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All cylinders: The role of the Midlands Engine in the British economy

Urban economies essential for driving growth in the Midlands Engine are underperforming, and low productivity is to blame.

Report published on 9 May 2023 by Matthew Coombes

Centre for Cities’ report, All Cylinders: The Role of the Midlands Engine in the British Economy, shows that the Midlands Engine plays a large role in the UK economy, however its economy is £18 billion per year smaller than it should be. Accounting for 89 per cent of this output gap, its cities, and in particular city centres, are not attracting enough high-skilled service export firms to increase productivity across the region. Policy must address the barriers to growth if the Midlands Engine is going to generate prosperity locally and make a larger contribution to the national economy.

The report finds that:

The Midlands Engine plays a large role in the UK’s economy

The Midlands Engine plays a significant role in the UK economy. While the region accounts for 15 per cent of total employment, it only accounts for 13 per cent of the UK’s GVA. This points to relatively low productivity levels across the area.

The role of the Midlands Engine in the British Economy

Urban economies in the Midlands Engine are below their ‘productivity potential’

While cities in the Midlands Engine economy are centres of production, they are below their productivity potential. Large cities should be more productive, as agglomeration effects increase with size. However every city in the Midlands Engine, except Coventry, is less productive than it should be for a city of its size.

The UK’s largest cities underperform – including some in the Midlands Engine

The Midlands Engine’s service exports underperform

The Midlands’ economy is concentrated in its cities, with the Birmingham urban area alone accounting for around a quarter of all jobs and output.

While the Midlands Engine’s manufacturing sector is performing close to the average for Great Britain, the report highlights that its cities, and particularly its city centres, are failing to attract enough higher-productivity service export firms, thereby hampering the region’s productivity growth. This is crucial to understanding why the Midlands Engine is underperforming, since cities contribute to 89 per cent of the area’s output gap.

The Midlands Engine is underperforming in the productivity of its service export sector

What needs to change?

Policy must address the barriers to growth if the Midlands Engine area is going to generate more prosperity locally, further contribute to the national economy and fulfil the Government’s goals of growing the UK’s ‘innovation industries’ and the levelling up agenda.

To achieve this, Government should: 

  • Improve skills by targeting skills money from the area’s Shared Prosperity Fund allocation to support residents without qualifications.
  • Prioritise the creation of new high-quality city centre office space that meets the needs of occupiers, in particular service exporters, through planning policy and use of central government funds.
  • Develop big cities’ public transport infrastructure and housing in tandem, increasing the pool of workers living around public transport stops.
  • Ensure availability of land, particularly greenfield sites with access to a significant workforce, in order to meet future manufacturing demand in the suburbs and urban hinterlands.
  • Aim to secure devolution deals covering all parts of the Midlands Engine by 2030 to better align economic policy with the region’s geography and grant greater control over policy to local authorities.

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