Features

Creating the UK’s Northern Powerhouse

Collaboration, connectivity and unity over infrastructure planning will create vital regional economic growth, reports Antony Oliver.

Creating a northern powerhouse

The expectation of relentless pressure on public finances is, according to Manchester City Council chief executive Sir Howard Bernstein, precisely why now is the critical moment for central government to invest to boost regional economies.

Without a substantial uplift in business, employment and economic activity to redress the growing imbalance in the nation’s economic fortune, the situation is only set to get worse and impact further on the nation’s economy, he explained.

“The deficit between levels of tax raised and what we spend is of the order of £5bn a year – the objective must be how do you significantly reduce that deficit?” Sir Howard Bernstein.

“Local government spend has been decimated but the reality is that in Greater Manchester we are spending exactly the same amount as we were five years ago,” he said addressing a conference on Northern economic opportunity hosted by KPMG in Manchester last month. 

“We are spending less on success and more on dependency and therefore failure,” he pointed out, highlighting the critical national imperative to boost economic growth in northern cities. 

“The deficit between levels of tax raised and what we spend is of the order of £5bn a year – the objective must be how do you significantly reduce that deficit?” he added. “Those are the fundament challenges. Productivity in the region has to be increased and devolution makes that possible.”

Greater Manchester made national headlines in November when it signed a landmark devolution deal with Chancellor of the Exchequer George Osborne. In 2017 this will see a Mayor elected to a newly created 11th seat on the Greater Manchester Combined Authority. The deal brings with it a host of new powers for the Mayor and the city region including control over transport, spatial planning and skills training (see feature page 22).

According to Bernstein poor transport connectivity is a key part of the productivity problem. “The way we organise transport in the UK, for example, has been a national disgrace,” he said highlighting the a fact that the silo decision making meant ports were still built in isolation from the road system.

One North

At the heart of the Manchester infrastructure debate was the deliverability of the plan set out in last August’s “One North” report by an alliance of six local authorities. This report set out how an interconnected North could benefit the nation in response to the challenge set by HS2 chair Sir David Higgins and the Chancellor George Osborne in his Northern Powerhouse speech in June.

The £15bn, 15-year investment plan to maximise economic growth across the north, boost transport links and help rebalance the national economy also predicted benefits for the whole of the North of England and was, he said, fundamental to turning this situation around. 

“We need to create a focus around multimodal travel,” said Bernstein. “One North is not just about rail. It is multi-modal and a fundamentally different way of looking at transport planning and delivery.” 

“We do seem to be within grasping distance of political consensus around investment in the north,” Richard Threlfall, KPMG

He added. “It is a fundamental part of how we drive agglomeration and connectivity and the key to growing and strengthening the diversity and depth of our business base in each particular place. We have to continue this focus. One North is about vision and planning, it is not about setting up a new bureaucracy. 

“We want the ability to retain the overarching vision about what sort of places we want to create.”

Cities in the north for the first time, he said, understood the benefit of working together to boost connectivity and, working with business, can create “a very powerful noise about investment in the north”. 

Not least, he added, given that the government was genuinely committed to rebalancing the UK economy. 

Collaboration is key

KPMG partner Richard Threlfall also underlined Bernstein’s view pointing out that unified regional government was clearly critical to making headway, not least to ensure that the issue doesn’t drop off the radar in the face of growing political and economic post-Election pressures.

“We do seem to be within grasping distance of political consensus around investment in the north,” he said, referring to progress on projects such HS2 and HS3. “The North report is a very important document, not so much for what it says but for the fact that it was written – for the first time we have got political leaders to talk about the future of the north together.

Threlfall referred to the opening paragraph of the RSA’s City Commission’s final report Unleashing Metro Growth published last October as summing up the scale of the current opportunity and impact that cities and city leaders had to have in driving the agenda. 

