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Statsblog: cities must not dwell on their economic past

Category : Business

The industrial profile of the UK has changed over 100 years, but trends suggests investment in skills and transport will drive growth

In the year the Queen celebrates her Diamond Jubilee, Centre for Cities looked back at the shape of urban Britain in the final year of her grandmother Queen Victoria’s reign. What we found was that while the geography of our economy looked very different in 1901, the patterns of city performance that we still see today were already emerging.

The industrial revolution was built on northern powerhouses such as Manchester and Liverpool. By 1901 the industrialised parts of the north and Midlands accounted for nearly 35% of England’s population, compared to around 25% today.

Many of our cities in these areas were reliant on heavy industry such as ship building, textiles and dock working. But much of this employment was cyclical and more susceptible to wider changes in the economic climate than other industries. The casual nature of employment in these sectors meant the typical response of employers to downturns was to either cut wages or lay off workers.

With the exception of Blackpool, heavy industry accounted for at least 45% of total employment in every city north of Mansfield. In Bradford it hit 59%, in Middlesbrough 64% and in Burnley it hit a high of 68%. So while heavy industry was a big source of jobs, it did not usually provide stable employment for its workers. Instead, it created periods in and out of employment for many people working in the north.

The reverse was observed in towns and cities in the south of England. These cities were much less reliant on cyclical employers; in Reading just 33% of workers were employed in these industries. Southern cities also had a greater proportion of service jobs and had a higher share of workers in professional occupations. In Bournemouth, for example, there were 10 times the proportion of men employed in professional occupations than in Nottingham.

The industrial profile of the towns and cities in the south meant that they were in a better starting position to adapt to changes in the structure of the national economy throughout the 20th century. Services overtook manufacturing as the largest employment sector as early as the 1920s, and today it accounts for 84% of all jobs in England and Wales. Manufacturing accounts for just 9% of all employment, down from more than 40% in 1901.

The pace of this change varied hugely across cities. In 1901, services were already a bigger employer than manufacturing in Bournemouth. But it wasn’t until the 1970s that services employment overtook manufacturing in Rochdale.

Despite these employment trends, UK manufacturing is and will remain important to our economy. It is a big investor in research and development, and some of our manufacturers are world leaders. Nevertheless, looking at urban development over the last century tells us two things about future patterns of economic growth.

First, manufacturing is highly unlikely to be a net contributor to the jobs growth that the country needs. In order to remain competitive in the global marketplace, manufacturing is continually improving in productivity, producing more goods with fewer workers. The UK is not alone here; even Germany has seen manufacturing’s share of total employment halve in recent decades in response to global competition.

Second, cities need to continue adapting to changes in the national economy. Many cities have grappled with the impact of structural change in the second half of the 20th century and some of this industrial legacy continues to manifest itself to this day.

The answer is not to attempt to turn back the clock. The assets that helped cities thrive in the 1900s are no longer the economic strengths they were. Instead cities need to focus on the distinctive assets that will help them thrive in a 21st-century economy, and to invest more generally in skills and transport, which our work shows to be important for growth and prosperity in the 21st century.

Looking back at the last 110 years of urban development shows that history matters for a city’s economic performance. The challenge for current and future policy makers is to ensure that cities are not beholden to their past, but instead make the most of their assets as they look to the future.

Paul Swinney is an economist who leads on data analysis for Centre for Cities

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Councils promote growth by tapping into London’s manufacturing base

Category : Business

East London is the centre of the UK’s hopes for a return to economic growth. Local authorities can learn by its example

Last week’s worse than expected GDP data – a 0.7% contraction in the last quarter – throws a spotlight on George Osborne’s search for economic growth. Apparently the diamond jubilee holiday contributed to the decline, but the Olympics will provide a boost that bodes well for the third quarter of the financial year. These statements reinforce the pivotal role of London in our national economic fortunes.

All local authorities and local enterprise partnerships (LEPs) need growth strategies that make the most of economic relationships with London. However, another London announcement is arguably just as significant to our long-term economic prospects – the opening of the new High Speed Sustainable Manufacturing Institute (HSSMI) close to Ford’s Dagenham factory in east London.

It seems counterintuitive to mention it during the Olympics, but London remains the UK capital of manufacturing. The latest Nomis figures show that, although London has the lowest proportion of employment in manufacturing of any LEP area, it actually still has by far the largest absolute number of manufacturing employees at 178,200.

