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Want to level up the UK? Look at disparity within the regions, not just between them

Want to level up the UK? Look at disparity within the regions, not just between them

It is a truth which has rapidly become universally acknowledged (to borrow Jane Austen’s famous phrase) that the government must deliver for its new supporters in the regions.

This is a massive challenge. The gap in income per head, for example, between London and other areas of the country is obviously large. But the firm trend has been for this difference to widen, rather than narrow.

Between 1997 and 2017, income per head, after allowing for inflation, rose by around 17 per cent in both the north east and the north west — just under one per cent a year. In Wales, another area where the Conservatives made big gains, the overall increase was a mere 11 per cent. In contrast, in London it rose by 42 per cent over these two decades. In inner London, the increase was no less than 56 per cent.

But that’s only half the picture. To fully understand what is going on, we need to look within the regions themselves. Manchester provides a perfect illustration.

In the mid-1990s, within half a mile of the city’s main rail stations was a bomb site. Not a site created by a contemporary IRA outrage, but by the Germans in the Second World War. In the subsequent 50 years, no one had thought it worthwhile to develop a piece of land in the centre of a major English city.

How times have changed. The total resident population of the city centre is now 80,000.  Manchester has been totally transformed. The skyline has altered just as dramatically as that of central London.

The economic structure of central Manchester has come to resemble those of the inner London boroughs.

The Office for National Statistics provides detailed data on the numbers employed in each industry for every UK local authority. Turning these into percentages, I used some fairly straightforward maths to work out which local authorities have an industrial structure most similar to that of Manchester.

The answer is urban areas like Camden and Islington in London, and other major regional cities such as Bristol and Leeds. None of the nine other boroughs which make up the Greater Manchester region look remotely like the city centre itself.

The same is true of other English cities such as Newcastle and Leeds. The types of jobs on offer are quite different from those in the surrounding hinterlands.

The cities voted for Labour with massive majorities. It was in their satellite areas where the Conservatives triumphed.

The story looks the same from whichever level of geographic aggregation we look. Comparing the regions of the UK, London is much richer than the rest. Within individual regions, the main city is much richer than the rest.

It is easy to see why this happens. Once an area starts to become more attractive for business, other firms increasingly see it as a place to locate. Skilled people want to both work and live there. A virtuous circle is created, and the area pulls away from its surroundings.

If the government really wants to level up the country, it will need to be really imaginative to avoid falling into this trap.

As published in City AM Wednesday 29th January 2020
Image: Manchester vis Flickr by Zuzanna Neziri licensed for use CC BY 2.0
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Catalonia tries to avoid repeating history, but Spain has economic reality on its side

Catalonia tries to avoid repeating history, but Spain has economic reality on its side

Karl Marx famously wrote: “History repeats itself, first as tragedy, second as farce”.

The phrase might well have been coined with Catalonia in mind.

Generalissimo Franco began a military coup against the elected Spanish government in the Canary Islands in 1936. The battle spread across Spain, and Catalonia was the last redoubt of the Republic to fall, in 1939. Franco took brutal revenge. Tens of thousands were imprisoned or executed, many of these within living memory. The Catalan language was banned.

Now the Catalans have proclaimed independence and Spain has imposed direct rule.

We do not of course know how events will pan out this time around. Things may turn serious. Yet there is certainly a slapstick element to having two different sets of police on the streets, and two different groups of civil servants, each taking different sets of orders.

In both the late 1930s and now, economics has a potentially decisive role in the eventual outcome.

There are many reasons for Franco’s victory. An important one is that the Republican side could just not obtain enough modern armaments. Catalonia even then was the richest part of Spain, but the arms the Catalans needed were made abroad, and, as the civil war progressed, increasingly they could not afford them.

A leading element in the Catalan government was the Workers’ Party of Marxist Unification (POUM in Spanish). POUM was inspired by Leon Trotsky, in much the same way as Jeremy Corbyn and his close acolytes appear to be today.

Sympathy for the historical role of POUM goes a long way to explaining why Corbynistas are enthusiastic supporters of the contemporary Catalans.

