Does building on its manufacturing legacy offer the North a brighter future?
Just because northern towns and cities have a strong manufacturing past doesn’t mean they are well placed to attract manufacturing jobs of the future.
Just because northern towns and cities have a strong manufacturing past doesn’t mean they are well placed to attract manufacturing jobs of the future.
A regular piece of advice given to places to improve their economies is that they should build on their sectoral strengths. A common extension of this is that because the North and Midlands have a legacy of manufacturing, this makes them the natural home for emerging, cutting-edge activities in the sector. But is this true?
The answer, sadly, is no. Figure 1 shows that there is no relationship between the share of jobs that a city has in manufacturing overall and its share of cutting edge manufacturing businesses in industries like AI, autonomous vehicles, and automation. Several cities with small manufacturing sectors overall (and no strong manufacturing legacy), such as Milton Keynes, Cambridge, and Aldershot, have large non-services new economy sectors. Meanwhile cities like Bradford, Barnsley and Blackpool have small manufacturing new economies despite the large role wider manufacturing plays overall in their economies.
Source: The Data City; ONS.
This is likely to be because lower and higher-skilled manufacturing industries are looking for different things. Higher-skilled activities require access to high-skilled workers. Lower-skilled activities still need access to lots of workers (which is why manufacturing in general tends to locate in or around cities), and lower-cost land (see Figure 2) – there is no point in paying a premium to be near high-skilled workers or knowledge if a firm has little need for these. As a result, cities and large towns with cheaper land, such as Barnsley and Sunderland, have proved attractive to this type of manufacturing, but less so to more innovative parts of the sector.
Source: The Data City; ONS; Valuations Office Agency.
Note: Rateable values are used as a proxy for commercial space rents.
Policy must understand the factors that drive the location decisions of high-skilled businesses if it wants to attract more of them into struggling areas. It should not make the somewhat lazy assumption that past activity makes a place a prime candidate for related activity today. Instead, it is the benefits that places offer that guide where businesses locate. That is why we see lower-skilled manufacturing (and services) activities in cities that offer access to cheap land and low-skilled workers, and higher-skilled manufacturing in cities offering access to high-skilled workers despite the costs of land.
For places looking to turn their economies around, it is usually what they don’t have that is the problem, rather than what they do have. The focus of local economic strategies should be to address this deficit.
This analysis is based on our latest report At the frontier: The geography of the UK’s new economy.
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