1 December 2016

  |  CBI Press Team

Press release

Regional growth gains worth more than £200bn over next decade

New CBI report lays out plans to power UK productivity and increase UK economy by more than 10% in a decade

Regional growth gains worth more than £200bn over next decade

Unlocking higher regional productivity could add £208bn to the UK economy over the next decade, according to the latest CBI research. That's equivalent to an economy that is 10% bigger (see notes to editors) than it would have been otherwise and should be a major part of the drive to tackle inequality at a time of real concern about living standards and wages.

Read the full report

Productivity is vital for long-term, sustainable economic growth as it is the foundation for prosperity. However, while some parts of the UK have seen world-class productivity gains, too many cities, towns and regions have been left behind, limiting opportunities for millions of families across the country.

The CBI’s new project, ‘Unlocking Regional Growth’ launched (Thursday 1 December) at the Manufacturing Technology Centre in Coventry and sponsored by solicitors lrwin Mitchell, draws on special access to ONS data to identify the four main drivers of regional productivity differences across the UK:

  1. Educational attainment of young people at 16 and skills
  2. Transport links that widen access to labour
  3. Improved management practices
  4. Higher proportion of firms that innovate and export.

In the Autumn Statement the Chancellor set out to tackle regional imbalances by pursuing an industrial strategy fuelled by infrastructure and innovation spending.

Now the CBI has calculated the potential gain to the UK economy if each local area can increase its productivity at the same rate as the top performer in their respective region or nation.

The size of the prize is huge – £208bn to the UK's nominal gross value added over the next decade and roughly equivalent to the combined GVA of Wales, Scotland and Northern Ireland. This would lead to more jobs and higher standards of living right across the UK.

To achieve this goal, business and policymakers must work together to place increasing productivity and economic growth at the heart of further devolution efforts, and take action to address the drivers specified above.

Examples include:

  • Focus on building the right skills across the UK and producing the best opportunities for our young people. Reduce the numbers of poorly performing schools by enhancing the role of regional schools commissioners (RSCs), who are charged with their improvement
  • Improve transport links between cities in the North of England could provide access to a population of 16m – the same number within one hour of London. Specifically, lowering transport times between Manchester and Sheffield to 30 minutes could provide a 10% lift in productivity
  • Reduce urban congestion and speed up travel times in our cities. This could boost productivity in Leicester by 8% and Nottingham by 6%
  • Improve management practices and simplify the number of business support initiatives, building on the work of the Productivity Leadership Group
  • More targeting of Government assistance for firms with the potential to export at a regional level. Exposure to foreign markets facilitates competition and promotes innovation.

Next steps

As part of the CBI regional growth project’s second phase, which will come to fruition ahead of next year’s mayoral elections, the CBI is developing regional productivity ‘scorecards’ that will assess the performance of UK local areas relative to the rest of the UK.

These will provide business leaders, policymakers and local communities with the evidence they need  to identify practical steps help to plug the productivity gap between and within regions. This data will help redress regional economic imbalances and offer communities that have been left behind, new growth opportunities in the face of further uncertainty that lies ahead.

To provide the best environment for growth, increasing productivity and creating economic growth must be central to further devolution deals. Aligning devolved powers to economic geographies, at the appropriate level and within robust accountability structures, will help. New Mayors have a major role to play as do local businesses, LEPs and local authorities.

Ultimately, only by embedding future investment in education, infrastructure and innovation in an industrial strategy that combines regions with sectors and delivered in true partnership between the Government and business, can the UK deliver prosperity for all in uncertain times.

Irwin Mitchell is sponsoring the report. Vicky Brackett, CEO of Irwin Mitchell’s Business Legal Services division, said:

“Increasing productivity across the UK’s economy is a subject Irwin Mitchell is passionate about, particularly as it can drive greater prosperity and ensure all businesses are able to reach their full potential.

“We are fully supportive of this CBI campaign and welcome their evidence based approach which looks at each region closely and identifies tailored solutions to boosting productivity.

