Growth of Knowledge, not Decline of Manufacturing, Shaped 21st Century City Economies

100-year study of UK cities finds that the geography of knowledge and a city’s culture of innovation are more important than industrial legacy of manufacturing in determining current economic success.

Press release published on 4 March 2015

A ground-breaking new Centre for Cities report reveals the enormous changes that have transformed Britain’s cities over the past 100 years – and highlights why the modern era saw some flourish, while others fell behind.

  • All in all, 22 of the 57 largest cities in England and Wales have more than doubled their employment over the past century. Peterborough, Oxford, Cambridge and Reading are among those that have grown most strongly, with Crawley now boasting more than 600 per cent more jobs than in 1911.
  • In contrast, 11 cities boasted fewer jobs in 2013 than they did in 1911, including former textile manufacturing hub Burnley – which alone lost around 50 per cent of its jobs over this time.
    During a century in which fundamental innovations such as electricity, air travel and the Internet transformed the way in which people live and how businesses operate, the report finds that Government policies and the geographic distribution of industries both played important roles in shaping cities’ economic performance and prosperity today
  • The best-performing cities in the 21st Century typically began the last century with a higher base of knowledge-rich and professional jobs, and responded to the evolving global landscape through innovation and adaptation. Over time, their economies transformed to favour knowledge-intensive industries, enabling them to offset job losses in declining fields, and build competitive and dynamic labour markets.

The cities struggling today have continued to devote large proportions of their industrial structure to increasingly unprofitable industries, or to take the ‘coal mines to call centres’ route of replacing low-skilled jobs with other types of low-skilled jobs. As their economies stagnated while the innovators went from strength to strength, the ‘North-South’ divide we know today began to take shape:

  • 2.3x more jobs were created in the South than in the North, Wales and Midlands over the past 100 years.
  • 11/16 cities that have reinvented their economies towards knowledge-intensive industries are in the South, while 30/41 cities that continue to boast low-skilled industry bases are in the North, Midlands or Wales.

Contrary to popular belief, A Century of Cities make clear that the decline of British manufacturing does not solely explain the emergence of the North-South divide, with the geography of knowledge a much stronger determinant in cities’ contemporary fortunes than a legacy of manufacturing.

In 1911, even London had an industrial structure heavily steeped in manufacturing, constituting 27 per cent of its total employment. And yet, with a highly skilled workforce, and through proactive efforts foster a business environment conducive to innovation and new services-based industries, the capital was able to transform its economy to become a global powerhouse. Today, manufacturing jobs account for just 2.6 per cent of its workforce.

By contrast, many cities that once held unique industrial advantages due to their geographies – such as seaside towns and ports – have been left behind, as the effects of advances in transport, logistics and power, the growth of air travel, and the impacts of globalisation have taken hold.

In Manchester, the loss of 400,000 manufacturing jobs over the century presented a challenge of a particularly staggering scale. In 2013, the city still hadn’t quite made up the shortfall, with 9,000 fewer jobs than in 1911. And yet, through a gradual shift through strong leadership to a more modern and knowledge-based economy, Manchester appears to be reaching a turning point – with 24 per cent growth in its jobs base since 1991.

The value that businesses place on a city’s culture of innovation and their capacity to attract high-skilled workers mean they will shoulder higher rental and operational costs to find such environments. As the report explains, this fact alone indicates that Britain has well and truly shifted from an age in which the economic success of its cities was determined by the geography of resources, to the era of ‘knowledge proximities’.

A Century of Cities sets out the various approaches that successive National Governments have taken to seek to respond to the changing urban landscape over the past century. It finds:

  • New town initiatives in the South gave rise to some of the best-performing cities today, such as Crawley, and Milton Keynes, which was born in the 1960s and now boasts 150,000 jobs and one of the nation’s most dynamic local economies.
  • So too has the expansion of the welfare state, and ensuing decisions around where to locate and expand public sector employment, played a significant role in shaping cities’ labour markets:
  • In London, an estimated 900,000 of the 1.8 million new jobs created in the capital over the past century have been in the public sector.
  • In Liverpool, the public sector has softened the extent of the city’s employment decline, adding 100,000 jobs over the last 100 years, as it has simultaneously lost 140,000 private sector positions.

Initiatives that have sought to interfere with the location of jobs, however, have been largely unsuccessful at encouraging business growth – and in some cases, they have been harmful to the performance of cities or the national economy. The ‘Brown Ban’ policy of the 1960s, which constrained new office building in both London and Birmingham in an attempt to encourage businesses to locate in other cities, and the trend in the 1980s to shift firms to ‘business parks’ outside of city centres, both significantly undermined the formation of concentrated economic activity that knowledge-intensive businesses need to collaborate, share knowledge and drive growth.

Given the importance of knowledge-intensive businesses to local and national economic success, the report recommends that future policy investment be directed to supporting cities to improve their baseline skills and education levels, and to encourage innovative, knowledge-focused business environments.

Commenting on the report, Centre for Cities’ Acting CEO, Andrew Carter, said:
“A Century of Cities offers a unique opportunity to make sense of the long-term factors behind the two-tier urban economy of progress and decline that we see in Britain today. It is a sobering reminder of the significant challenges many cities have experienced in an era characterised by the effects of technical development and globalisation. But it is also a positive and constructive lesson of how, in the face of enormous changes, targeted investment, strong leadership and an appetite for transformation can help cities to reach unprecedented heights of economic strength.”
“We must take heed of the lessons of the past when planning for the future. This means ensuring that local economic growth policies are focused on helping cities to build sustainable industrial structures that favour knowledge-based activities – through supporting them to invest in skills and education, and to create adaptive and innovative business environments for the 21st Century. In doing so, we will give a much larger number of places – and the people who call them home – a better chance to share in the prosperity of today, and tomorrow.”

Sophie Gaston, Press and External Affairs, Centre for Cities
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