What the West Midlands’ local industrial strategy means for other cities

West Midlands mayor Andy Street and Prime Minister Theresa May learn a little something. Image: Getty.

Back in May, the West Midlands won the race with Greater Manchester to publish the first local industrial strategy. No doubt both will become the benchmark for other areas to follow as they produce their own strategies. But if these or other strategies are to be successful, they will need to focus on making their areas more attractive to highly productive businesses.

As with the national strategy, the purpose of the local industrial strategies is to improve the productivity of the economies that they cover. While the prevailing thought is that poor productivity is the result of a “long tail” of unproductive businesses, a point referenced in the West Midlands’ strategy, our previous work has shown how this isn’t the case. And looking at the West Midlands and Greater Manchester specifically shows this to be true for these areas too.

The charts below look at the distribution of businesses according to their productivity for the West Midlands, Greater Manchester and cities in the Greater South East. They show two key things.

Source: ONS, Annual Business Survey.

The first is that the long tai’ in all areas is dominated by local services businesses such as cafés, bars and hairdressers. And there is very little difference in the distribution of these businesses, meaning they do not explain the difference in productivity between the areas as a whole.

The second is that the difference between the areas is in the distribution of exporting businesses – those that sell beyond their local market – such as advertisers, finance businesses and software developers. While Greater Manchester has a higher share of higher productivity exporters than West Midlands (the distribution is more skewed to the right in the chart), both lag well behind cities in the Greater South East of England.

This difference is not because exporters in the West Midlands and Greater Manchester are performing below par, but because the nature of the activities is different, with highly productive, innovative activities more likely to locate in the Greater South East than elsewhere. So the challenge for both areas is to make themselves more attractive to this type of activity (such as software design), rather than the lower skilled exporting activities (such as back-office functions for a bank or data handling company).


This has been increasingly happening in Manchester in recent years.  Bet365 have opened a city centre office in Manchester to locate its tech team, rather than at its headquarters in Stoke. Siemens engineers its wind turbines in the city that are then built in Hull. And JLR is to open a software, IT and engineering centre there too.

But the chart above and overall productivity figures for the city region show that even with these moves there is still a considerable gap. And so the challenge for the local industrial strategies will be to identify the specific barriers that prevent more investment from these types of exporting activities.

This holds true for many other places too, especially in the north of England. They will no doubt take great interest in the local industrial strategies of West Midlands and Greater Manchester, and take inspiration from them.

But if they want their own strategies to be useful, they must be clear in how the actions that they propose – be it investment in skills, transport or commercial space, for example – will help them be more attractive to higher productivity exporters in the future than they have in the past.

Paul Swinney is head of policy & research at the Centre for Cities, on whose blog this article first appeared.

 
 
 
 

To see how a city embraces remote work, just look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”