“A new global picture of growth is taking shape,” says the report. “This is not about a transfer of economic power from North to South, or West to East. It is about the rise of cities, the concentration of productivity, innovation and creativity that will drive our economic future.”

Threlfall highlighted the relentless North to South shift in economic performance seen over the last few decades and pointed out that turning this around was possible but required cities of the north were able to take advantage of their collective power by investing in better connectivity.

“There is huge agglomeration potential in the North West but it doesn’t perform largely due to the lack of connectivity,” he said pointing to figures showing that a combined population of the North West was, at 6.7M roughly equivalent to London’s 7.2M but had half the jobs and a third of London’s £300bn contribution to the national economy. 

“What does the north deliver? The answer is not enough so the challenge is a national plan by the north for the nation. We have won the [argument for devolved spending in] theory, now we need to win the practice,”  John Mothersole, Sheffield City Council

Furthermore 62% of the total UK infrastructure spend in 2014 was focused on London – great for London, said Threlfall but a problem for the rest of the country. And while the growth of London has been fantastic for the UK, continued investment at this proportion will, he added, only exacerbate the situation.

“This is in part correcting for what has not been done right over the last 50-60 years but for me it is far more about the north gearing up to play the most powerful positon it can in a future of a changing world. A key element of that is what is going on in cities.”

As Bernstein also made clear, while devolution is important, devolution with money is critical. Threlfall pointed out that in this respect the UK was way below other parts of the world with only 1.7% of UK spending controlled by the regions compared to a world average of around 10%.

“There is no fundamental problem with a centralised system provided money is allocated with a view to boosting regional economies,” he said, “And if the level of productivity in the north can be increased to that of the south then we really will have a Northern Powerhouse.” 

“But there is a demographic time bomb in the north – it has an inability to hold high earning population,” he added. “And if we carry on like this the north will become the retirement home for the south.”

Investment case

Yet with the current case for investment in London and the South East still very strong, local authorities in the north highlighted the critical need to underline the national value of boosting investment outside the capital. “The north needs to make the proposition,” said John Mothersole, chief executive of Sheffield City Council.

“What does the north deliver? The answer is not enough so the challenge is a national plan by the north for the nation. We have won the [argument for devolved spending in] theory, now we need to win the practice,” said Mothersole. “Not by demonstrating how badly done by we have been [in the North] but by showing what we can offer the country.”

“This is about creating a step change and it is about leadership,” she said. “We have much to bring to this partnership.” Newcastle City Council chief executive Pat Ritchie

The solution, agreed local authorities speaking at the KPMG event was to boost the case for investment in the north as a solution to the national economy. “We need to win the argument about new rail in the north to avoid more funding flowing into new Crossrail style projects in the south,” said Ged Fitzgerald chief executive of Liverpool City Council.

Tom Bridges, chief economic development officer at Leeds City Council agreed that the arguments were there to be made. “We have huge economic potential and economic scale. We are a significant element of the national economy so it is important for the UK economy,” he said. “We need investment in infrastructure to cope with the growth that we have got and the growth we are expecting.”

Newcastle City Council chief executive Pat Ritchie pointed out that while there had been focus on investment in the north before this time it felt different. “At the heart is strong political leadership from across the north and across the north cities regions,” she said.

“There is also collaboration around priorities and making the case for those priorities,” she added that there was also a strong championing in central government that recognised the need to invest in the north and to work with regional authorities to make the case. “This is about creating a step change and it is about leadership,” she said. “We have much to bring to this partnership.”

 

Recent work by KPMG highlighted so-called “Magnet Cities” to uncover what makes cities successful? Seven key attributes were highlighted as being central to success:  

  1. Strong leadership
  2. Fundraisers
  3. Connectivity
  4. Constant physical renewal
  5. Definable identity
  6. Cultivate new ideas
  7. Attract young wealth creators
If you would like to contact Antony Oliver about this, or any other story, please email antony.oliver@infrastructure-intelligence.com.