What are the challenges that economically successful cities face?
Short-term support to help businesses bounce back from Covid-19 should be combined with the delivery of new housing and transport improvements.
Short-term support to help businesses bounce back from Covid-19 should be combined with the delivery of new housing and transport improvements.
While much attention is rightly focused on places which need to level up post-Covid, what’s often overlooked is that more successful cities also face challenges that, if left unaddressed, will prevent them from performing at their full potential, and risk a knock-on impact on the entire economy.
One example is the Fast Growth Cities group (FGCs) representing Cambridge, Peterborough, Milton Keynes, Norwich, Oxford and Swindon. These cities are more successful than the UK average and are growing quickly. Figure 1 below shows that Norwich’s employment rate, for example, grew by 6.5 percentage points between 2014 and 2018 and Oxford’s by 7.4 percentage points. By 2018, all FGCs apart from Peterborough had higher employment rates and lower unemployment than the rest of the United Kingdom.
Figure 1: Nearly all Fast Growth Cities have more people in employment than the national average
Source: ONS, Annual population survey resident analysis 2014 and 2018
It is not only overall number of jobs which sets these cities apart from other parts of the country, but also the quality of the jobs these cities have to offer. Almost all FGCs have higher shares of jobs in productive Knowledge Intensive Services jobs (KIBS). As a consequence, these cities together also have a disproportionately large contribution to the GDP of the British economy.
But their successful labour markets and the attraction of more workers comes at a price – there are costs to growth. For example, between 2004 and 2018, FGCs saw housing affordability worsen at a much higher rate than other places in the UK. Oxford and Cambridge were always expensive places to live but between 2004 and 2018 housing costs accelerated, as shown in Figure 2. Both cities are now among the three least affordable cities in the UK. While the worsening of affordability reflects in part how attractive these places are to live in, it also poses constraints on their future growth. If key workers cannot access affordable housing, over time the city will also likely become less attractive for workers in more other industries who rely on services such as childcare or healthcare.
Figure 2: The high demand for housing in many Fast Growth Cities has led to high house prices
Source: Land Registry, Market Trend Data 2004 and 2018. ONS, Annual Survey of Hours and Earnings (ASHE), average gross weekly workplace-based earnings 2004 and 2018.
Air quality is a further cost of growth. Four of the FGCs are already in the upper third of UK cities with the worst air quality. This is likely to increase if these cities keep on seeing high commuter inflows: Around 40 per cent of workers in Fast Growth Cities come from outside the city’s boundaries, compared to an average of 26 per cent in other cities in the UK. Road congestion and strains on city centre parking are likely to be additional effects of increased traffic in these cities.
Being a strong city economy also does not mean being entirely shielded from the impact of Covid-19 either. While the FGCs saw comparatively smaller unemployment increases due to the pandemic, mainly because they are dominated by sectors with a higher likelihood to work from home, at least 20 per cent of their workers have been furloughed since the pandemic began. Additionally, none of their high streets recovered to pre-pandemic levels with the easing of lockdown last summer, meaning that local service businesses could continue to suffer a lack of custom even after the economy reopens.
Limited future economic growth in the FCGs would not just affect the cities themselves, but also the places around them due to the jobs they provide for their surrounding areas.
The immediate focus of the FGCs, and of government support, needs to be on the economic recovery. That means a particular focus on supporting businesses both on and off the high street. In the long run however, support must address more strategic challenges: Besides addressing individual issues each city is facing, this should also include further increases in the supply of affordable housing, and further investing in alternative modes of transport to allow the group to grow quickly in a sustainable way.
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