Talk of the Town

The economic links between cities and towns

Since the Brexit vote, there has been a great deal of policy debate and focus on ‘left-behind’ towns, and whether consecutive governments have focused too much on cities at the expense of smaller places.

But what is overlooked in these debates is the economic relationship between cities and towns, and how this should inform policy.

This report explores the ways that the economies of cities, towns and villages interact. It shows that the impact of cities goes well beyond their boundaries – and that they shape the economies of the places around them – in two key ways:

1. Cities are home to the majority of the economy – bringing benefits to other places

Cities account for just 9 per cent of land in Britain, but are home to 55 per cent of businesses and 60 per cent of jobs. This has a number of implications for people who don’t live in a city:

  • Cities raised 63 per cent of all growth-related taxes in 2013/14, which was then used to provide public services across the country.
  • Cities provided jobs for more than 1 in 5 working residents living outside cities in 2011.
  • Due to their larger markets, cities are able to support specialisms in health, education, arts and entertainment activities that people living in nearby towns and rural areas are able to benefit from.

2. The economies of cities and towns are intrinsically linked

The report shows that when a city prospers, nearby towns are also more likely to be successful:

  • Towns close to highly productive cities perform better in terms of attracting high-skilled business investment, jobs and firms. And they also have lower unemployment rates.
  • In contrast, towns close to less successful cities have higher unemployment rates, and have also struggled to attract high-paying firms and jobs.

The report argues that these factors should be important considerations for policy debates on industrial strategy, inclusive growth and productivity. It makes the following policy recommendations: 

  • Focus on improving skills in all places across the country
  • Recognise the role that cities play in their wider local economies
    and the national economy
  • Proceed with further devolution to tailor policy responses to different
    areas

 

This report was supported by Core Cities