
Urban economies essential for driving growth in the Midlands Engine are underperforming, and low productivity is to blame.
Recently announced trailblazer devolution deals will see ‘growth zones’ established in the West Midlands and Greater Manchester Combined Authorities. Matthew Coombes makes the case for why they should be established in city centres.
As part of the trailblazer deals, the West Midlands and Greater Manchester Combined Authorities have reached an agreement that will establish ‘growth zones’. Growth Zones will allow the Combined Authorities (CAs) to retain 100 per cent of business rates above an agreed baseline for 25 years, but do not come with funding packages like investment zones do.
There is an understandable view in both areas, that because of the recent successes of their city centres, zones should be targeted at other struggling areas. While GMCA has not yet set out its plans for their Growth Zones, WMCA have set out their intention to establish growth zones in five areas across the area, as shown in Figure 1.
Source: West Midlands Combined Authority Trailblazer deeper devolution deal, Policy Paper, Department for Levelling Up, Housing & Communities (2023)
In both places, the city centres have indeed done better than other parts of the city regions. As shown in Figure 2, Birmingham city centre has seen employment growth of 15 per cent between 2015 and 2021, while the suburbs have seen growth of 6 per cent in the same period. Only Solihull has seen faster growth but 84 per cent of its employment growth (or 27,000 additional jobs) is due to the growth within the Birmingham airport area.
Source: ONS Business Register and Employment Survey (2021)
Despite recent progress, Manchester’s and Birmingham’s city centres are still smaller than they should be. Figure 3 shows that, while Birmingham and Manchester’s working age population is three times the size of Leeds and Bristol, their city-centre economies are the same size in terms of employment.
Source: ONS Business Register and Employment Survey (2020), ONS Population estimates by local authority (2020)
City centres offer access to a large pool of workers and to knowledge through face-to-face interaction with clients, collaborators and competitors. These benefits increase as city centres get larger, specifically with the benefit of face-to-face interaction that dense city centre environments facilitate, aiding new ideas and innovations. Figure 4 shows how larger city centres tend to have higher productivity.
Source: ONS UK small area gross value added (GVA) estimates (2020), ONS Business Register and Employment Survey (2020)
While Manchester and Birmingham city centres are some of the most productive parts of the UK and perform as expected for a city centre of their size, their productivity is largely on par with smaller cities such as Bristol and Leeds. Ultimately, with larger and more prosperous city centres, Birmingham and Manchester would be able to make a larger contribution to their regional and national economies. This is why policymakers in both Manchester and Birmingham should not lose focus of their city centres, even if they have outperformed their suburbs.
Centre for Cities’ analysis of the Enterprise Zones policy implemented by the coalition government in the early 2010s identified that the Birmingham city centre enterprise zone supported the creation of 2,680 jobs and was a major catalyst for the wider redevelopment of the city centre. Through borrowing against future business rate growth, the zone raised over £100 million of capital investment to fund redevelopment including extending the metro line.
The desire to allocate growth zones to other parts of the CA areas that are lagging behind is understandable. But despite their recent success, the Birmingham and Manchester city centres are still not big or productive enough, and because of this do not provide the scale of opportunities that other city centres do for their wider areas. For this reason, the allocation of Growth Zones in Greater Manchester and West Midlands should seriously consider allocating at least one zone in the respective city centres.
Urban economies essential for driving growth in the Midlands Engine are underperforming, and low productivity is to blame.
England's incoming metro mayors will face challenges and opportunities that necessitate decisive action and collaboration.
Investment zones will need to help struggling places offer something different to businesses, rather than doubling down on what they already have, if they are to improve their fortunes.
Reflections from our 'In Conversation’ events last week with Andy Burnham, Mayor of Greater Manchester, and Andy Street, Mayor of the West Midlands, on new trailblazer devolution deals announced in the Spring budget.
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