Yet London’s importance in manufacturing is not principally a function of its employment footprint. The capital’s continuing pre-eminence as Europe’s leading world city depends on its industrial capabilities. Running and maintaining transport systems, the logistics of supplying the city, minimising and managing waste, delivering the infrastructure and support for knowledge-based, consumer and residential sectors are huge undertakings of industrial scale. London’s financial and business services also provide significant sources of private sector resourcing and capability for UK manufacturing’s expansion into new national and international markets.

In short, for councils and LEP areas that consider manufacturing an important sector, London provides both the major national market for industrial goods and services, and also the most likely supply of finance for manufacturing growth across the UK. How authorities and LEPs understand and help their businesses connect to these markets will be a major determinant of how and when local growth resumes.

If HSSMI is an understated reminder of London’s manufacturing prowess, it is potentially a major milestone in the long-term economic future of east London, where the economic and social challenges are as acute as anywhere in the UK. The latest GVA per capita figures for the sub-region for outer east and north-east London is £13,429. This is a mere 12% of the figure for inner west London, which stands at £109,278; the degree of economic inequality in our world city is four times greater than elsewhere in Scotland and the rest of England put together.

Of the flagship investments made to redress the balance, the Olympic legacy, Crossrail, and the emergence of a new tech city at “Silicon Roundabout” are the most striking. But as a recent report on Tech City by the thinktank Demos suggests, most of the impact of these initiatives will be realised in inner east London – with diminishing ripples into Barking and Dagenham, Havering, Redbridge and Thurrock across the border in south Essex. This begs the question of what the economic foundations for growth in outer east London might be in the medium and longer term.

HSSMI points to a potentially powerful scenario: building on Ford, the new London gateway port at Thurrock and the low carbon environmental goods and services in the London Sustainable Industries Park, east London can provide a hub for the industrial capabilities needed to keep London functioning as a strong, growing and internationally competitive world city.

London in 2012 points to a return to growth for the whole UK economy, and steers the strategies of all local authorities and LEPs in this process. Amid the noise and glamour of London 2012, local leaders need to recognise and build on London’s role as a driver of manufacturing growth throughout the UK. They need to replicate the implicit process outer east London is going through (of which HSSMI is a signifier) to determine their own future credible and deliverable roles and functions in the global and local economy.

David Marlow is director of Third Life Economics and a former local government chief executive

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Why councils should be leading the way on youth unemployment

Category : Business

The Youth Contract is a good start on tackling worklessness, but local authorities need to be at the heart of policy

The government’s £1bn flagship Youth Contract, which has promised to create at least 410,000 jobs for young people, was launched last week.

Set amid a backdrop of rising unemployment figures, it makes sense for central government to tackle youth unemployment as a top priority. Young people aged 18 to 24 are now part of the fastest growing age group without work and the country is at serious risk of creating a lost generation. Figures released last month by the Office for National Statistics revealed that up to 1 million young people across the UK are now jobless.

However, plugging large quantities of cash into high profile schemes is not necessarily the answer to unlocking growth and creating jobs – this comes from confident and creative engagement with employers, and it is at a local level where this can happen.

The Youth Contract marks an important start for raising awareness of the seriousness of the problem, but fails to factor in how local government can help to deliver results.

Councils sit at the very heart of their local community and as a result they have an unparalleled overview of local business and the needs of their area. This enables them to play a central role in helping to foster local growth by targeting resources to meet local needs.

The recent investment into local high streets pledged by the government in response to the Mary Portas review is an excellent example of local and central government working in partnership to stimulate growth and regeneration. A similar approach should be applied to tackling youth unemployment if things are to change.

The onus must be on local authorities to become more creative about how they engage with local employers to foster opportunities for work. Councils need to play a bigger part in both supporting and galvanising local employers to create more jobs.

Westminster currently generates 2% of countrywide GDP, so our businesses are well placed to help stimulate job growth, particularly for young people looking for work.

Last month, Westminster council launched a programme to create 2,012 apprenticeship and employment opportunities for local young people before the end of the year. It brought together 170 employers from different sectors, including catering, performing arts, technology and the charity sector. We have also committed £1m to a work and skills board to train young people for work.

Councils must seek to create an environment in which young people can thrive, and we are constantly looking for new ways to achieve this; for example, we are currently looking at bringing in travel concessions for 18- to 24-year-olds to improve transport access to job interviews across London.

Getting councils to engage with local employers is the key to making the Youth Contract and other similar schemes work – it is our collective responsibility to prevent a lost generation of young people spending a life on benefits.

Councillor Daniel Astaire, Westminster council’s cabinet member for business

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