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How to unlock regional growth

2 December 2016

The UK’s productivity gaps are wide, but new CBI research has identified opportunities to narrow them

The CBI launched its “Unlocking Regional Growth” report at Lloyds Bank Advanced Manufacturing Training Centre, Coventry on 1st December.

“Some of our regions have been left behind,” CBI director-general Carolyn Fairbairn told delegates. “But there is a lot of energy around this. Business and politics are aligned on this issue and it’s time to do something about it.”

Nine out of ten UK cities perform below the European average

The report is the result of cross-sector, cross-region research carried out in partnership with McKinsey, using Office of National Statistics data and CBI member input from 500 companies of all sizes. The aim of the research, sponsored by law firm Irwin Mitchell, was to understand what drives growth and productivity in the UK, and what can be done to fix disparities.

Mind the gap

The CBI used the data gathered to create a “productivity map”, detailing strengths and weaknesses in every area of the UK.

The findings are striking: nine out of ten UK cities perform below the European average and more than half are among the 25 per cent least productive cities on the Continent. The most productive areas of the UK are three times more productive than the least.

Solihull is one-third more productive than Wolverhampton

“Wandsworth is 2.5 times more productive than Blackpool; Solihull is one-third more productive than Wolverhampton,” Fairbairn said. “People living in Wolverhampton earn £5,000 less per year than those in Solihull.”

If the UK was able to bring the worst performing regions in line with the next-best-performing over the next ten years, it would bring an extra £200bn to the UK economy, Fairbairn told delegates.

Four fixes

The four drivers of productivity uncovered by the research are education, transport, business management and exports, the CBI director-general announced.

Educational success at age 16 shows a correlation with regional productivity, which indicates a need for a greater role for regional school commissioners, Fairbairn suggested.

Investment in staff and in growth is as important as a company’s size

Reducing commuting times to below 40 minutes through better transport links in the North East could boost its local available workforce to close to that of London, she said. “Local transport projects are needed but funds are five times oversubscribed.”

The way in which a business is managed – investment in staff and in growth – is as important as a company’s size, the research reveals, suggesting the need for more business management development tools such as those offered by the Productivity Leadership Group’s Howgoodisyourbusinessreally.co.uk.

The data shows correlation between exports and productivity. “It’s chicken and egg,” Fairbairn said. “Up to 15 per cent of firms have the characteristics of exporters but aren’t exporting. Help for companies to export is fragmented and needs consolidation.

Great change, great opportunity

“We have a golden opportunity to unlock productivity across the regions and nations of the UK,” Midlands Engine chairman Sir John Peace told delegates.

He welcomed a government strategy tailored towards the strengths of each region, calling the empowerment of local people to influence regional strategy “a bold approach but the right approach”.

“It’s about collaboration, working together. Business and the CBI have an important role to play in leading the way,” he told delegates. “Our competitors are not London and the Northern Powerhouse, they’re global.”

The pace of change, whether that’s digital, economic or demographic, means it’s important to work together

Remaining competitive in the face of local skills shortages and improving productivity levels around the country are issues continually challenging Irwin Mitchell’s clients, said its CEO, Vicky Brackett, speaking as part of the event panel discussion. “We have also found that infrastructure is really important to attracting skills into our local area,” she said.

“It’s important to work out what works in each individual region,” she told delegates. “There’s a lot to do but great opportunity to do it well. The pace of change, whether that’s digital, economic or demographic, means it’s important to work together.”

“We know the answers to a lot of these problems, but they’re fragmented,” Fairbairn summed up. “The CBI is keen to work with businesses, government and stakeholders across the country to seize the significant economic and social prize on offer.”