“There are some significant challenges ahead but if businesses and government can make it a priority and work closely together, then I genuinely believe that economic growth within our regions can be unlocked.”

Introducing Unlocking Regional Growth at the Manufacturing Technology Centre in Coventry, Carolyn will say:

“The fact is that some of our regions and nations have been left behind.

“There is a very real gulf in opportunities between people in different parts of the United Kingdom.

“Changing this is something that the CBI and I – personally – am passionate about.

“We’re facing a unique moment in history, a true alignment between business and politics.

“There’s a real commitment from the Prime Minister to deliver an economy which works for everyone.”

“Regional productivity will play a crucial role.

“And today, we’re launching our ‘Unlocking Regional Growth’ report.

“With analytical support from McKinsey & Company, special access to ONS data and conversations with hundreds of CBI members, our report explores what drives productivity across the UK.”

“When it comes to productivity there are big variations between different parts of the UK.

“But while you might expect big gaps in productivity between regions, you might be surprised to hear that productivity differences within regions are almost as big.

“Here in the West Midlands, for example, Solihull is a third more productive than Wolverhampton, just 20 miles away.

“Most of all – these productivity differences matter to people through their effects on wages and living standards.

“If you live in Wolverhampton – for example you’ll earn on average £5,000 less than someone in Solihull.

“It’s the same story across much of the UK communities living side by side, divided by an invisible productivity gap.”

CBI analysis has identified four main drivers of regional productivity differences. On education, Carolyn will say:

“Educational attainment is the single most important driver of productivity differences around the UK. Bar none.

“One reason for this is people do not move around the UK as much as you might expect, with only 3% of the working age population moving to another region in a given year.

“CBI analysis found that where children get the best GCSE results and school performance is highest regional productivity is also greater.

“Yet – at the moment – this differs wildly, even within regions.

“In the North West – for example almost 8 out of 10 pupils in Trafford achieve at least five A* to C grades at GCSE while in Blackpool, only 5 out of 10 pupils manage this.”

On transport, Carolyn will say:

“Imagine if we managed to cut the time it takes to travel between some of our Northern cities like Sheffield, Leeds, Manchester and Liverpool, to just 30 minutes.

“Our analysis shows that reducing travel times between these cities by the fastest realistic mode of transport could provide access to a working population of up to 16 million matching the number within an hour of London today.

“This would have a big impact on productivity in the North.

“So while we saw many welcome announcements in last week’s Autumn Statement we can’t let up.

“We need to keep investing in – and delivering – on road and rail.”

As business, if we’re asking a lot of government, we need to ask just as much of ourselves, Carolyn will say:

“The Productivity Leadership Group, chaired by Sir Charlie Mayfield has shown that from management, to leadership and innovation, business practices make all the difference.

“Today people often define firms by their size – big, medium or small.

“Yet it’s not just about how big companies are, but how they’re run, how they invest in their people and whether they want to grow and expand.”

Productive firms are more likely to export, and exporting firms are more productive, Carolyn will say:

“Exposing firms to the pressures of foreign markets helps them become more competitive and encourages them to innovate.

“So how can we get more firms exporting?

“In most regions and nations up to 15% of firms could export, but don’t at present.

“We need to help them take that ‘leap of faith’ into new markets.

“Today, there are over 500 business support programmes many helping firms to export from the UK.

“Following the success of schemes like ‘Exporting is GREAT’ and ‘Invest Northern Ireland’ we need to consolidate these programmes giving business a single place to get the support they need.”

Concluding her speech, Carolyn will say:

“While policy at national level will play a crucial role, almost by definition the solutions to regional growth can’t just be national. 

“Regional productivity can’t be mandated from an armchair in SW1.

“Raising productivity across all parts of the UK should be the single most important domestic goal of the next 5 years.

“So let’s all unite behind this common agenda and usher in a new era of opportunity – and prosperity – for all.”