What levelling up really means: changing the geography of knowledge

This briefing uses the theory of economic complexity to show how the economies of Britain’s cities and large towns have developed over time and sets out the implications for how the Government should approach its levelling up agenda.

Briefing published on 22 September 2021 by Guilherme Rodrigues, Anthony Breach and James Evans

Centre for Cities’ ongoing work on levelling up has called for the Government’s flagship agenda to focus on improving the performance of the UK’s biggest cities as a means to address regional inequalities.

Using historic data, this briefing looks at how the economies of Britain’s cities and largest towns have become more complex over the last four decades to show that:

  • There are clear links between the present and past economic complexity of UK cities and large towns and their current productivity levels. Successful cities and large towns today – mostly located in the Greater South East- had higher levels of complexity in 1981.
  • The largest cities outside of the Greater South East, such as Manchester and Glasgow are much more economically complex today than they were in 1981.
  • Despite this newfound complexity, the aforementioned large cities still underperform, not only when compared to smaller cities in the Greater South East, but also when compared to international counterparts.

The four key messages for policymakers from this analysis are:

Levelling up the economy must focus on the geography of knowledge

To level up the economy, the geography of knowledge in Britain must change. This means the large cities outside of the capital must continue to attract high-skilled, high-paying firms.

Big cities are the most promising places for levelling up

High-skilled, high-paying firms prefer to locate in the UK’s big cities. This means that policies to further improve the economies of these places would go with the grain of changing trends in the British economy and support the Government’s goal of creating an internationally-competitive city in every region.

A note of caution for those who urge local areas to ‘build on their strengths’

Complexity has declined in places which have historically built on their strengths alone, that is, those which have ‘doubled down’ on a single or few sectors such as manufacturing and have not broadened their export base beyond these activities. Our research shows that the most complex local economies are those which are strong in a large number of high-value, knowledge-intensive industries.

For struggling places, it’s not what a place has, but rather what a place lacks that should be of concern

If places in the North and Midlands continue to solely focus on what sectors they already attract then they will improve their economies. Their focus should be on addressing the barriers that stop more economically complex and knowledge intensive businesses from investing in their areas.

More on these issues