Latest report finds that more realism needed from Coalition and cities chasing "bandwagon" sectors
Date: 17/09/2010The Centre for Cities is calling for more realism from the Coalition and the cities across England pursuing “bandwagon” sectors - from green industries to creative clusters, in a new report, published today.
Only a small number of cities will be able to develop specialist clusters in sectors identified as “growth” industries. These are more likely to emerge as a result of a natural or historic advantage – such as life sciences in Cambridge, with its highly qualified workforce and its University – than government intervention which has been found to be limited*.
The report identifies a “reality gap” at a time of shrinking public expenditure. 70% of cities in England believe they have a creative industries sector worth investing in, 46% of cities, a green or low carbon sector and 59% of cities, an advanced manufacturing cluster. More than one in four of England’s cities plan to support the emergence of all three, despite funding constraints.
While these specialist sectors are important for the national economic recovery and particularly for productivity, they will not be the generators of the majority of England’s future jobs. The average share of employment in these sectors across England’s cities is very small. On average, life sciences account for 1% of private sector jobs across England’s cities.
The distribution of employment in key sectors across England as a percentage of total private sector employment, 2008
Even in the three cities with the highest share of employment in green, creative, life science and hi-tech manufacturing – Cambridge, Aldershot and Reading - no more than 15% of their private sector workforce is employed by any one of these sectors.
The report finds that the bedrock of future private sector jobs growth across England’s cities will instead be a small number of high growth firms**. Only 6% of businesses accounted for over half of all private sector jobs*** created in the UK between 2005 and 2008. 64% of high growth firms in England were found in cities. Some of England’s cities have a far higher share of high growth businesses than others - with twice the share of high growth firms in Warrington than Worthing.
One fifth of high growth firms were found in wholesale and retail, a further third in construction, hotels and restaurants and just over a quarter in financial and business services. To expand their workforces, individual businesses need further focus from the Government and the new local enterprise partnerships, which will be replacing regional development agencies. This means fixing the fundamentals in city economies that will help businesses with potential to grow.
The report recommends:
Planning applications need to be dealt with more quickly, so businesses are able to expand their premises and their staff can find suitable housing. In 2008, nearly half (46%) of urban local authorities failed to decide more than 70 percent of their major planning applications within the 13 weeks’ suggested timeframe.
Further investment and integration for local transport links: Continued investment and integration of transport connections is essential for business productivity, allowing individual firms to access a larger pool of labour and choice of suppliers, opening up competition and allowing city residents to access a larger number of job opportunities.
Driving up the skills of tomorrow’s workforce: It’s critical that skills are improved among the local working age population of cities across England, particularly places that have been hit hard by the recession and industrial decline.
Alexandra Jones, Chief Executive of the Centre for Cities said,
"Support for high growth firms across a wide range of sectors needs to be at the heart of the Coalition’s plans to kick start future jobs growth across England’s cities. Specialist sectors are important for the national economic recovery but only a small number of cities will be able to develop strong clusters in these sectors.
"If more private sector jobs are to be created, with scarce public resource, then cities need to be realistic about the strength of their local economy and focus on broader business drivers. Businesses in cities need employees with the right skills, who are able to commute to work easily. Unless cities can fix these basics they risk choking off private sector growth, and in particular the expansion of high growth firms.”
Lewis Atter, Head of Infrastructure Strategy at KPMG said,
"This paper is a welcome and timely contribution to a really important debate. KPMG's work on economically led city region strategies, most notably in Greater Manchester, has shown the importance of strong leadership, innovative funding approaches and focused decision making tools in the development of programmes that can successfully drive economic growth. Centre for Cities rightly points out that with the appropriate governance, funding and incentive structures, Local Enterprise Partnerships have the potential to become critical agents for delivering the government's objective of a rapid, private sector led and regionally balanced recovery."
Cllr Ken Hudson, Leader of Preston City Council said,
"Preston has been identified by the Centre for Cities as a place with private sector growth potential. Between 1998 and 2008 Preston added 17,100 private sector jobs to its economy, an increase of 16.2 percent – placing the city in the top ten nationwide. The city has good rail and motorway links and a good higher education institution – the University of Central Lancashire.
But the scale of the challenge in re-balancing the economy is substantial and cities like Preston will need particular focus to ensure their potential to drive future private sector employment growth is realised.”
For
more information or more detail on the specific recommendations in the report,
please contact:
Rosamund Taylor,
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020 7803 4316 / 07876
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Notes to editors:
Firm Intentions: Cities, Private Sector Jobs and the Coalition by Paul Swinney, Kieran Larkin and Chris Webber is available at www.centreforcities.org/firmintentions
Firm Intentions is the second installment in the Centre for Cities’ Agenda for Growth series. The first paper – Private Sector Cities, published on Monday 7 June – set out the geography of private sector job growth in England’s economy and identified that some cities are much better placed than others to generate the private sector jobs needed to drive economic recovery. The report is available at www.centreforcities.org/privatesectorcities
We are grateful to KPMG in the UK for their generous support and assistance in developing this report. We are also grateful to our local authority partners, Preston City Council and Lancashire County Council.
The spatial distribution of high growth firms
Some of England's cities have a far higher share of high growth businesses than others - with twice the share of high growth firms in Aldershot than in Bolton. Cities with the largest proportion of these businesses are found across the country, bucking the oft quoted "North-South divide". Warrington has over twice the share of Worthing.
Distribution of high growth firms across England's cities
The Centre for Cities is an independent, non-partisan research and policy institute. Committed to helping Britain's cities improve their economic performance, the Centre produces practical research and policy advice for city leaders, Whitehall and employers.
KPMG's Infrastructure Strategy team provides objective advisory support to its clients in respect of:
- Helping develop economically driven infrastructure strategies;
- Prioritising the investments and projects that best serve these strategies; and
- Advising on funding and financing approaches that make these strategies happen.
For additional information regarding KPMG please email ed.thomas@kpmg.co.uk
*One international study found that “other” - government interventions and random events - were cited as the most important determinant of a cluster’s success in just 3.7 percent of studies of the world’s ten most competitive clusters in their industries.
**High growth firms are defined as those businesses (with 10 employees or more) that achieve an average annual growth rate in their number of employees of 20 percent or above over a three year period. This definition does not distinguish between internal ‘organic’ job creation and expansion through an acquisition of another firm. There is currently no reliable way of making this distinction.
***This figure refers to net private sector job creation
