10 ideas for a successful place-based industrial strategy

How the Government can develop an industrial strategy which recognises the significance of place in the national economy

When Theresa May first announced plans for a new industrial strategy last summer, she suggested the Government would take a ‘place-based’ approach to driving growth up and down the country,  recognising the crucial role that place plays in shaping the national economy.

But when the industrial strategy green paper was launched in January, the Government’s rhetoric had shifted, putting much greater emphasis on sector-based approaches to boosting growth. ‘Place’ was included as one of the green paper’s ten pillars underpinning the industrial strategy, but its critical influence on the economy was down-played.

If the industrial strategy is to succeed in supporting growth up and down the country, then place should be the over-arching framework on which the strategy is based – and that cities in particular are where the remaining nine pillars of the strategy will come together.

In the coming weeks we will be publishing a series of briefings outlining the role of place in an industrial strategy. To kick that series off, here are 10 ideas on how the Government can develop an industrial strategy which recognises the significance of place as the organising framework for the UK economy, and which builds on the diverse roles that different places play within it:

1.The industrial strategy should be about cities not sectors

Economic activity in the UK is not evenly or randomly distributed across the country – it is clustered in cities, with Britain’s 62 largest urban areas accounting for 9 per cent of land but 60 per cent of national output. However, there is great variation across cities in terms of the contribution that they make, and big differences in terms of how the same sectors perform in different places across the country. For example, business services are 45 per cent more productive in Brighton than Middlesbrough, firms in financial services and insurance are 57 per cent more productive in Aldershot than Swansea, and manufacturing is almost twice as productive in Swindon as it is in Wakefield. If the same sectors perform very differently in different cities across the country, then it suggests that industrial policy should tackle the issues making some cities less productive, rather than focusing on sector deals.

2. Growth can’t be easily pushed around the country

Policy has been attempting to push private sector jobs around the country for at least 80 years, going back to the Special Areas Act of 1934, yet the differences in economic performance in different places suggest that this has not been particularly successful. In order to help create growth across the country, policy needs to look at what influences business location decisions, and address the barriers that prevent businesses from starting up and expanding in some parts of the country (such as low skills-levels, or lack of transport infrastructure ).

3. Be wary of discussions around public sector relocation

Relocating public sector jobs from London to different parts of the country is often highlighted as a way to encourage growth. This idea has been tried already (e.g. ONS to Newport, BBC to Salford), and it continues to be raised (see recent calls for Channel 4 to be moved to Birmingham, or the Houses of Parliament to any number of places). But such proposals should be treated with caution, as evidence suggests that the BBC and ONS relocations have had a limited wider impact on the economies of their host cities.

4. Skills needs to be a top priority everywhere

Cities that have lots of high skilled workers (such as Brighton and Reading) perform well across a range of economic indicators such as average wages and jobs growth, while those that have lots of low skilled workers (such as Blackburn and Stoke) do not. In particular, cities that cannot offer businesses a pool of high-skilled workers will struggle to attract the kind of knowledge intensive firms which offer the best prospects for future economic prosperity. Nissan is a good example of this. The high-skilled components of its operations, such as design and engineering, take place in London and Cranfield where there are lots of skilled workers. The component assembly part takes place in Sunderland, where there are lots of lower skilled workers and land is relatively cheap.

5. Focus on supporting agglomeration in a range of industries, not sector-based clusters

Clusters in places such as Silicon Valley in California and Motorsport Valley in Oxfordshire and the Midlands capture the imagination of policymakers. But it is often unclear what the role of policy should be in creating clusters or boosting their performance– and where policy options are clear, they often relate to addressing general place-based problems relating to skills, transport and housing. As such, instead of focusing on developing clusters, policy should concentrate on how cities can support greater agglomeration of firms in a range of different sectors – and make the most of the knowledge spill-overs and innovation that this enables – by acting on the strengths and weaknesses of their economies.

6. Infrastructure isn’t the answer everywhere

Infrastructure indisputably has a role to play in supporting economic growth. But it is a much bigger problem in some places (particularly successful cities such as London and Cambridge) than in others, such as Middlesbrough and Doncaster. Supporting growth in different cities across the UK requires policies that address their particular challenges. For some places it will be transport infrastructure (with further questions as to whether this is bus, rail etc). But in other places it will be education, skills and planning.

7. Focus primarily on making people and places better off in absolute terms

A great deal of policy discussion in recent years has been pitched in relative terms – for example, the need to close the gap between London and the South East and the rest of the country, or between the rich and the poor. The two issues are interlinked – some of the poorest people in Britain live in struggling places outside of the South East, and they tend to be poor because their economies are struggling. To improve living standards of people living in cities like Hull and Doncaster which have low average wages, we need to focus on growing the economies of these places and helping the their residents to access jobs in their city or elsewhere, rather than worry about relative differences between Hull and London.  Once growth is sustained in these cities, then we can shift the focus towards how growth is distributed.

8. Successful places require help too

Cities with strong economies such as Reading, Cambridge and Milton Keynes face significant challenges resulting from their success, such as expensive housing, congestion and pollution. The industrial strategy needs to focus on helping these places manage the costs of growth if they are to continue to be successful.

9. If industrial strategy is to work, it should be crafted by cities, not just Government

Different cities face different opportunities and challenges, and so for industrial policy to be effective cities must be able to develop and implement their own tailored approach to supporting their economy. This means that some aspects of the industrial strategy should be city-led if it is to deal with the specific challenges and opportunities that each city faces – for example, Plymouth’s priorities will look different to York’s.

10. But not everything should be devolved to cities

The UK is the most centralised country in the developed world, and Centre for Cities has long argued that greater devolution is required to get the most out of cities. That said, some policies (such as infrastructure projects or higher education) are more appropriately designed and delivered at the national level. To take an example, HS2 is clearly a national policy that needs to be developed and led by national government. But the location of stations within the cities along the route will have big implications for the future economic development of those cities. To maximise the economic impacts of HS2, the station location decisions taken by HS2 need to be informed by the wider economic impacts that they will have on the future prosperity of those cities.

Watch this space for more briefings, commentary and analysis of the industrial strategy in the coming weeks.