Widening North-South divide fuels calls for further devolution to regional cities

POSTED: 26th January 2015
IN: Business news

Two pieces of new research point to evidence of a widening economic gap between the North and South of the UK, strengthening the argument for giving northern cities a greater say over their future.

undefinedPublished this January, the Centre for Cities ‘Cities Outlook 2015’ report reveals southern cities were responsible for creating twelve times the number of new jobs as cities in other UK regions between 2004 and 2013. Excluding public sector positions, the picture is worse still, as private sector jobs contracted by 1.1 per cent on average for those beyond the south over this time period.

Similarly, the number of businesses present in southern cities grew at twice the rate witnessed elsewhere in the UK during the decade, at 26.8 per cent and 13.7 per cent respectively. Even controlling for the relative sizes of different cities, London saw 41 per cent more business starts per 10,000 inhabitants than the next highest ranking city of Milton Keynes.  In fact, using this measure, eight of the ten highest ranking cities were located in the South of England, while eight of those with the lowest rate of business starts were in the North.

Mirroring the report’s findings, The Guardian also took the time to create a map of 2013 and 2014 entrepreneurial hotspots this week, using data from StartUp Britain’s daily new business registrations tracker. For both years, the publication discovered all of the top ten local authorities for start-up numbers were located in the South, with nine in the Greater London area alone.

Explaining the phenomenon, Centre for Economic Performance director John Van Reenen reasoned:

“Entrepreneurs learn from entrepreneurs. Innovation sparks innovation and it creates a multiplier effect for entrepreneurship.”

Despite the South’s dominance, the analysis did show some areas of promise in the North, with boroughs such as Warrington and Trafford in the Greater Manchester region reporting above-average startup rates. Meanwhile, as the UK’s second largest city, Birmingham lags behind, coming in at 49th place with just 12.2 new businesses per 1000 citizens.

Taken together, the reports underline the need for greater support to enable the cities of the North and regions beyond the South to realise their growth potential.  As David Cameron admitted while launching regional investment plans in Manchester last week:

“When it comes to the next generation, to Britain’s long-term future, few things are more important than rebalancing our economy. We need a strong London, but we need a northern powerhouse too.”

During the event, the Prime Minister announced a six point plan to support a thriving northern economy, including £4.5 billion worth of transport infrastructure investment, the construction of 25,000 new homes and a focus on scientific innovation. This plan is underpinned by a move to devolve powers to cities beyond the capital, following devolution deals for Manchester and Sheffield.

As summarised by Lord Andrew Adonis, Shadow Infrastructure Minister:

“Devolution of power and resources from Westminster and Whitehall to city regions across the country is vital to creating a sustainable and strong economic recovery nationwide. The North/South divide provides a continuing challenge to central government to ensure that the proceeds of growth benefit every region.”

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