With a new government has come a renewed focus on supporting growth throughout the country and building an economy that works for everyone. And while there is some nervousness about the potential economic impact of the UK leaving the EU, most cities are entering this period of uncertainty from a position of strength.
Nearly all of our cities, and all Local Enterprise Partnership areas, have seen improvements in their Good Growth score between 2012-2014 and 2013-15, with the overall index value surpassing its previous peak in 2006-08.
However, this overall improvement masks considerable variation between cities and, in many cases, within cities. Furthermore, many cities are finding themselves having to tackle the ‘price of success’ characterised in particular by a worsening performance on housing affordability, transport and work-life balance. This suggests that the recovery has put pressure on the scarce resources of housing, transport and skilled labour. Failure to tackle these supply side factors will see the rate of improvement in city scores reduce, and potentially for the positive trend to reverse. These areas should therefore be top priorities for national, regional and local policymakers, including the new directly elected mayors.
The devolution of powers from Westminster and Whitehall, to strengthen the influence of local leaders over the levers of growth, continues to be on the Government’s agenda. However, while the Northern Powerhouse was initially constructed around fulfilling the economic potential of Northern cities in order to rebalance the economy, and the Midlands Engine doing likewise for the Midlands, the future focus for devolution must go more broadly and ensure that no citizens, and no places, are left behind.
Now in its fifth year, PwC and Demos’ Good Growth for Cities Index seeks to put the spotlight on economic performance from the point of view of the public. Our aim has been to shift the debate on local economic development from a narrow focus on ‘Gross Value Added’ (GVA) to a more holistic measure, understanding the wider impacts that are associated with economic success in a place.
There has seldom been a better time to deliver deep economic reform and embed a more inclusive approach to growth across cities and regions, supported by a place-based industrial strategy.
Key findings
The Demos-PwC Good Growth for Cities Index measures the current performance of a range of the largest UK cities (and Local Enterprise Partnership areas) against a basket of 10 categories, based on the views of the public and business as to what is key to economic success and wellbeing.
Employment, health, income and skills are the most important of these factors, as judged by the public, while housing affordability, commuting times, environmental factors and income inequality are also included in our index as well as new business start-ups (new this year).
As with our 2015 report, the two highest performing cities are Oxford and Reading, although their order is reversed by a small margin. The most recent results also show a substantial gap having opened up between these two cities and the rest of the index that was not present in our 2015 report.
This reflects continued improvement across a range of measures in each of these cities, such as jobs, income and skills, during the recovery from the financial crisis. It is also indicative of the health of the business sector in these cities, which results in strong performance in the revised ‘new business start-up’ variable.
In addition to the performance of Reading and Oxford, it is notable that two Scottish cities, Edinburgh and Aberdeen, remain in the top 10 highest performing cities within the index. Edinburgh has maintained its position as the third highest placed city, although Aberdeen has moved down a little and out of the top five, which may reflect the adverse effect of lower oil prices on the city in the latter half of the 2013‑15 period.
As we have seen previously, cities in less affluent regions typically have lower scores than their more affluent peers. This is driven by weaker performance in some of the more highly weighted elements of the index, such as jobs, income and skills. It’s worth noting, however, that some of the cities with lower scores have seen some of the biggest increases, with Doncaster and Wakefield & Castleford in the top five of cities with improved scores.
On the other hand, wealthier cities may see factors such as housing affordability and ownership and commuting times offset stronger performance in other elements.
The analysis presented here considers only data up to 2015, and does not therefore reflect any impacts from the Brexit vote. However, we can begin to assess in directional terms what the likely impact of the vote might be on the index. Of all of the elements, jobs and income are the most likely to be affected negatively as a result of a slowdown in economic growth over the coming few years, largely driven by increased political and economic uncertainty.
By contrast, we might expect to see an improvement in housing affordability as house price growth slows due to reduced international investor and consumer confidence. Analysis at this stage suggests that the net impact on the index will be more of a slowdown rather than a reversal of recent growth, although any projections are highly uncertain at this stage.
Finally, this year we have extended our analysis to include seven English Combined Authorities. As with the cities and LEPs, scores have generally improved since 2012-14. However, performance remains mixed. This places heightened importance on the role to be played by city mayors and other local policymakers to take advantage of newly devolved powers, the results of which in most cases are yet to come through fully in our analysis.
Implications
This year’s Good Growth for Cities Index highlights five broad implications for cities seeking to deliver good growth:
- Delivering good growth is all about balance, in particular between investment in growth and public service reform. With the introduction of 100% business rate retention, this will become a more challenging balance to strike, with the variable proceeds of growth feeding directly into investment in local public services.
- Places need to pick their priorities for investment for growth, including investing in social infrastructure, such as skills, as well as physical infrastructure, particularly housing and transport.
- Cities need to build distributed leadership. Over the next year there will be much focus on the new ‘metro’ mayors being elected in cities including Liverpool, Manchester, Sheffield and the West Midlands. Our Citizens’ Juries at the 2016 party conferences highlighted what the public want from a mayor – including being a champion for the area, a good communicator and having integrity – but good growth cannot be achieved by any one person alone. Delivering good growth requires players across local government, central government and the private sector to act together and work collaboratively.
- There is a need to embrace key digital and data enablers to support delivery, from building an evidence base of what works through to transforming public services and delivering good growth from which everyone can feel the benefits.
- Finally, while the repercussions of the UK’s decision to leave the EU will not become apparent for some time, our analysis suggests that Brexit will bring new risks and opportunities for UK cities. Cities need to grasp the impacts, understand their strengths and weaknesses in a post-EU landscape and develop a prioritised action plan. Underpinning these five areas is the need for places to refocus on delivering devolution. This year’s report has highlighted the challenge facing the Combined Authorities in particular, as the focus shifts from doing the deal to delivering ambitious plans for growth and public service reform. Devolution starts with a mindset change rather than a deal. Cities, working with their partners, need to clearly articulate and deliver their own agenda and vision for their future.
Read the report in full here.
For media enquiries please contact:
Alex Porter, Demos
Email: [email protected]
Mobile: 07969 326069
Pippa Vaux, PwC
Email: [email protected]
Mobile: 07753 460118