To bridge England’s productivity gap, the government should plan the north’s housing and transport together

Houses and bicycles in Hulme, Greater Manchester. Image: Getty.

At a meeting with the Northern Metro Mayors last year, chancellor Philip Hammond said that increasing productivity in the north of England is vital to the government’s plans to boost economic growth.

The scale of that productivity challenge is vast. According to an excellent report from the Centre for Cities, cities in the South East of England are a whopping 44 per cent more productive than cities in other parts of the country. The think tank estimates that, if all British cities were as productive as those in the South East, the national economy would be over £200bn larger. 

To boost productivity levels across Britain, regions need to be able to attract and maintain the kind of highly skilled talent which companies seek when choosing where to set up their operating base. A recent Homes for the North report found that over the past decade 300,000 highly skilled workers had left the north. Retaining this talent will require both better transport links and more quality and affordable homes. The challenge is enormous. 

To be fair to the government, the aim of its modern industrial strategy is to tackle the productivity problem over the next 30 years, ensuring that all parts of Britain can participate in and prosper in what policy wonks have termed “the fourth industrial revolution” – the labour market of the future. 

While the fruits of this industrial strategy will not be felt immediately, the government has made some other encouraging moves which could help attract investment and talent to the north. 

The decision to establish combined authorities and regional mayors to allow local councils to pool responsibilities and receive specific functions from central government means locally elected and accountable leaders, not Whitehall, will be responsible for more decisions over housing and transport investment. 

It is also good news that Transport for the North (TfN) will become a statutory body. TfN is a true pan northern organisation which can help identify the infrastructure priorities that the region wants and needs. The government’s decision to create a sub-national transport body is welcome – although it does need budget responsibilities to be truly transformational.

Research from the Mace demonstrates the opportunities that TfN could grasp to deliver real economic growth across the north. The construction consultancy found that reducing average journey times by 60 seconds across the north of England could lead to £1bn a year extra in productivity gains. 

However, when it comes to housing in the north the picture is less rosy. While the Prime Minister has clearly made housing a political and economic priority, recent moves by the Government risk undermining the housebuilding efforts across the north.

The reason for this can be traced to a set of proposed changes the government put forward before Christmas on how local councils assess future housing need. The aim was to exert pressure on local authorities to increase the number of new homes they plan to build. Unfortunately the draft methodology is flawed. It focuses on councils using a new, backwards-looking methodology based on growth assumptions which reflect today’s problems rather than tomorrow’s aspirations.


Councils are not required to plan housing to match their plans for economic growth. Instead the new numbers will only require them to plan in accordance with what is in effect historic trends. If this seems counter-intuitive, hostile to aspiration and growth, it is because it is. As a result, thousands of homes have been shaved off local benchmarks in the north. The proposed changes effectively amount to an anti-northern bias and a potential cap on economic growth across the north. Common sense must prevail.

New quality housing for rent and for purchase – hand in hand with an upgraded transport system – could act as an economic boon to the northern economy. However, infrastructure investment is currently viewed in silos. Decisions over new or upgraded road and rail routes have to be made in conjunction with an assessment of how many new homes should be built as demand increases. Quite simply, if the necessary homes do not follow, there is a danger that infrastructure investment will be squandered. 

Improving infrastructure across the north could truly unleash the Northern Powerhouse. The further devolution of powers is vital. So too is unlocking the purse strings and giving local leaders the funding they require. Finally, the north needs a sub-national coordinating body – whether under the auspices of TfN or something else – which can deliver a coherent plan to deliver the investment we need in our railways and roads, energy infrastructure, as well the hundreds of thousands of new homes the region requires over the coming decades. 

If the chancellor seizes this agenda then the government’s industrial strategy really could work in the interests of the north.

Mark Henderson is chair of Homes for the North.

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“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.


You can read the Centre for Cities’ full report here.

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

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