Regional growth gains worth more than £200bn over next decade

Unlocking higher regional productivity could add £208bn to the UK economy over the next decade, according to the latest CBI research. That’s equivalent to an economy that is 10% bigger than it would have been otherwise (see Notes to Editors) and should be a major part of the drive to tackle inequality at a time of real concern about living standards and wages.

Productivity is vital for long-term, sustainable economic growth as it is the foundation for prosperity. However, while some parts of the UK have seen world-class productivity gains, too many towns and regions have been left behind, limiting opportunities for millions of families across the country.

The CBI’s new report, ‘Unlocking Regional Growth’ launched (Thursday 1 December) at the Manufacturing Technology Centre in Coventry, draws on special access to ONS data to identify the four main drivers of regional productivity differences across the UK:

• Educational attainment of young people at 16 and skills
• Transport links that widen access to labour
• Improved management practices
• Higher proportion of firms that innovate and export

In the Autumn Statement the Chancellor set out to tackle regional imbalances by pursuing an industrial strategy fuelled by infrastructure and innovation spending.

Now the CBI has calculated the potential gain to the UK economy if each local area can increase its productivity at the same rate as the top performer in their respective region or nation.

In the North East, our research shows it is 31.8% less productive than London, with Hartlepool & Stockton-on-Tees the most productive area and Durham the least.

Sarah Glendinning, CBI North East Director, said:

“Raising productivity across all parts of the UK should be the single most important domestic goal over the next 5 years.

“Powering productivity in the North East could help lead to a UK economy that is 10% bigger in a decade than it would have been otherwise.

“We can achieve this by pursuing investment in education, infrastructure and innovation in an industrial strategy delivered in true partnership between the Government and business.

“So let’s all unite behind this common agenda and usher in a new era of opportunity – and prosperity – for all.”

The Rt. Hon. Greg Clark MP, Secretary of State for Business, Energy and Industrial Strategy, said:

“Our upcoming industrial strategy will have a particular focus on improving productivity and just last week we announced the £23 billion National Productivity Investment Fund.

“This new investment will help us unlock the full potential of regional economies and support businesses of all sizes to grow and prosper.”

The size of the prize is huge – £208bn to the UK’s nominal gross value added over the next decade and roughly equivalent to the combined GVA of Wales, Scotland and Northern Ireland. This would lead to more jobs and higher standards of living right across the UK.

To achieve this goal, business and policymakers must work together to place increasing productivity and economic growth at the heart of further devolution efforts, and take action to address the drivers specified above.

Examples include: 

• Focus on building the right skills across the UK and producing the best opportunities for our young people.
• Reduce the numbers of poorly performing schools by enhancing the role of regional schools commissioners (RSCs), who are charged with their improvement.
• Improve transport links between cities in the North of England could provide access to a population of 16m – the same number within one hour of London. Specifically, lowering transport times between Manchester and Sheffield to 30 minutes could provide a 10% lift in productivity.
• Reduce urban congestion and speed up travel times in our cities. This could boost productivity in Leicester by 8% and Nottingham by 6%.
• Improve management practices and simplify the number of business support initiatives, building on the work of the Productivity Leadership Group
• More targeting of Government assistance for firms with the potential to export at a regional level. Exposure to foreign markets facilitates competition and promotes innovation.

Next steps

As part of the CBI regional growth project’s second phase, which will come to fruition ahead of next year’s mayoral elections, the CBI is developing regional productivity ‘scorecards’ that will assess the performance of UK local areas relative to the rest of the UK.

These will provide business leaders, policymakers and local communities with the evidence they need  to identify practical steps help to plug the productivity gap between – and within –  regions. This data will help redress regional economic imbalances and offer communities that have been left behind, new growth opportunities in the face of further uncertainty that lies ahead.

To provide the best environment for growth, increasing productivity and creating economic growth must be central to further devolution deals. Aligning devolved powers to economic geographies, at the appropriate level and within robust accountability structures, will help. New Mayors have a major role to play as do local businesses, LEPs and local authorities.

Ultimately, only by embedding future investment in education, infrastructure and innovation in an industrial strategy that combines regions with sectors and delivered in true partnership between the Government and business, can the UK deliver prosperity for all in uncertain times.

National law firm Irwin Mitchell is sponsoring the report. Vicky Brackett, CEO of Irwin Mitchell’s Business Legal Services division, said:

“Increasing productivity across the UK’s economy is a subject Irwin Mitchell is passionate about, particularly as it can drive greater prosperity and ensure all businesses are able to reach their full potential.

“We are fully supportive of this CBI campaign and welcome their evidence based approach which looks at each region closely and identifies tailored solutions to boosting productivity.

“There are some significant challenges ahead but if businesses and government can make it a priority and work closely together, then I genuinely believe that economic growth within our regions can be unlocked.”