“In fact, cities are the key drivers in trade”: in the wake of Brexit, we need devolution more than ever

Brexit campaigner Liam Fox standing before a promise he will now, as trade minister, have to deliver. Good luck with that. Image: Getty.

There remains great uncertainty in the aftermath of the UK vote to leave the European Union. Few seem to have a plan for what Brexit will look like and how the UK’s relationship with the outside world will take shape.

But while the desire for sovereignty and to “take back control” were top of many voters' list of reasons to vote to leave, the fact that we live in a globalised world where economies and trade supersede national boundaries cannot be ignored.

Much of the confusion about how Brexit will affect the British economy has resulted from the inability of those for and against it to acknowledge the realities of the position of the UK in the contemporary global economy. This failure to understand the realities of globalisation is partly why there is such confusion about how to deliver the kind of post-Brexit UK demanded by those who voted leave. But regaining national sovereignty is extremely difficult, if not impossible, in today’s global economy.

The interconnected world

The recent global financial crisis should have sent a powerful message. The degree of interconnection between places in the global economy has reached unprecedented levels and attempts to “unpick” these interconnections are highly problematic.

Globalisation is complex. It is no longer a case of “us” and “them”. Capital, goods and services flow within, between and across national borders – and the flow is uneven. It is often directed through key cities. So when we talk about flows of foreign direct investment between the UK and Germany, we are actually discussing flows of people and money between cities such as London and Berlin.

In fact, cities are the key drivers in trade. It is no surprise therefore that there were significantly higher votes to remain in the EU in cities such as London and Manchester. This is because these cities are points in the global economy through which trade, services and people flow. It is in these locations that we can most easily see the benefits of interconnection with cities in the EU and beyond.

Cities have benefited disproportionately from globalisation. Image: Andy Sedg/creative commons.

Outside of the major cities, the regions of the UK have experienced a downward shift in the scale at which economic activity takes place and political power is exercised. The national shift from manufacturing to a service-based economy has had a geographically uneven impact. Many manufacturing industries in the UK’s regions have shrunk or disappeared. This has not been helped by UK national policy which focuses on the financial services sector (predominately in London).

Globalisation’s disconnect

Globalisation has brought with it disconnection between the way that economies and their management have been simultaneously downscaled and upscaled. So, as well as the concentration of decision making in Westminster, there are also a number of decisions being made abroad that affect regions across the UK: the evolution of the European Union epitomises this process.

This upscaling of power is necessary. Many of the most important issues of the last three decades are shared across national boundaries – take for example environmental concerns. The formation of supra-regions begins with an acknowledgement of the benefits of removing trade barriers and having free movement of goods and services, which should create opportunities for all regions of the UK.

Cross-border concerns are better shared. Image: motiqua/flickr/creative commons.

In fact, the best hope for deprived areas of the UK is not to place decision making squarely back in the hands of the UK government. This gives power back to the very institutions that created and exacerbated the regional inequalities seen in the UK today. Benefits such as investment in local enterprises and infrastructure, improvements in working conditions and levels of employment result from international engagement and cooperation.

Those who – justifiably – feel isolated and economically depressed should call for greater decision-making power at a more local level. Local power, combined with access to international resources and opportunities, can start rebuilding local economies.


Globalisation makes this possible as cities and regions do not necessarily need to go via London for trade and investment. These connections are essential for local economies to compete in the globalised world.

But leaving the EU means leaving the hundreds of trade agreements the UK has with non-EU countries, and also possibly the freedom of movement of goods and services there is within the EU. Until these are rearranged (which will take several decades), the UK’s constituent regions may struggle to access international markets. So the “take back control” rhetoric offers no solutions, only problems.

The UK government has consistently failed to articulate the rationale and benefits of upscaling in its relations globally (specifically in the form of EU membership), despite the economic benefits it has brought. It is not about the removal of national boundaries but rather an acceptance of how so much of what drives the global economy occurs outside of these strict boundaries.

Closer economic cooperation is the only logical response to globalisation and the best way to ensure stable growth. Indeed, the short, medium and long-term impacts of the Brexit vote will surely serve to provide the UK with a harsh lesson in the dangers of going it alone.The Conversation

Jennifer Johns is senior lecturer in international business and economic geography at the University of Liverpool.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

What do new business rates pilots tell us about government’s appetite for devolution?

Sheffield Town Hall, 1897. Image: Hulton Archive/Getty.

There have been big question marks about any future devolution of business rates ever since the last general election stopped the legislation in its tracks.

Not only did it not make its way to the statute book before the pre-election cut off, it was nowhere to be seen in the Queen’s Speech, suggesting the Government had gone cold on the idea. (This scenario was complicated further recently by the introduction of a private members’ bill on business rates by Conservative MP Peter Bone, details of which remain scarce.)

However, regardless of the situation with legislation, the government’s announcement in recent days of a pilot phase of reforms suggests that business rates devolution will go ahead after all. DCLG has invited local authorities to take part in a pilot scheme which will allow volunteer authorities to retain 100 per cent of the business rates growth they generate locally. (It also notes that a further three pilots are currently in operation as they were set up under the last government.)

There are two interesting things in this announcement that give some insight on how the government would like to push the reform forward.

The first is that only authorities that come forward with their neighbours with a proposal to pool all business rates raised into one pot across a wider geography will be considered. This suggests that pooling is likely to be strongly encouraged under the new system, even more considering that the initial position was to give power to the Secretary of State to form pools unilaterally.

The second is that pooled authorities are given free rein to propose their own local arrangements. This includes determining, where applicable, a tier split (i.e. rates distribution between districts and counties), a plan for distributing additional growth across the pool, and how this will be managed between authorities.

It’s the second which is most interesting. Although current pools already have the ability to decide for some of their arrangements, it’s fair to say that the Theresa May-led government has been much less bullish on devolution than George Osborne in particular was, with policies having a much greater ‘top down’ feel to them (for example, the Industrial Strategy) rather than a move towards giving places the tools they need to support economic growth in their areas. So the decision to allow local authorities to come up with proposed arrangements feels like a change in approach from the centre.


Of course, the point of a pilot is to test different arrangements, and the outcomes of this experiment will be used to shape any future reform of the business rates system. Given the complexity of the system and the multitude of options for reform, this seems like a sensible approach to take. But it remains to be seen whether the complex reform of a national system can be led from the bottom up. In effect, making sure this local governance is driven by common growth objectives, rather than individual authorities’ interests, will be essential.

Nonetheless, the government’s reaffirmation of its commitment to business rates to devolution and its willingness to test new approaches is welcome. Given that the UK is one of the most centralised countries in the western world, moves to allow local authorities to keep at least some of the tax revenue that is generated in their area is a step forward in giving places more autonomy over how they spend their money. That interest in changing this appears to have been whetted once more is encouraging.

There are, however, a number of other issues with the current business rates system which need to be ironed out. Centre for Cities is currently working on a briefing of the business rates system, building on our previous work in this area, and we’ll be making suggestions as to how the system can be improved.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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