Government should build city innovation districts to kickstart the new economy

Centre for Cities calls on Government to invest £14.5bn to build city innovation zones in Birmingham, Glasgow, and Manchester in order to kickstart the new economy.

Press release published on 14 December 2022

  • Centre for Cities report finds 60% of UK’s new economy businesses are based in cities
  • Advanced tech industries favour Greater South East with cities outside this region missing opportunities
  • Government should invest £14.5bn to build innovation zones in Birmingham, Glasgow, and Manchester

The Government should seize the opportunities of the growing technology sector and invest in delivering innovation districts in cities across the UK, according to a new report by Centre for Cities.

As part of last month’s Autumn Statement, Chancellor Jeremy Hunt announced plans to make Britain the “world’s next Silicon Valley” with ambitions to “build clusters for new growth industries”.

In a report published in partnership with HSBC UK, entitled At the frontier: The geography of the UK’s new economy, Centre for Cities outlines how such advanced technology industries – including software, robotics, telecommunications, and gaming – are created in cities, which, despite only accounting for 9 per cent of land, are already home to nearly 60 per cent of firms in these emerging sectors. This is because urban areas offer greater access to skilled workers and knowledge sharing with neighbouring companies.

However, the majority of these businesses are concentrated in London and the Greater South East, meaning cities outside of this region are missing out on vital economic opportunities and thousands of high-skilled jobs.

As such, today’s report calls on the Government to combine its science and technology ambitions with the levelling up agenda and prioritise building new economy districts in Birmingham, Glasgow, and Manchester – the three cities initially chosen as “innovation accelerators” in last February’s Levelling Up White Paper.

Ministers should properly fund these plans by creating a £14.5 billion growth package for these three cities over ten years. This could mostly be made up of existing earmarked spending and would go towards funding infrastructure upgrades and boosting research and development (R&D) to help make Birmingham, Glasgow, and Manchester more attractive to new economy industries.

This should be the first step in the creation of a new industrial strategy that looks at how how places can cater for a range of emerging industries, in contrast to recent plans that have only focused on the development of specific sectors.

In addition to the recommendation to invest £14.5bn to build innovation districts in Birmingham, Glasgow, and Manchester, the Government should also support the new economy more generally across the UK by:

  • Increasing R&D funding targets from 2.4 per cent of GDP to 2.7 per cent by 2027.
  • Reversing the cuts to public skills spending seen over the last 12 years and setting a target to increase spending from 5 per cent of GDP to 7 per cent.
  • Expanding R&D tax credits to expenditures associated with innovative services.
  • Extending the Strength in Places Fund to continue to provide specific support to innovative activities across the country, with funding continuing to come from the Strategic Programmes budget.

Finally, to address the UK’s skills shortage and to reflect the role that a diverse workforce plays in innovating companies, the Government should expand the period of the ‘graduate visa’ from two to five years and guarantee the policy will not be reverted in the next decade. This would make the post-work visa more competitive compared to international peers, such as Australia.

Centre for Cities Chief Executive Andrew Carter said:

“Supporting the growth of the new economy will be essential to ensuring the UK’s future success and by offering access to skilled workers and knowledge sharing between firms, city centres will have a big part to play in this.

“The Government has high ambitions for Britain to be a world leader in innovation but achieving this will rely on a clear plan with substantial funding from Westminster. Investments in skills, regeneration, and infrastructure will all be needed to ensure we can attract leading businesses to cities across the UK and reap the rewards of success.”

Ian Stuart, Chief Executive Officer at HSBC UK said:

“New economy businesses are a driving force for innovation and we must support cities across the UK to facilitate their growth.

“At HSBC UK we have been supporting new companies to realise their growth ambitions through our landmark £15bn SME fund and our £250m Growth Lending facility, but financing is only one part of the equation. Partnerships between private and public sectors will be key to ensuring these high growth companies can access the finance, expertise, and infrastructure they need as we develop the UK’s economy.”


Notes to editors

The £14.5bn package to build innovation districts in Birmingham, Glasgow, and Manchester, should comprise of:

  • Allocating a total of £1 billion of the annual £7 billion R&D uplift that the Government has promised to spend outside of the Greater South East to the leading university in each of these cities.
  • Making a £500 million investment in each to improve how attractive their city centres are to new economy and other high productivity businesses, funded from the Strategic Programmes budget.
  • Extending the City Region Sustainable Transport Settlement beyond 2026/27 for a further five years for Greater Manchester and West Midlands (a further £1 billion each) plus a similar commitment to Greater Glasgow, and giving all three places Transport for London style powers to give them greater control over services and the ability to use revenues to invest in their systems.
  • The Scottish Government establishing and working with a new Greater Glasgow combined authority to set out a single departmental style spending settlement for the city in the way that the UK Government has committed to explore for Greater Manchester and the West Midlands. Legislation should also be amended to allow all areas to introduce local taxes such as a tourist tax.

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