Centre for Cities

City Readings - my latest offerings

My latest collection all explore the significance of ‘place’ in local economic development. 

They explore differences and linkages between place-based and people-based approaches; between place-sensitive and place-blind policies; and between local and national institutions.  

I hope you enjoy and suggestions of further reading are always appreciated.

• ‘How Regions Grow’ by OECD (2009)

• ‘Why do regions develop and change? The challenge for geography and economics’ by Michael Storper (2011)

• ‘Regional development policies: Place-based or people-centred?’ by Indermit Gill (2010) and ‘The Place Based Approach: A Response to Mr Gill’ by Philip McCann & Fabrizio Barca (2010)

• ‘An Agenda for a Reformed Cohesion Policy: A place-based approach to meeting European Union challenges and expectations’ by Fabrizio Barca (2009)

• ‘Why Nations Fail’ – Econtalk Podcast with Daron Acemoglu (on the back of the podcast I’ve now committed myself to reading the 500 page book!!)

 

Wave 1 City Deal insights

With confirmation that 2013 will see a further 20 City Deals, it is a good time to reflect on what has been learned so far.  There are currently eight City Deals with the cities belonging to the Core Cities Group.  In preparation Wave 2 Deals announcement, Centre for Cities asked each of the Wave 1 cities about the successes from and the challenges of negotiating their own Deals. We have reflected on their views in a short report - City Deals: Insights from the Core Cities. 

Perhaps the most significant achievement of City Deals to date is to have opened up a new dialogue between cities and government.  Nick Clegg’s acknowledgement that government has become too centralised, and that local economic growth requires local solutions, has set a new agenda.  The Government has issued a challenge to cities, asking “How would you do it better than us?”  A fast-paced process has pressed cities into action, requiring them to clarify their economic strengths and weaknesses, identify priorities and develop credible policy requests for central government.  Ministers have judged the results, with an unusual level of direct contact between the Cabinet and local authorities.  This has created some genuinely ground-breaking proposals of which the Manchester Earn Back scheme, returning £30 million per annum of central taxation to the city, is the poster child. 

A great deal of ground has been covered in a short space of time, but there is still much more to be done.  Cities need to up their game with more consistently ambitious policy asks that prove too good for the Government to refuse.  There should be more collaboration between cities and the Government to devise joint solutions to common problems.  The process of considering place as a matter of course when devising central government policy, and lining up Whitehall departments behind a collective agenda to empower places, has only just begun.  And the Government needs to connect the City Deals agenda, including Core Package policies, with its response to the Heseltine review to avoid policy confusion.

However, some essential lessons are already clear for the Wave 2 cities.  Above all they need to know their local economies better than ministers and civil servants, and have the evidence to back up their alternative growth proposals.  If they can do this, they should stick to their guns and back the policies that can really make a difference to their place.  And there is no reward without risk, so it is clear that Wave 2 cities will need to back up their ideas with political commitment.  City Deals have great potential, and we will know by the end of 2013 whether they can fulfil it.

City Deals - which sectors are most popular?

Using the press release on the annoucement of Wave 2 City Deals we've pulled the words used to describe the sectoral focus of each deal into a word cloud. As the graphic below shows, the words 'advanced' and 'manufacturing' are by far the most popular, although I must note that they are not always paired together.

It's a Deal

Last night Nick Clegg announced that another 20 cities will be given additional economic powers as part of the City Deals programme. As this press release sets out, each city has its own distinctive focus, whether manufacturing or maritime, the knowledge economy or green technologies. Having said it would be a competition without any limit on who gets through, the Government has been true to its word – but the Deals will be developed in phases. The ‘flotilla’ of Deals (apparently how it’s being described) will involve the first few Deals being developed in the next few months, the next phase being completed in Autumn, and the final phase of Deals being signed off towards the end of the year or early next year.

Overall it’s a welcome announcement and good to see that the Government is pushing ahead with devolution – you wouldn’t expect the Centre for Cities to say anything else – but it raises a number of interesting questions about what next, not only for City Deals, but for the Heseltine Review recommendations and for devolution as a whole. Five key questions spring to mind for me.

