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Economy / Jobs

So why are Britain’s secondary cities underperforming their European peers?

The latest instalment of our series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Britain’s cities. 

Last week, I used data from the Centre for Cities’ Competing with the Continent report to show that Britain’s secondary cities were underperforming their European peers. This, I’d argue, is a pretty big part of the productivity puzzle. To shamelessly quote myself: “The problem is not that Manchester, Birmingham or Glasgow are not as productive as London: it’s that they’re not as productive as Marseille, Barcelona or Cologne.”

But to identify a problem is not to explain it, so that’s today’s job. The question is: why are Britain’s secondary cities underperforming?

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First up a reminder of what I’m counting as a secondary city: I’m looking at urban areas which consultancy Demographia reckons have a population of a million people or more. Also, to keep the data manageable, I’m only looking at cities in the five biggest European countries (Britain, France, Germany, Italy, Spain). That gives us 19 cities:

  • Dortmund (Ruhr), Germany – 6,670,000
  • Milan, Italy – 5,280,000
  • Barcelona, Spain – 4,790,000
  • Naples, Italy – 3,700,000
  • Manchester, UK – 2,685,000
  • Birmingham (West Midlands), UK – 2,550,000
  • Cologne (inc. Bonn etc.), Germany – 2,165,000
  • Hamburg, Germany – 2,105,000
  • Munich, Germany – 2,025,000
  • Leeds (West Yorkshire), UK – 1,955,000
  • Frankfurt, Germany – 1,950,000
  • Lyon, France – 1,650,000
  • Marseille, France – 1,620,000
  • Valencia, Spain – 1,585,000
  • Turin, Italy – 1,530,000
  • Stuttgart, Germany – 1,395,000
  • Glasgow, UK – 1,235,000
  • Sevilla, Spain – 1,110,000
  • Lille, France – 1,065,000

Sometimes the city for which we have data doesn’t quite map onto the urban area it represents: Leeds, for example, is standing in for the broader West Yorkshire conurbation. This is annoying, but it’ll have to do.

Anyway, on with the show. So what can we say about the structure of these cities’ economies?

There’s no obvious correlation between productivity (expressed here in GVA per worker) and the share of a city’s economy dedicated to public services:

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Other than the fact the Italian cities shown here all have tiny public sectors – so small, in fact, I’m tempted to assume this is a quirk in the methodology rather than some insight into how Italy works – there’s not a vast amount to say, so let’s move on.

It’s a similar pattern when we look at what one might term “heavy industry”:

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Milan is not only one of the most productive cities in our index, with productivity higher even than London: it’s also a major industrial hub. But then, Naples also has quite a lot of manufacturing going on too, and that’s much poorer. So perhaps the only conclusion we can draw from this is that Italian cities (those coloured green) are big on heavy industry.

What about “business services” – the data the Centre uses as a proxy for high-value knowledge-based jobs?

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Here there’s a much clearer correlation: generally speaking, the larger the share of the economy dedicated to business services, the higher the GVA.

You can see this in the chart as a whole, but also in individual countries. Dortmund, by far the least productive of the German cities (in black) on the chart, also has the lowest share of business services. The same is true of Naples in Italy, and Seville in Spain.

That’s clearly only part of the explanation, though. While the pattern sort of holds in Britain, Leeds actually has quite a high share of business services by European standards – yet it’s still among the less productive cities on the chart.

Last but not least, this chart plots business stock – that is, the number of businesses per head of population – against GVA per worker. This time, there’s no data for the Spanish cities:

  

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Once again, there’s a clear correlation. Having a lot of businesses in a city is clearly good for productivity – although whether one thing leads to the other, and if so which way round, is not entirely clear.

Also, while we’re at it: this graph suggests either that Italians are among the most entrepreneurial nationalities in Europe – or possibly just that the Italian economy is unusually fragmented.


Anyway, we still can’t say why British cities are underperforming, but we do have some clues. The size of their public sector doesn’t seem to be a big factor (which gives the lie to a whole swathe of right-wing economic thought). But having a lot of high-value business services is a boon to a city, as is having a lot of businesses generally.

Which suggests that a decent leg-up for Glasgow might be to open another few dozen accountancy firms. That’d work, right?

Well, no, probably not. And all the charts above are about businesses, rather than people – so next time, I’m going to look at skills instead. In the mean time, why not have a play with the Centre for Cities “Competing with the Continent” database?

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.

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