Greater emphasis needed to maximise agglomeration benefits across the UK.
The upcoming Budget offers a crucial opportunity to lift regional growth and should not be missed, warns a new KPMG report.
Regional inequality in the UK is not merely a recent phenomenon and London’s dominance can be traced back to over a century ago. However, despite some efforts to accelerate economic growth beyond the capital, the gap has been widening since the 1980s.
The report calls for significant investment in regional transport and broadband connectivity to support the creation of larger agglomeration areas outside London and the South East by linking more economic areas together. A handful of strong cities at the centre of each agglomeration area will need to be nurtured so they can drive growth outside the South East.
Yael Selfin, Chief Economist at KPMG UK and author of the report, commented: “There are no quick fixes. The Budget in March will offer the Government an opportunity to address the regional disparities in the UK, but if it is to make a long-lasting difference, it will need to be focused on the right areas and follow the key principles outlined in this report.
“Driving regional growth cannot be done from Whitehall alone. Implementing our framework will require strong co-operation between different layers of government and local communities, through devolution, continued dialogue, and the augmentation of local capabilities.”
Regional strategies should look to incorporate the full range of interventions needed to accelerate economic growth, from transport to education to governance, with greater use of spatial planning to ensure the interactions between all these areas are considered in order to maximise returns.
A framework for interventions under three pillars is recommended for government to follow:
• Building a fertile business environment
Through investment in transport, it will be possible to connect larger commutable areas to core regional business and cultural hubs, as well as increase the capacity on busy routes to ease local congestion. Digital connectivity, availability of office space, access to funding, and innovation support are also part of this pillar.
• Creating regions that are magnets for people
No location will be successful if it does not attract people to live and work in it, or provide its existing population with the means to prosper. Places need to be planned as attractive locations to live, with adequate housing supply and cultural and recreation offerings. Studies show that human capital plays a bigger role than physical capital in facilitating the catch-up process that fosters regional growth. As the pace of new technology adoption accelerates, investment in post-school upskilling will become ever more important, with workers increasingly expected to embrace a lifelong approach to learning. But primary and secondary school outcomes must also be addressed, as well as pre-school education.
• Securing an enabling governance
Solid strategies pursued by local leaders on the ground, within well-established governance structures, are crucial in driving regional growth. Far-sighted vision, flexibility to try new things, and outstanding execution are all paramount.
All this will require significant additional funding. Public funding will be constrained, and there is a need to consider new and sustainable ways of funding and ensure that money is well spent.
Chris Hearld, Head of Regions at KPMG, said:
“The UK’s regional economies are on the scoreboard when assessed against the three pillars our report considers to be essential to economic growth.
“From Greater Manchester’s flag bearing devolution deal to the North East’s cultural renaissance along the River Tyne’s Quayside; with Birmingham planning for the Commonwealth Games in a couple of years and Leeds’ offer as a base for fast growth businesses being stimulated around University innovation hub Nexus, there is a great deal of exciting progress underway to support a diversity of economic ambition around the country.
“Yet, growth and productivity are not where they might be. This supports our assertion that all three pillars must be in place for an area to thrive. And it is imperative the UK’s regions prosper for the nation’s bottom line to grow sustainably.”
Yael Selfin, Chief Economist at KPMG UK, concludes: “As central and local government look to reinvigorate the regions, they should not neglect the importance of culture and recreational spaces in improving the quality of life and instilling purpose and pride.
“The aim must be to design places where people desire to live and to support their community beyond the provision of good employment opportunities alone. People should feel connected and supported by their local communities and cherish living in their region.”
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Notes to Editors:
To read the report, visit: https://assets.kpmg/content/dam/kpmg/uk/pdf/2020/01/nmw-youth-rates.pdf
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