The time has come for Britain’s regions
Five things will help them stand out on the world stage
Britain needs more Chicagos, more Bostons and more Frankfurts; devolution combined with cheap money and a strong vision is the recipe for a new generation of civic politicians to take their regions global.
Even in a world trending to zero (zero growth, zero inflation, zero interest rates), there is plenty of slow money for shovel-ready projects. This is a great opportunity for Britain’s regions to transform themselves and take their places on the world stage.
Devolution has been a huge positive, empowering civic politicians to make the big decisions that can bring to life ambitious projects. In the global competition for growth, Britain’s regions’ “winning themes” are: specialisation; partnership; innovation; regeneration, and new asset creation.
Traditional sources of infrastructure funding have dried up; national governments are struggling with the limits of large deficits, and the banks have retreated from this territory. This means we are going “back to the future” with fund management and insurance firms are once again creating the future by investing for the long-term.
Legal & General is the custodian of around £842bn on behalf of pension schemes, families and institutions such as charities and local government. In the “trending to zero” world, we need to look to direct investments to deliver the income that supports our customers.
Legal & General has made a commitment to invest around £15bn of this “slow money” over the next few years in long-term direct investments, sometimes for thirty or forty years. We have already invested £8bn into projects including housing, student accommodation, care homes, hospitals and urban regeneration.
We want to work with the UK’s regions to help them compete globally. What is the recipe for an economically successful region, ready for the world stage?
First, specialisation. The world needs to know what a region’s vision is, how it will specialise its offer to the world. Local stakeholders and politicians need to be able to communicate a strong vision of what their area is for in the global economy.
Salford is a great example of a city with a strong media and “tech” vision and great leadership. Our partnership in Salford has seen over 11,000 new jobs created with major investment in new homes, offices, retail and leisure space. Improved transport infrastructure such as the delivery of the Ordsall Chord rail link is a vital ingredient in creating the right mix. Our commitment to Salford has also seen us invest in a £503m scheme in MediaCity UK, as well as a build-to-rent development to create much needed affordable homes for working people.
Specialisation is blooming all over the UK. Cambridge is the pharma city; Newcastle is focussing on ageing, with a new science park, and of course London has its financial services.
The second success theme is partnership. Great regions are putting together partnerships of funders, government, and developers, among others.
Our £15bn programme is built on partnerships. For example, our partnership with UK local government and English Cities Funds has seen urban regeneration projects set up in Liverpool, Plymouth, Salford and Wakefield as well as some previously deprived parts of east London. These projects have seen new homes and businesses built together with vital infrastructure such as roads and schools.
In addition to strong partnerships, we see great regional growth when innovation is pollinating across a local economy.
Thirdly, a critical source of innovation in any area’s economy is their pool of talented entrepreneurs and researchers, although too often they are strangers to one another. L&G believes that UK business has under-invested in entrepreneurs because our venture capital industry is sub-scale. Universities are often creating great science but a shortage of capital stops the journey from R&D work-ups to start-ups to scale-ups. In addition, UK businesses have failed to invest in new technology to boost productivity. This has contributed to the fall in real wages we’ve seen in the UK for the last 10 years (1).
Fourth, regeneration turbocharges a region’s economy. Our cities are not over-built, they are under-demolished. Urban regeneration such as the work we are doing in Cardiff is a great example of its kind. In Cardiff we contributed towards a £400 million, mixed-use development, including a new Central Square with offices, hotels and residential developments, together with a transport hub and a new HQ for BBC Wales.
Housing is at the heart of regeneration. L&G has been vocal about Britain’s housing crisis and we are doing something about it. Britain’s rate of building new homes is woefully behind the 250,000 homes a year that need to be built (2). Any region hunting for growth needs to get on and boost its housing stock. L&G is doing its part with a pipeline of 25,000 homes, but the private sector alone cannot meet the demand for housing.
The final ingredient for a standout global region is the creation of genuinely new assets, most commonly in terms of infrastructure. If we’re going to boost productivity and add value then we need to build NEW projects. This means, in the first instance, that local governments need to provide the shovel-ready projects that have been lacking in recent years. We are seeing much more of this come on stream. The economic benefit from new infrastructure projects is considerable, with an economic multiplier of 3:1. If we could get our infrastructure spending to match other leading global economies, we could be adding percentage points to GDP.
This does not mean investment in just any project though. In national terms, L&G would rather that the government concentrated on the 3Gs, rather than the 3Hs. Politicians should avoid “marquee” projects like HS2 and airports in the estuary—uncertain outcomes, long timeframes— in favour of achievable projects like better east-west rail in the north, and upgrades to our existing airports, with better transport links, at Heathrow, Gatwick, Luton and Stansted, as well as in the regions.
L&G is putting its money where its mouth is on infrastructure spending, some of our recent projects include the London Gateway deep-sea port, a science park in Newcastle and a large regeneration scheme in Bracknell, which has seen the town centre virtually bulldozed and rebuilt.
There is an amazing future for the cities and regions of the UK, and devolution can add the rocket fuel needed for global appeal. Shovel-ready projects, matched with plentiful, cheap money is a powerful formula to deliver to the rest of the country the infrastructure, productivity and commercial benefits that London has already seen.
We need strong local leaders, be they Mayors or Councils, working with the private sector in their patch to create a strong, specialised vision of what they can offer to the world.
- There was a 10 per cent fall in real wages between 2008 and 2014. Understanding the Great Recession: From Micro to Macro Conference, Bank of England, 23rd and 24th September 2015 ifs.org.uk
- KPMG/Shelter report. “The homes we need” http://thehomesweneed.org.uk/
With the support of Legal & General, Prospect hosted a private roundtable discussion at the 2016 Labour Party Conference on how, within the context of devolution, cities can develop in a manner that best contributes to a region’s economic objectives. The discussion was chaired by Andy Davis, Associate Editor of Prospect. Speakers included: Helen Goodman MP, Member of the Treasury Committee; Richard Leese, Leader, Manchester City Council; Jim McMahon, Shadow Minister for Local Government and Devolution; Catherine West MP, APPG on Reform, Decentralisation and Devolution; and Joe Anderson, Mayor of Liverpool.
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