Levelling up is now one of the country’s economic buzzwords.
In his recent Spending Review the Chancellor announced a Levelling Up fund and, more strategically, through funding for jobs in low carbon energy production and revisions to the Green Book, the government appears to be taking some steps towards the transformation needed to address regional economic inequality across the UK.
Sometimes I am questioned about why I so passionately believe this is a business issue.
Well, big picture, I’m convinced rebalancing will be vital to the country’s economic recovery from COVID-19, boosting our productivity and improving social mobility.
A more equal UK economy will be better able to grow sustainably, improving the quality of life in different ways, for citizens from both poorer and wealthier areas, with more comparable costs of living and greater accessibility of public services. Taking the economic and infrastructural pressure off the SE will benefit the whole country including those living there.
And it’s never been more important. COVID-19 has worsened regional economic inequality in our country. KPMG’s economic analysis earlier in the year found 7 of the 10 most impacted local authority areas are in the Midlands or North. This makes levelling up activity more essential, while also more challenging, given public finances haven’t been under this much pressure in our lifetimes.
Across our business we are seeing clients feeling different depending on where in the country they are located. The current situation is highlighting that no business operates in isolation from the community it serves with, for example, schools; partners’ jobs; and availability and capacity of public transport all influencing a business’ ability to operate.
The less prosperous regions, with more manufacturing and production businesses and lower average skill profiles, have suffered more in terms of health and earning inequalities. This is in part due to fewer opportunities for employees to work from home, exacerbated by regional tiering restrictions. With a third of the country’s food supply coming from the M62 corridor it’s safe to say the contribution of these jobs is valuable to the country at large.
The Spending Review’s Levelling Up fund is of value but more transformational change, involving on the ground leadership, is required.
Regional devolution is an important element. At KPMG we believe decisions taken in the place they impact, by people who understand the area they represent and the businesses who create the wealth there, are likely to have better outcomes.
So, we’re convinced business leaders in the ten areas of England with devolution deals should ensure they are familiar with their strategies. We were pleased to hear from Manchester’s Mayor, Andy Burnham on one of our ‘New Reality’ events recently. He spoke passionately about the benefits to an area of operating in a landscape in which policies are designed specifically for that geography and economy, discussing support for sectors, cities and skill building.
Thinking about the specifics of a place brings me to the more micro part of my answer to why rebalancing is a business concern. It’s because investment, or lack of, in a place creates conditions that determine where companies locate and grow; the talent they can access and the infrastructure they can count on. The opportunity a business founder or leader sees within the local or regional economy in which they are based can impact their ability to achieve their business ambitions, which has the potential to nudge their own investment decisions.
So, I think that when planning government spend to facilitate our economic recovery, it’s critical that regional economies are in focus.
In this context the Chancellor’s commitment to changing the ‘Green Book’ of government investment appraisal is key as it suggests recognition that the policy and investment changes needed are structural. It was also pleasing that the Business Secretary referenced his determination that hundreds of thousands of the new jobs in the government’s ten point plan for a green industrial revolution will be in the areas that require levelling up, as will the National Infrastructure Bank.
Rebalancing will mean transformational change so that renewal is prioritised where most needed, rather than investment reinforcing historic patterns. If achieved, businesses will benefit from a far broader suite of appealing options on where, with whom, and how, to thrive and drive our prosperity.