Britain’s ‘twin second cities’ can and must lie at the centre of national efforts to restart growth – but that means avoiding wishful thinking about the scale of change required, being distracted by Birmingham’s immediate financial struggles, or complacent in the face of Manchester’s nascent success, according to major new Resolution Foundation research.
A Tale of Two Cities (parts 1 and2) – the 42nd and 43rd reports from The Economy 2030 Inquiry, funded by the Nuffield Foundation – examines what a plausible route to higher productivity would be for Britain’s twin second cities – Greater Manchester and the Birmingham urban area, which together have a population of 5.6 million (9 per cent of Britain’s total population).
The reports note that while in most advanced services-based economies like Britain, the largest cities are productive centres that underpin national prosperity, most of our major cities outside London are actually less productive than the national average.
This is particularly true of Birmingham and its surrounding urban area, which in 2019 had a 37 per cent productivity gap with London, and an employment rate today 5 per cent below the national average. But even Greater Manchester, widely regarded as an economic success story, still had a productivity gap to London of 35 per cent.
The Foundation says that reducing these productivity gaps requires local, city-wide and national policy makers to work together and get serious at the scale of the task at hand. This should include:
Focusing on Britain’s strengths. Birmingham’s iconic manufacturing sector is important, but simply too small to plausibly be the main growth engine for the city, accounting for just one-in-ten workers across the area (down from four-in-ten in 1981). Instead, both cities’ future prosperity will be built on sectors like IT, insurance, finance, culture and education – where Britain enjoys a comparative advantage over other countries, and large cities are uniquely placed to succeed because they can combine deep labour markets of skilled labour and locations for large numbers of productive firms to cluster. Greater Manchester has made a good start – doubling its share of workers in these knowledge-intensive sectors over the past thirty years to 17 per cent. But it still trails far behind London (26 per cent), while Birmingham lags even further behind (13 per cent).
Building Birmingham’s centre upwards, and Manchester’s outwards. Both cities have productive city centres (a worker in central Birmingham produces 27 per cent more than one based elsewhere in the city region), but they are too small to make the cities as a whole prosperous, accounting for just one-in-eight workers in Manchester, and one-in-nine workers in Birmingham (vs one-in-three in London). To provide badly needed office space, Birmingham has scope to build upwards – its low-rise city centre is just 3.3 storeys high on average, compared to 5.4 in Manchester. There is more competition for land in Manchester city centre, but there is plenty of scope for developing the areas immediately adjacent to it – such as the five per cent of land currently being used for storage and warehousing.
Attracting more highly skilled workers. A more productive Birmingham and Manchester would together need around 345,000 more graduate workers to provide the skills that high-paying knowledge-intensive firms need. This requires both inward migration and better retention of recent graduates. Birmingham currently has a lower share of graduate workers than any other major city, and nine per cent less than Manchester does.
Shifting from levelling up rhetoric to reality in Whitehall. Making Birmingham sufficiently accessible for its larger workforce (half of the area’s highly-skilled workers cannot reach the city centre within 45 minutes) requires doubling the size of its metro network and improving its bus routes, at a cost of £5.4 billion by 2040. Modernising Manchester’s public transport would cost up to £5 billion. Each of these vital investments are bigger than the entire Levelling Up Fund (£4.8 billion).
Building 242,000 more homes. 116,000 more homes would be needed to accommodate Birmingham’s bigger workforce, while 126,000 more are needed across Greater Manchester. This requires a step change in house-building – doubling the current building rate across Birmingham for example. This won’t be achieved without significant government investment, including a £4.1 billion grant to maintain both cities’ share of social housing.
Boosting cities to raise national economic output and local living standards. Successfully reducing the productivity gaps between Manchester and Birmingham, and London, so that they are the same size as those between Paris and its next biggest cities (Lyon and Toulouse, with 2019 gaps of 27 and 21 per cent respectively) would boost national economic output by 1.0 per cent, and transform the living standards of the near six million people living in these areas – raising median incomes by £2,400 across Greater Manchester, and by £1,700 across Birmingham.
Lindsay Judge, Research Director at the Resolution Foundation, said:
“Everyone agrees on the need to boost economic growth and reduce geographic inequalities across Britain, but we don’t focus enough on the key to achieving this – raising the productivity of Britain’s twin second cities of Birmingham and Manchester, with their combined population of almost six million people.
“Too often we are distracted by popular narratives that Birmingham is broke or that crane-laden Manchester is already too successful.
“Turning Birmingham’s fortunes around, and turbo-charging Manchester’s nascent economic progress, requires policy makers to get serious about the scale of change required, including far greater investment needed to deliver more office space, skilled workers, decent housing and efficient public transport.
“Change and investment on that scale is not consistent with national politicians refusing to concentrate their efforts, or local politicians being unable to embrace the disruption involved because they lack the powers to shape it.”
Paul Swinney, Director of Policy and Research at Centre for Cities, said:
“This report establishes a broad and deep consensus that big cities outside the Greater Southeast have a far bigger role to play in the economy.
“Addressing the under-performance of Manchester and Birmingham would raise living standards and go a great distance to addressing the UK’s poor productivity.
“This requires serious investment from Government at a scale far surpassing what big cities currently receive. Investment in cities should be a key pillar of future growth.”