First, does Whitehall have the capacity to deliver the Deals? This is a lot of Deals for a relatively small Cities Unit, which will be going out to bat against some heavy-hitting Whitehall departments. The Unit not only needs to support these 20 cities, but also the original eight core cities (which are hoping to extend their Deals further). A lot of the Deals are also very big asks for departments traditionally very sceptical about the need for or desirability of any devolution. Nick Clegg and Greg Clark have been instrumental in pushing through a lot of change; they and other senior ministers and officials will need to work very hard to ensure Whitehall is ambitious, open to change and able to deliver.

Second, do cities have the capacity to deliver the Deals? A lot of work will be needed to turn the expressions of interest into the level of detailed policy that will get through Whitehall, and all areas are facing the strain of reduced budgets and reduced staff. If Deals are to be successful then cities will need to ensure they invest in the appropriate levels of resource to shape the Deal, that they are both ambitious and realistic about what their city can achieve, and that they are astute in the way they ‘sell’ their Deal to national officials and to ministers. 

Third, will the core package deliver? The menu of additional options that places can draw on once they have signed a bespoke Deal – due to be announced in March – matters, as many cities were encouraged to focus on just one issue relevant to their local economy in their bespoke Deal, and told that other policy options would be in the core package. From my perspective, this core package should also be a trailblazer for other places, whether cities or not, to access powers, given they can satisfy some basic criteria such as strong governance and accountability.

And that’s my fourth question: is enough being done to ensure that local governance is strong enough? With Local Enterprise Partnerships, Combined Authorities, Joint Boards and an array of options in-between, governance is always going to be diverse. Yet, given that City Deals are partly about ensuring economic development takes place at a more practical level – i.e. the level of the functional economy – it will be important to ensure that governance is sufficiently strong to encourage places to take the tough decisions required in a climate of limited spending.

And that brings me on to my final question, what about Heseltine? Are City Deals laying the ground for Heseltine, or something separate? We would argue that there needs to be links made across these two agendas, so that City Deals can help to pave the way for Heseltine but also encourage further ambition in how Heseltine’s recommendations, particularly around the single pot, are implemented. We’ll be writing more on this in the run-up to the Budget.

Net effects: how fast is your city's broadband?

In a super connected world access to fast broadband is not a luxury any more; in many cases it is a matter of business survival. So how do British cities vary on their provision of this essential XXI century infrastructure?

The answer is a lot.  Using data released by Ofcom last year, in Cities Outlook 2013 we looked at digital connectivity in cities across the UK and found great disparities in the availability of superfast broadband. This may have significant implications for business location choices and economic performance of cities. But looking at connectivity patterns within cities can tell us even more.

Comparisons of two Core Cities – Manchester and Bristol – and two smaller cities – York and Brighton - show that  broadband speed varies a lot across these cities and that city centres do not necessarily offer the best digital infrastructure.

Broadband speeds in Manchester city centre in particular tend to be slower than many other areas within Greater Manchester, and a similar pattern can be found in Brighton, where the fastest connections are outside the city core. This is not the case in Bristol or York, where city centre broadband speeds are stronger than in the wider area.

Reasons for poor digital infrastructure in city centres are likely to vary on a case by case basis. But this should be a concern for any city. As the economy continues to shift towards knowledge intensive sectors, physical infrastructure - road and rail - will remain important, but digital infrastructure – broadband – is likely to become an ever more important part of a city’s offer to businesses, workers and residents. Strong city centres, where businesses can exchange knowledge and share ideas will be increasingly critical. Poor broadband coverage and speed may well be a reason why some businesses choose one city over another, or leave the core for out-of-town offices, thus stripping the city of its main strengths – proximity and agglomeration.

This year we are taking a closer look at the economic performance of UK city centres and quality of digital infrastructure will be one of the factors we will explore in more detail.

