Powering up places: Unlocking regional growth through devolution

The UK lags behind international competitors when it comes to productivity, with output per hour just 1.3% higher than it was in 2007. Amongst other things, this impacts wage growth, costing private sector workers on average £5,000 in lost income every year. This productivity problem is not just at a national level, but is felt keenly at the regional level.

CBI research in 2017 showed that closing the gap could add more than £200bn to the economy in the next decade.

Whilst successive governments have tried to address this challenge, they have been hampered. Alongside stagnating productivity, inequality in the UK has grown faster than EU comparisons. This is a business issue that impacts skills, infrastructure and the health and wellbeing of the workforce. With the country facing growing levels of inequality, there’s a need to improve local decision making and develop new funding models.

Outside of London, English devolution is still in its formative stages. The idea is that by giving funding and powers to local areas, and allowing key decisions relating to productivity to be made closer to the places they affect, this could support in unlocking regional growth.

Business recognises the opportunities that could come from further devolution in England, which includes a raised international profile for the region, clarity over the strategic direction and improved collaboration with neighbours across the region and the country.

This is not to say that there aren’t challenges. As the report highlights, businesses have cited concerns around the additional bureaucracy and complexity that devolution may bring, as well as the risk of a patch work approach that could exacerbate existing inequalities between regions.

The case for further action is clear and the CBI is calling on government to work closely with business in order to develop and publish plans for supporting further and meaningful devolution across the country. To be a success it must focus on addressing the productivity puzzle across England and empower people and places to hold their leaders to account as they address growing inequalities across the country.

The CBI has set out three steps that government should take in order to kickstart devolution and maximise the potential of English regions:

• Step one: Develop and publish a framework for devolution that includes means to assess current and future deals and provides a clear definition of a functional economic area.
• Step two: Optimise Westminster and Whitehall for devolution including prioritising regional growth within Cabinet and across Whitehall, reviewing the Green Book and establishing new ways of working with Metro Mayors.
• Step three: Deliver new deals and streamline local government including government committing to deals covering 60% of the population, advancing unitary authorities and improve local engagement.

This work is ongoing. The next stage to the project will focus on what powers businesses would like to see devolved to a local level, as well as understand where devolution poses risks to business, and how these can be avoided. We will be looking to consult members through round tables, meetings and calls. If you would like to get involved, please contact Hannah Richmond.