The levelling up agenda is going to require tens of billions of pounds worth of investment in the UK’s cities – a level of investment that is not currently being considered by policy makers, think tanks say.
A joint Resolution Foundation/LSE research for the Economy 2030 Inquiry has shown that Britain’s economic gaps are significant throughout the country. At the extreme, incomes in the UK’s richest area (Kensington & Chelsea) are 4.5 times higher than the poorest area (Nottingham).
Funded by the Nuffield Foundation, Incomes Outcomes also found that these economic gaps are persistent. Four-fifths of the variation in incomes across local authorities today is explained by the pattern in 1997, with only traditionally poor inner London areas like Hackney and Newham significantly changing their positions.
The research also identified significant productivity gaps between local authority areas. According to the report, productivity of £76,000 per job in London is twice that of Powys and Torbay, and the productivity gap between London and Manchester is 30%.
Incomes Outcomes concluded that this gap has been driven by the transition from an industrial to a services-based economy, where highly productive economic activity is more geographically concentrated, and by the failure of major cities outside of London to successfully make that transition.
The report’s authors argue that raising productivity in the cities and their hinterlands where 69% of the population are based would bring broad benefits. However, they also warned that the scale of change required goes far beyond anything currently being contemplated.
In order for Manchester, for example, to raise its productivity so that its gap with London was almost halved, considerable levels of investment would be required. It would need change equivalent to tens of billions of pounds of investment, a seven percentage point increase in its graduate share, and increasing the size of Greater Manchester by almost 300,000 workers.
Lindsay Judge, research director at the Resolution Foundation, said: ‘Britain is beset by huge economic gaps between different parts of the country, and has been for many decades. While progress has been made in reducing employment gaps, this been offset by a surge in investment income among better-off families in London and the South East.
‘People care about these gaps and want them closed, as does the Government via its “levelling up” strategy. The key to closing these gaps is to boost the productivity of our major cities outside London, which will also lead to stronger growth overall.’