Data sources::

Contains Ordnance Survey data © Crown copyright and database right 2012
Contains Royal Mail data © Royal Mail copyright and database right 2012
Contains National Statistics data © Crown copyright and database right 2012
Contains Microsoft Bing Maps data ©
Contains Ofcom UK Fixed Broadband Data 2012

 

Green progress from economic recession

Arguably, the greatest progress in reducing UK carbon emissions has been the recession and its impact on industry.

Between 2005 and 2010, total CO2 emissions in the UK fell 10 percent, with the most dramatic shifts coming since the recession began in 2008. Industrial emissions, which account for 44 percent of all UK CO2 emissions, fell 15 percent since 2005. This is clearly linked to the reduction in economic activity and closure of industrial firms, as cities with more service-based economies (e.g., London) have lower CO2 emissions and experienced lower reductions than manufacturing-based economies like Middlesbrough.

Source: DECC 2012

Middlesbrough is an extreme case in this story. In total, the average per capita CO2 emissions fell 0.2 tonnes per person each year from 2005-2007—during the boom years. But, they fell 3.4 tonnes per person per year during the recession (2008-2010). The city saw a reduction in home and transportation emissions, but those pale in comparison to their industrial emissions reductions. This suggests two things:

• CO2 emissions are falling, in part, due to concentrated efforts for reducing energy consumption in homes and on the roads.
• CO2 emissions are falling, for the most part, due to the reduction and closure of manufacturing facilities in the UK.

The figure below shows just how dramatic that change is.

 

Source: DECC 2012

Carbon emissions in Middlesbrough fell for housing and transport by over 160,000 tonnes per year from 2005, equivalent to CO₂ emissions from burning over 620 railcars’ worth of coal. There are concerted efforts on behalf of the council around carbon mitigation and energy saving which have very likely played an important role in that change.

However, the vast majority of the reduction in CO2 emissions came from industrial decline. Anecdotally, the closure of major manufacturing plants like Corus Steel in 2010 and Croda Chemicals would have had a large impact on the emissions of the city. Overall, employment in manufacturing fell in Middlesbrough by roughly 20 percent since the onset of the recession.  That speaks to the impact of this recession on CO2 emissions from industry.

But, the Corus Steel plant has restarted their operations in Middlesbrough, so some of the reductions the city has seen will rise again. 

Reducing local carbon emissions is a worthwhile and valuable goal. But, the sustainable successes need to come from mitigation and energy reduction efforts rather than being a side effect of temporary and localised industrial decline. Else, when the growth engine gets going again, the fumes will rise as well.

 

Lessons for Luton: aim for resilience, not only growth

This year’s Cities Outlook revealed that while the UK economy has experienced a downturn of two halves – rapid decline from 2008-09 followed by a three year period of minimal growth – the performance of UK city economies has been more variable. Places such as Swindon and Cambridge recovered rapidly after a sharp decline early on in the downturn while others, such as Swansea or Bradford, were only hit in the later stage of the crisis.

Luton is another city which bucked the national trend. In the decade prior to the recession Luton’s economic output grew by 3.6% a year exceeding the growth rate of the national economy by 0.5  percentage points, yet the city struggled through both phases of the downturn.

Luton’s economy is dominated by the private sector which accounts for almost three quarters of jobs in the city. This helps to explain why it struggled during the first phase of the downturn when businesses were feeling the effects of the credit crunch. From 2008-09 Luton lost eight businesses for every 10,000 people which contributed to a 50% increase in the share of people claiming Job Seekers Allowance.  

During  2009-12, when the national economy was shifting between low growth and stagnation, Luton didn’t recover as strongly as some of the UK’s other cities with strong private sectors. The make-up of Luton’s business base helps explain this. Despite Luton having a high share of jobs in the private sector,  meaning it is less vulnerable to public sector cuts than many other cities, its private sector relies heavily on large employers. Luton is ranked 48^th (out of 63 cities) on the number of businesses for every 10,000 residents.

