01The state of urban Britain in 2018

Urban Britain is a divided entity, both in terms of politics and economics. Cities Outlook 2018 shows the extent of these divides, and the implications they have for the future.

Mansfield has broadcast some very clear messages via the ballot box in the last two years. It polled the highest percentage of votes to leave the European Union of any UK city in the EU referendum. And it returned its first non-Labour MP since 1923 in the form of Conservative Ben Bradley in last year’s general election.

There is clearly dissatisfaction among the residents, and the city’s economic performance suggests why this might be the case. In 2017, resident wages were 19 per cent below the national average, while employment rates were lower than the national average too. In much of the recent discussion around ‘left behind’ places, Mansfield is a leading example.

The picture looks very different in Reading where its residents voted to remain in the EU. Resident wages were 18 per cent above the national average, and it saw a swing towards Labour in the last election. And in 2016/17, welfare payments were £1,100 lower for every resident living in Reading compared to Mansfield.

This is a story seen across urban Britain, which is divided both politically and economically. In terms of politics, this can be seen both in the outcomes of the EU referendum and the most recent general election (as shown in Figure 1). In the referendum small and medium sized cities on the coast (such as Southend and Chatham) or in the midlands or the north of England (such as Mansfield and Doncaster) tended to poll a greater share of votes for leave.

A similar geography is seen when looking at the swing towards or away from the Conservative party at the election. The majority of Britain’s cities returned Labour MPs once again. But the swing towards the Conservatives was surprising – cities such as Stoke and Hull, long considered Labour heartlands, saw shifts towards the Tories. And while many northern cities did see a swing towards Labour, this was smaller than the swing the party enjoyed at the national level.

The economic divides across urban Britain map closely to the political ones (see Figure 2). In terms of wages, welfare spend per capita and employment rates, the patterns tell a story of winners and losers, with southern cities in general being the relative winners. This has come at a cost though (for renters at least, if not homeowners), with housing being much less affordable in southern cities than elsewhere.

Why economic divides exist across the country

One of the main reasons for these differences in economic outcomes is the differing productivity – the average output of each worker – across the country. While the UK’s productivity woes have been subject to a great deal of comment and analysis in recent years, there has been much less consideration of how this plays out across the country and the implications for the national picture.

Centre for Cities analysis¹ has shown that the country’s productivity problems are the result of the underperformance of many cities outside the Greater South East of England. While cities such as London and Reading are among the most productive in Europe, cities such as Leicester and Sheffield perform well below the European average². This means that a big part of improving the productivity of the UK as a whole will need to address the poor productivity in these cities.

How well politicians do this will depend in part on how well they use the tools made available to them in the most recent Budget and the Industrial Strategy. Both unveiled a number of helpful place-based initiatives, including new devolution and growth deals and funds designed to tackle the challenges that different cities face, such as the Transforming Cities Fund for local transport. The six metro mayors were also given extra tools and funding to support their economies.

But neither the Budget nor the Industrial Strategy set out with enough clarity the overarching role of place in explaining the UK’s productivity challenges. The productivity divergence seen across the country is the result of the different advantages that cities offer to businesses. Those cities that struggle economically tend to offer many lower-skilled workers and cheap land to businesses, but they don’t offer access to a large number of higher-skilled workers or a network of higher-skilled businesses. The result is that while many have been successful at attracting investment from call centres and distribution warehouses, for example, they have struggled over a long period of time to attract investment from more productive, innovation-focused firms.

Without this clear overarching strategy, there is a lack of coherence to the many initiatives announced. This makes tackling the underperformance of a number of cities, and the impact this has on national productivity, a much more difficult task.

That said, the commitment within the national strategy to create local industrial strategies offers a chance to address this. The ability of the local industrial strategies to set out a coordinated set of actions to deal with the challenges and opportunities their areas face will make or break the success of the national strategy overall.

A successful local industrial strategy will be one that is able to change a city’s offer to businesses across a range of sectors, with the result being an increase in higher paid, more productive jobs in that city.

Devolution and local leadership

Over the last 12 months there has been increased variation in the way England is governed. Last May six metro mayors took office for the first time, with some powers over skills, planning and transport in particular. Along with the Mayor of London, they now have a mandate which covers one third of England’s population. And while their powers are limited, they are already expanding.

A number of announcements in the last Budget and Industrial Strategy showed a clear preferencing of metro mayors, for example the direct allocations of money to the mayors from the Transforming Cities Fund (while other cities will have to compete for money) and the invitation to Greater Manchester to be the first place to agree a local industrial strategy.

This once again shows that the original devolution deals that the Government struck with particular areas are likely to be the first of many, and have opened the door to further rounds of devolution and access to national funding. This means that those big cities that have not been able to agree an initial deal, such as Leeds and Nottingham, are increasingly being left behind.

A key achievement for national and local policymakers in 2018 would be to secure devolution deals for the remaining big cities that do not have one in place. Cities have long been restricted by the centralised nature of the UK, and this has limited their ability to tailor policy to respond to the ongoing changes seen in the national and global economies. The variation seen across the country (as shown in the maps above) reduces the effectiveness of blanket national policies which invariably fail to address the different challenges that places face. But those places with a metro mayor now have the ability to tailor policy to do just this.

Urban Britain in 2018 is one characterised by its divides, and as we show in the next chapter, these divides are likely to widen without sufficient policy intervention. Variation in outcomes across cities requires variation in policy. This requires the recognition of the crucial role that place plays in this, be that through national policies such as the Industrial Strategy delivered locally, or more local control through greater devolution.