But POUM made a catastrophic mistake: initiating a policy of expropriating private property. One effect was a major loss of confidence, and the collapse of the Republican peseta on the foreign exchanges, meaning that all imports, not just weapons, became punitively expensive.

Another generalissimo who was a political contemporary of Franco, one Joseph Stalin, described Trotskyists as a “gang of wreckers and diversionists”. In this, at least, he was surely correct.

This time, the Catalans are desperately trying to create separate a currency, using technology based on digital tokens. Their government is considering an e-residency programme such as the one in Estonia. This provides a way to operate a location-independent business online.

More traditional businesses have already voted with their feet. Almost 1,700 companies, including two big banks (Sabadell and CaixaBank), have switched their headquarters to other parts of Spain since the crisis escalated at the start of October.

The EU has made it clear that an independent Catalonia would not be a member of either the EU or the Eurozone. The latter would probably be a decided advantage, but effective expulsion from the EU could cause serious short term dislocations.

It is not just loyalty to Spain which is leading a lot of Catalans to demonstrate against independence. Whatever the long term outlook, the immediate economic costs would be substantial.

As published in City AM Wednesday 1st November 2017

Image: Demonstration by By Màrius Montón  via Wikimedia Commons is licensed under CC by 4.0
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How to stop tech hubs in urban hotspots from intensifying geographic inequalities

How to stop tech hubs in urban hotspots from intensifying geographic inequalities

Perhaps George Osborne’s most abiding legacy from his time as chancellor will be the creation of the concept of the Northern Powerhouse. Certainly Manchester, its principal focus, is booming.

The landscape of the centre is being altered dramatically by skyscrapers. Peel Holdings, the huge investment and property outfit, is planning to double the size of the development around Media City in the old docks, where the BBC was relocated. The airport, already the third busiest in the UK, is expanding.

All in all, it seems a triumph for modern capitalism. After decades of relative decline, a city is being transformed by private enterprise. But what is really going on?

In a piece this month in the MIT publication Technology Review, urban guru Richard Florida has picked up on a startling new trend in the location of new technology companies in the US.

In the 1980s, there were essentially no high tech companies in city locations. Instead, we had Intel and Apple in Silicon Valley, Microsoft in the Seattle suburbs, the Route 128 beltway outside Boston, and the corporate campuses of North Carolina’s Research Triangle.

Now, urban centres are rapidly becoming the places which attract technology companies. In 2016, the San Francisco metro area was top of the list for venture capital investment, attracting more than three times the amount of the iconic location of Silicon Valley. Google has taken over the old Port Authority building in Manhattan. Amazon’s headquarters are in downtown Seattle.

The impact of this new, high concentration of tech firms is to intensify geographic inequalities. As Florida puts it: “tech startups helped turn a handful of metro areas into megastars. Now, they’re tearing those cities apart.”

A relatively small number of urban areas in America, and within them a small number of neighbourhoods, are capturing all the benefits.

The same sort of thing seems to be going on in Greater Manchester. A few areas are soaring away and attracting wealth and talent. In 1981, fewer than 600 people lived in what the Council describes as “the heart of Manchester”. Now, over 50,000 do, almost all of them young graduates.

But the more traditional outlying boroughs of the city region, especially to the north and east, are struggling to capture any trickle down from this massive transformation. Indeed, they are at risk of losing out, as their young bright sparks are attracted by the life of the inner metropolis.

Richard Florida does not just identify the problem, he suggests some possible solutions. One of which is a programme of building lots of good housing in the outlying areas, supplemented by a top class public transport service. This would keep house prices down, and attract some of the people stuck in rabbit warrens in the urban centres.

Manchester already has a modern tram service. But the new Labour mayor, Andy Burnham, is resolutely opposed to building on the green belt just to the north and east of the city. Yet another example of the sanctimonious intentions of the Left serving to intensify, not reduce, inequality.

As published in City AM Thursday 29th June 2017

Image: Media City UK by Magnus D is licensed under CC by 2.0
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