Cities Outlook 1901 showed that  reliance on a small number of large firms can limit the resilience of a city economy and Luton’s experience illustrates this

Although the flow of business closures stemmed during 2009-12 and house prices recovered, real weekly wages fell by £86. This was due in part to job losses at Vauxhall, a significant local employer. The firm pays relatively high wages and, as a result, the 350 jobs lost in 2009 had a significant impact on the city’s economy.

A significant drop in the number of passengers passing through the airport, the other major employer, also contributed to poor economic performance. Most significantly the decision of Easy Jet to reduce its presence in the airport  affected the 550 strong workforce employed by the airline in Luton.

Figure 1. The impact of the downturn on Luton

 

Source: NOMIS Annual Survey of Hours and Earnings workplace-based analysis, DCLG, Office for National Statistics Business Demography, NOMIS Claimant Count

So what does the future hold for Luton? Vauxhall recently confirmed that it will produce its new Vivaro van at its Luton plant, safeguarding 1,100 jobs for a decade. And, Easy Jet’s decision to introduce new flights along with rising passenger numbers suggests the airport is on its way to recovery.

To further support Luton’s economy there also needs to be a focus on improving residents’ skills. Luton is currently the city with the second highest share of residents  without any formal qualifications in UK. As the UK economy continues to shift towards knowledge intensive activities higher level skills will become increasingly important. Luton  Council is already working with schools to highlight the range of local career opportunities available and the qualities and qualifications needed to get these jobs.  A combination of short term interventions and a long term strategy to increase skills and qualifications will be vital if Luton is to be more resilient in the future.

Deprivation - an urban issue?

There are almost 122,200 very deprived households in England and Wales.

Yesterday, another slew of Census data was released. This included statistics on deprived households measured across four different factors: levels employment, education, and health and disability as well as quality of housing.  

To some extent the data tells us what we already knew; a disproportionate number of England and Wales’ very deprived households – those counted as deprived on all four of the factors listed above – can be found in cities.

But levels of deprivation do vary across cities. As the map below shows Hastings, Liverpool and Bradford have the highest share of people in very deprived households. But, naturally, it is England and Wales’ largest cities that house the largest number of very deprived households – London and Birmingham together account for almost one third (or 38,500 households) of all very deprived households.

At the opposite end of the spectrum in places such as York, Aldershot and Crawley only a very small proportion of households are very deprived. In York, for example, only 211 households (0.2 per cent of the total number of households in the city) are very deprived.

Figure 1: Share of households that are very deprived

Source: Contains Ordnance Survey data © Crown copyright and database right 2013, Census 2011

Urban deprivation is of course a bad thing and is, quite rightly, being tackled through initiatives such as the Work Programme and Troubled Families programme.

Yet, as Ed Glaeser reminds us, although cities house lots of poor people, they don’t make people poor. As we showed in Cities Outlook, cities cover nine per cent of landmass but house 53 per cent of businesses and 58 per cent of jobs. Because of this, helping those living in deprived households access these job opportunities is critical. And to do this policy makers should focus on things like improving skill levels and making transport to and from employment nodes more affordable.

Housing Market Renewal: where is it now?

Over the past 12 months, housing has become the zeitgeist for economic growth - and rightly so. Cities Outlook 2013 has shown that if we put the place back in to policy by understanding the variation in housing markets between cities, it has the potential to have quick economic wins as well as a more efficient long term strategy.

 

Those cities that are most unaffordable in terms of home ownership and rental (the top right) tend to have low vacancy rates and should focus on expanding the supply of housing. This will bring the price of housing down, allow existing people to buy property and encourage new workers to live and work there – all of which will boost the economy.

But the more complex story happens in those places that are relatively affordable already but often suffer from vacant or low quality stock (cities in the bottom left). Here, a focus on retrofitting and refurbishment will make the city more attractive, encouraging businesses and workers to the area while also raising house prices for existing owners.

Essentially, this is what the old Housing Market Renewal Initiative (HMR) focussed on.  The HMR targeted places in the Midlands and the North of England where the housing markets suffered from low demand and high vacancy rates and the area suffered from low wages and a poorly performing economy.

