1. Economics
January 27, 2016

Britain's cities are 14% more productive than the rest of the country – but the north-south divide remains

By Paul Swinney

Why are cities so great? There are, of course, a great many answers to this question. But one of the most important answers is that they are the most productive parts of our national economy. As our new report Cities Outlook 2016 highlights, cities in Britain were 14 per cent more productive than other parts of the nation in 2014.

But as regular readers will no doubt anticipate, there is great variation in productivity levels of different cities across the country. Few maps show the disparities between the economic performances of cities more clearly than a map of productivity.

As you can see below, our most productive cities are almost exclusively found in the South East corner of England. London is 67 per cent more productive than Newcastle; while Reading is 75 per cent more productive than Blackpool.

There are a couple of notable exceptions – Aberdeen ranks 6th out of Britain’s 62 largest cities, while Derby is comes 13th. But there are specific factors contributing to productivity in these. The former’s inclusion in the top ten is down to its oil and gas industry; the  latter’s productivity is largely the result of Rolls Royce’s base in the city.

So why this important? The way the economy grows, and so makes people better off, is by coming up with new ideas and better, more efficient ways of doing things. Those cities that are best able to do this are the ones that will be our strongest performers in the future – and the map above shows that many cities in the north have lagged behind their southern counterparts in recent years.

If initiatives like the “Northern Powerhouse” or the “Midlands Engine” are to be successful, then increasing productivity in cities like Nottingham, Blackburn and Hull should be their main, long-term objective. These cities, which were once very successful as places of low-cost goods production, need to continue developing as places of knowledge production.

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Any mention of the words “innovation” and “ideas” are usually followed very quickly by the words “R&D”, “science” and – in the context of the Northern Powerhouse – “graphene” (the world’s “thinnest material”, discovered at the University of Manchester, and held up by George Osborne as an example of Northern innovation). All very en vogue

But while explicit policies to boost R&D are always popular, it’s just as important to get smart people together to come up with new ideas for new businesses, services, products and other ways of boosting the local economy. Ultimately, this has little to do with innovation policy – it’s more about educating, attracting, and retaining highly-skilled, creative people in the local workforce.

Paul Swinney is principal economist at the Centre for Cities.

To find out more about the Cities Outlook 2016 report, click here.

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