To pass the Nissan test, policies will have to address the reasons for why knowledge-intensive activities do not locate in the parts of the country the policies are attempting to target.
In the coming days we are likely to hear what the new Prime Minister’s version of levelling up will look like. Liz Truss’s policies will need to pass the ‘Nissan test’ if they are to be effective.
Nissan is not only a very good example of how different sectors or businesses locate in different parts of the country, but also of how various parts of the same business locate in different places. Nissan’s Sunderland factory and 7,000-strong workforce is well known. In the North East, it mainly assembles the parts to put its cars together, but its more knowledge-based jobs of design and engineering are based much further south, in London and Bedfordshire respectively.
Nissan applies this split because of the different benefits that the different locations offer. London in particular offers both access to workers and access to a network of other knowledge-based businesses to exchange ideas and information with. The high costs (for example through commercial space rents) of locating here suggests that Nissan is prepared to pay a premium to get access to these benefits.
Meanwhile, Sunderland is an attractive place for Nissan’s factory because of the very different benefits it offers. It instead offers access to cheap land and a large pool of relatively cheap workers. Given the more routinised nature of the work that goes on in the factory, this means Sunderland outcompetes Bedfordshire to both attract and retain this part of Nissan’s activities in the city.
A long history of policies designed to reduce the cost of doing business even further – for example, through grants – have helped Sunderland both attract and retain the plant. The many thousands of jobs it has created has been a good thing for the city and its surrounding areas. Yet, they have done little to change the offer that Sunderland makes to attract in higher productivity activities, which in turn would increase wages, career progression and access to greater prosperity. It is for this reason that Sunderland remains in need of being levelled up almost 40 years after the arrival of its car factory.
So, to assess any forthcoming announcements on levelling up one should use the following thought experiment and ask: will this policy increase the chances of Nissan (or another company) moving its more knowledge-based activities further north? To do so it will need to overcome the barriers that prevent this currently. Policies that look to make areas even cheaper places to do business do not pass this Nissan test. Policies that focus on skills and making city centres more attractive places to do business in particular will score more highly.
Disclaimer: The purpose of policy of course should not be to move existing activity around – the idea of the thought experiment is to test whether new knowledge firms (including foreign firms) would choose to set up and grow in areas with weaker economies. This has increasingly become the case in Manchester in recent years thanks in part to the many policies that have been put in place, and more recently City of Sunderland council have begun on a wide-ranging city centre regeneration project that will hopefully increase the future economic performance of the city.
Red wall MPs point to the success of Sunderland’s Nissan plant as the model the current Government should replicate, but almost 40 years on the city is still in need of being ‘levelled up’.
Paul Swinney reflects on Liz Truss’s first speech as PM, outlining how levelling up can play into her pro-growth goals and how she can use the agenda to the UK's advantage.
Chief Executive Andrew Carter on what the next prime minister must prioritise to successfully level up the country.
Director of Policy and Research Paul Swinney assesses the long-awaited Levelling Up White Paper
Leave a comment
Be the first to add a comment.