Why city centres should be designated as areas of national economic significance
The Industrial Strategy will look to support areas of the economy that are nationally significant. Here’s why that should mean city centres.
The Industrial Strategy will look to support areas of the economy that are nationally significant. Here’s why that should mean city centres.
A challenge of looking at the economy through the lens of specific sectors is that you miss where these sectors overlap. Many of them do overlap, and they usually co-locate in city centres.
City centres in Britain cover 0.1 per cent of all land, but account for a much larger share of the economy. For example, 18 per cent of the cutting edge of the economy – the part of the economy the forthcoming Industrial Strategy should be looking to boost – locates in these very small pockets of the country.
And the most successful of these centres are melting pots of the cutting edge rather than mono clusters of single industries, with a whole range of cutting-edge activities co-locating within them. Figure 1 shows that the more productive a city centre is, the higher the number of cutting-edge sectors that it tends to have located within it. Focusing in on individual sectors both misses this co-location and misses the role of particular places in hosting such cutting-edge activities.
As frequent readers of Centre for Cities’ work will know, this is because of the benefits that a city centre location (in principle) offers. Namely they offer access: access to a large pool of skilled workers and access to knowledge, in the form of other high-knowledge businesses.
It is for this reason that city centres are the most productive parts of the country. ONS data shows that they are 30 per cent more productive than the national average (and this is likely to be an underestimate given the methodology used to create these estimates).
There is though a dual problem, as Figure 2 shows. The first is that a number of large city centres – such as Sheffield and Newcastle – lag behind the national productivity average when the benefits they should be able to offer to high-skilled businesses means they should be ahead of it. The second is that while Manchester and Birmingham city centres in particular are ahead of the national average (just), they are small, accounting for no more than 17 per cent of all output. To put this in perspective, not only is Central London 1.8 times more productive than the national average, it also accounts for 43 per cent of all output from the Capital.
This limits how much prosperity Birmingham and Manchester city centres generate for the national economy and so how much they spread to surrounding areas. In both cases, many parts of each city don’t much benefit from their recent success because they generate nowhere near enough prosperity to go round.
A question policy makers currently working on the Industrial Strategy are likely to be asking is: ‘where in the UK is there economic activity of national significance, and how can policy support it?’
The question instead should be ‘where in the UK should there be economic activity of national significance?’ This question talks more to future potential rather than was is currently observed. And it is much more relevant for policy. If something is currently nationally significant, then it may not require intervention – it is doing well already without any help. But if something should be significant but isn’t currently, the rationale for intervention is much clearer.
The UK’s largest city centres should be nationally significant. If the national economy is to grow its cutting edge, it will need the locations that these activities have a clear preference for to be attractive places to do business in.
For this reason they should be at the centre of the industrial strategy. The Government should class them as key national infrastructure, going further on its intention to make choices on which places to target policy on, and target the improvement of large city centre economies in particular.
Centre for Cities has previously called for a UK version of the US CHIPS Act, focusing (what looks set to be very limited) investment into a small number of large cities. The Chancellor should announce this alongside the Industrial Strategy to give it some clout.
Money is very clearly an issue. So this package should principally redirect R&D investment that has already been committed into large city centres. It should be supplemented with some cash to invest in redevelopment projects in these centres, and by extending the powers that through TfL London has to other large cities. The aim should be to increase the size and the density of the city centres to increase the access they provide to knowledge, which is facilitated through higher density. In practical terms this means making these city centres taller.
A more successful future UK economy needs city centres that are attractive to the industries of tomorrow. An industrial strategy that has place as part of its focus must prioritise tackling the reasons why they currently aren’t as attractive as they should be.
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