The initiative ran between 2002 and 2011 and initially worked with 25 local authorities but was expanded to 38 in 2006. In total, between 2002 and 2008, £1.2 billion was spent predominantly on refurbishment (40,000 refurbished properties and 1,100 new builds) and a further £1 billion was allocated to it for between 2008 and 2011. However, the initiative wasn’t without local political difficulties as housing demolition raised concerns about empty streets and destroying social cohesion which led to the formation of community lobby groups.

Unsurprisingly, some of those local authorities targeted by the HMR initiative are found in our top ten cities by vacancy rate. Indeed, seven of the ten cities that suffer most from vacant stock were targeted (shown below in bold).However, due to a combination of austerity measures and the political tensions within the HMR initiative, the Coalition Government scrapped the program and assisted in the formation of a Transition Fund which is managed by the Homes and Communities Agency.

Addressing problems caused by weak demand requires public sector involvement. Government should look to provide incentives and funding - for example, cuts to tax rates on refurbished or renovated properties, or a more efficient use existing policies, such as Get Britain Building or ideas from the Montague Plan - to enable cities to improve their existing housing stock without the priority of new build. This, in turn, will have beneficial impact on the local economy in both the short and long term.

Follow Joe on Twitter: @joesarling

Maintaining the golden glow

After six months of relative silence, the debate about the Olympic Legacy reappeared on front pages yesterday with a joint article by David Cameron and Boris Johnson. And it appears that they have been reading our report “A Marathon, not a Sprint” that we published in September. 

In our report we looked at the experiences of past Olympic cities to see what London can learn from them.  In their article the PM and the Mayor used the same approach to show that London is already taking lessons on board and to restate their commitment to the 2012 Olympic legacy.

Here are some of the recommendations we made and how they have been reflected in Cameron’s and Johnson’s article:

1. Use the success of the Games to help business grow. The agreement announced yesterday between the British Olympic Association (BOA) and International Olympic Committee (IOC) to allow businesses to promote their Olympic experiences will benefit suppliers across the country and is likely to unlock more export-led growth.  The fact that the Prime Minister is engaged in conversations about getting British firms involved with future Olympics is also a sign of the Government’s commitment to making the most of business opportunities created by the Games.
2. Develop a clear legacy vision for the Olympic park. The speed with which the conversion of the Olympic Park and venues is progressing is also good news. With a number of venues reopening this summer and several events already scheduled, the threat of these venues becoming white elephants appears to be receding.
3. Use the Games to deliver a social legacy for east London. The commitment to deliver more jobs and apprenticeships, housing and social infrastructure as part of the legacy is welcome.  Yet it is still unclear whether any of the new development will be located outside the Olympic Park, and whether local communities will benefit from new developments. In our report we showed that most of the direct Olympic interventions were limited to the Olympic Park and its immediate boundaries. East London remains one of the most deprived areas in the country. The challenges of low skills, unemployment and poverty are deep rooted and can’t be resolved through developing the Olympic Park alone. The Host Borough Unit is committed to narrowing the gap between Olympic Boroughs and the rest of London, and has seen some success. But broader initiatives focused on addressing deprivation are still missing from the Olympic legacy framework.
4. Be patient and be ready to invest more. A long term plan for legacy development outside the Olympic Park needs to be put in place, and the Government needs to commit to it and be ready to invest more to make it happen. It remains unclear whether any progress has been made in this regard. It took Barcelona’s Olympics over a decade to be recognised as a legacy success, and that was based on considerable political commitment and more investment. There is no reason to believe that it will take less than that in London.

The Olympics produced a once in a lifetime summer of sport.  Its legacy is likely to take more than a lifetime to realise.  

Related articles

East London leads the way on business base growth in the Capital

2012 was a big year for UK cities; now 2013 is all about delivery

David Cameron and Boris Johnson: Six months on, we won't let the Olympic Games legacy die

The Olympic legacy has failed to bring jobs to London's East End | Rushanara Ali