18 Sep 2018
It’s time for the cities of the North to drive our prosperity
This blog is based upon a speech that Nigel Wilson gave at the ‘Convention of the North’ in Newcastle. This inaugural meeting brought together local leadership from many of the county, city and borough administrations in the north of England, giving the region’s leaders the opportunity to speak to government with a strong voice. Its huge success means it’s likely to be a powerful driver of change.
Legal & General are committed to supporting cities, towns and communities in the North through using its long-term investment funds to create housing, urban regeneration, transport, clean energy and jobs. Some recent important investment schemes are:
- Leeds: £642 million programme, including urban regeneration, housing, road upgrades and hospital renewal
- Salford: £503 million MediaCityUK investment, New Bailey homes and urban regeneration project
- Newcastle: £350 million investment in Helix Science Central, creating over 4,000 jobs, 500,000 sq ft of office and research space, and 450 new homes.
- Manchester: Deansgate Square and Piccadilly Square regeneration schemes
- Liverpool: English Cities Fund urban regeneration, St Pauls Square scheme, investment in HMRC office space for 3,500 employees
- North Yorkshire: Modular Homes factory in Sherburn
In my experience, inspired local leadership works much better than waiting for ‘the man from Whitehall’ to make something happen. Whitehall can provide the nudge to close the city deal, but the ideas, innovation and capital come from the cities themselves. They drive their own success.
Legal & General are investing billions of pounds to help inspired local governments of all political persuasions regenerate and revive their cities in places like Salford, Newcastle, Leeds as well as in Scotland and Wales. We learned that we need to drive change ourselves at a local level and not wait for central government to act.
Why is UK wealth concentrated in London?
The gap between London and our Northern cities, in terms of GDP, incomes and productivity, is simply too wide. It is unusual to have this concentration of wealth in the capital city. Countries with more federal and devolved systems of government such as Germany have stronger cities outside the capital, like Frankfurt, Hamburg and Munich. The US has a range of strong cities including San Francisco, Denver, Austin and so on.
It is in the cities of the north of Britain that we can make the most impact in closing the 30% productivity gap we have with international competitors, and where our investment can make the most difference, not least because land prices are lower and regeneration more affordable than in London.
The UK’s investment rate is around 17% of GDP. That’s four points lower than the OECD average, at least £50 billion less than it should be, and it has been falling for most of the last 30 years. This is ironic given there has never been so much money in the world, earning such low returns. $8 trillion of it even earns a negative return.
New industries drive job creation
But the investment of our long-term money is having positive results. For example, MediaCity in Salford now employs more people in technology than were ever employed there when it was a dock. Wellington Place in Leeds is another great example. The Helix science centre in Newcastle will make a greater local economic contribution than when the site was home to the Scottish & Newcastle brewery as explained in this video from Facebook.
Brexit will increase business costs in London and the South and, in the short-term at least, reduce the tax take. There will be less in southern tax receipts to send northwards. This will create a challenge. But if the policy framework is set correctly it will create opportunities.
Brexit will also drive a need to replace the key elements of EU regional funding such as the European Social Fund, European Regional Development Fund and probably European Investment Bank money.
How the North can lead industrial strategy
Cities and regions in the North will have a major role in building and delivering the Modern Industrial Strategy. For example, the North-East can build on its role in renewable energy to encompass also oil and gas decommissioning, where there will be huge future global demand. Developing global leadership in ageing and care is another opportunity to address a global challenge. And the revolution in modular housing can be led from the North, ideally from our factory in Sherburn in Yorkshire. In this way the cultural strengths of many of our Northern cities including broadcasting in Manchester and gaming in Newcastle can be built upon.
In earlier times, our Northern cities sat powerfully astride the industrial revolutions of the day: in steel and heavy engineering, textiles, shipbuilding and manufacturing. We should look to show the same ambitions around the fourth industrial revolution.
The current digital revolution will also require whole new skillsets to equip those who are at risk of job displacement by artificial intelligence and robots for new high-tech, high-productivity and high-wage jobs.
Let’s stop the brain drain from northern cities
Our great universities here in the North are one mechanism to do this. They will produce the digital and tech entrepreneurs of tomorrow. Almost all the world’s largest and most successful tech companies – Google, Microsoft, Apple, Facebook etc. were established by students.
It’s important that our northern cities are environments where talented people work and stay to live. We need to move away from a situation where our graduates are “Dick Whittingtons” who want to move to London because the streets are paved with gold.
There is a clear role for devolved authorities in this. Skills are a key part of recent devolution deals and the devolved authorities, as they implement their economic plan, will know best what the skills requirements will be.
Now is the time to rise to the challenge. Never has there been so much global capital. Never has money been so cheap and yet so poorly used. Never has science and technology been so exciting.
History will judge us badly if we miss this wonderful opportunity.