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For the Northern Powerhouse to succeed, the government must focus on underperforming city-regions

Source: PSE Jun/Jul 16

The government has made the Northern Powerhouse a top priority – but the initiative will only work if it focuses on boosting productivity in underperforming northern cities, chief executive of Centre for Cities Alexandra Jones argues.

In the recent Queen’s Speech, the government reaffirmed its commitment to building the Northern Powerhouse, and empowering places in the north of England to reach their economic potential. 

The speech followed George Osborne’s pledge in the March Budget to give the green light to the High Speed 3 train-link between Manchester and Leeds, and to improve road links between Manchester and Sheffield, as part of the government’s commitment to “making the Northern Powerhouse a reality and rebalancing our country”. 

Thinking beyond inter-city links 

It’s clear that the government is intent on ensuring that the Northern Powerhouse is more than just a sound bite. The initiative has the potential to have a real impact in addressing the north/south economic divide. However, our new research warns that, if the government is to boost economic growth in the region, it needs to go beyond improving transport links between northern cities. 

The report, ‘Building the Northern Powerhouse’, compares northern cities to the Rhine-Ruhr and Randstad regions of Germany and Holland, which the government has cited as models for the Northern Powerhouse. 

In particular, the government has argued that these regions function as vibrant single economies – with strong transport links enabling workers to commute between different cities – and that bolstering rail and road connections is key to the success of the northern economy. 

But our new analysis suggests that the success of the Rhine-Ruhr and Randstad areas is not down to inter-city transport links, but is instead driven by the economic strength of individual cities and their surrounding areas within those regions. 

Local productivity deficits 

For a start, the research shows that inter-city commuting links in the Rhine-Ruhr and Randstad areas are actually little better than in the north of England. Only 5% of workers commute between Düsseldorf and other cities in the Rhine-Ruhr region, for example – similar to the proportion of people who commute from Sheffield to Leeds, or from Liverpool to Manchester each day. 

Instead, the real difference between the Rhine-Ruhr/Randstad areas and the north of England is productivity levels – with the largest cities in the German and Dutch regions 40% more productive than counterparts in the Northern Powerhouse. 

For example, Amsterdam – the most productive city in the Rhine-Ruhr and Randstad regions – contributed £75,188 per worker to the Dutch economy in 2011. In contrast, in the same year, Leeds – the top-performing city in the Northern Powerhouse region – contributed £46,575 per worker to the national exchequer. 

The international examples suggest we can’t build a successful Northern Powerhouse without taking steps to address the productivity deficit in the north. For that to happen, the priority for national and local policymakers should be on addressing skills-gaps in the north. 

Only three Northern cities – York, Warrington and Leeds – are in the UK top 20 in terms of the number of residents educated to degree level. While nearly half of residents in Reading (47%) have a degree, for example, only a quarter of people in Liverpool are educated to this level. Addressing these discrepancies across the north will be crucial in boosting productivity in the Northern Powerhouse region. 

Addressing economic challenges 

Of course, there is still a case for improving train links between big cities such as Manchester and Leeds, which can help encourage economic development. But our research suggests that an even bigger priority should be strengthening transport networks within northern cities, to help people access jobs and businesses access customers across their wider city-region more easily, as well as making it easier to attract businesses wishing to be near – but not in – a large, thriving city centre. 

Ultimately, the government needs to maintain its original focus with the Northern Powerhouse initiative – boosting economic growth in big city-regions such as those around Leeds and Manchester. 

Instead of spreading limited monies and political focus equally across the whole region, national and local policymakers need to concentrate the majority of resources on addressing the economic challenges that major northern city-regions face, as these have the greatest potential to deliver benefits for the north as a whole.

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