlands will be amongst the top 10 fastest growing in the next 10 years.

We also predict that the gap between London and the Northern Powerhouse economies will grow by £25.7bn over the next 10 years. The gap between London and the Midlands Engine region is set to increase by £46.6bn during the same period.

Our latest study calls for detail on how an over-concentration of industries in certain locations can be avoided – something which the report says can limit a city from maximising its true economic potential – and how Government wants slower growing regions to emulate the successes of cities such as Milton Keynes, Oxford and Cambridge, where clusters and networking effects have driven growth.

Although there is praise for the planned £126m investment into a world-class research institute at Manchester University, the report raises concerns about the overall level of detail included by the Government on how to address regional imbalances in education and skills.

The report highlights that the fastest growth cities in the UK have multi-faceted and well-balanced economies, but warns that the government’s aim of cultivating world-leading industries will mean the government is likely to support already strong industries and this could hold back slower growing cities.

An example of the likelihood of investment being channelled into already strong industries is the £49.7m which has been allocated for the International Advanced Manufacturing Park in Sunderland.

This investment will strengthen the region’s automotive sector but this industry already dominates the city’s economy and it will leave only £7.5m for Newcastle, Gateshead, Northumberland, Durham, and Tyneside. The report highlights that the singular focus on car manufacturing, the intended use for the business park, means other industries will be left picking up crumbs of investment overall.

 Vicky Brackett, CEO of Business Legal Services

“We have seen in the case of the North East Local Growth fund that there is a focus on established industries, namely manufacturing, leaving little to other sectors. There are some schemes looking to grow specialised digital sectors, such as Tech North, but these have not seen levels near the investment of manufacturing in the North.

“The challenge is how to emulate the successes of cities such as Milton Keynes where clusters and networking effects have driven growth. The government has been thin on detail as to how this will be done.”

“The government’s regional investments in initiatives such as the Northern Powerhouse and Midlands Engine will certainly boost these regions, but these investments as they stand are not likely to narrow the gap between the North and South.

“The North and Midlands are receiving investment, but so too are London and the South East, especially from abroad. The new industrial strategy does not rebalance this fact.

“Both institutions and skills need to be focuses for this industrial strategy. Creating research institutions such as the one in Manchester is a good start, but there is some way to go. There are promising signs from the Midlands Engine, such as the space tech hub in Leicester which was recently confirmed, but these are more likely to be a small local boosts than total game-changers.”

Published: 16 May 2017

Focus on Manufacturing - Edition 5

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Victoria Brackett