Vibrant places

Key growth drivers in the Northern Powerhouse

We analysed economic growth contributors in five major cities in the north of England, and how we can harness the potential of the Northern Powerhouse

Coined by then Chancellor of the Exchequer George Osborne in 2014, the concept of the Northern Powerhouse has grown in popularity. With Osborne’s departure comes the appointment of a new Northern Powerhouse minister, Andrew Percy, and a message from the newly-formed cabinet that the Northern Powerhouse will “continue to be a priority”.

Our analysis covers five northern cities: Leeds, Liverpool, Manchester, Newcastle and Sheffield. Growth in the north of England is not limited to these cities, but without an official definition we have focused on places linked closely to the Northern Powerhouse concept.

The referendum result has brought forward questions regarding EU funding. Figure 1 shows the English regional recipients of the European Regional Development Fund Programmes 2007-2013. It reveals the North West, including Manchester and Liverpool, has the highest level of EU funding (24% of the pot) at £534.9 million. The North East, which includes Newcastle, comes third with 13% of all funding in England, amounting to £295.7 million. The funding may have sparked some growth in these two regions, but we believe it isn’t enough to drive the economy forward and other factors are at play.

  

Figure 1: Regional funding received under the European Regional Development Fund Programmes

The growth could come down to the inhabitants of these five cities enjoying a better quality of life, one that might be healthier, offering improved access to affordable housing or better education when compared to other district areas within England.

Looking at key determinants of health and wellbeing in the 47 sub-regions of England – unemployment, deprivation, crime and environment – we see that the five northern sub-regions including our five focus cities, ranked 37th to 41st with only London and the West Midlands faring worse.

Academic attainment also doesn’t appear to have a bearing on the growth of Leeds, Liverpool, Manchester, Newcastle and Sheffield. Our research of each city’s median performance identifies that our five northern cities are in the lower half of English districts for GCSE results A* to C and are also in the top half of those cities with higher numbers of school leavers without qualifications.

Perhaps the cities are attracting skilled workforces with more affordable housing. Our research identifies the large cities in the north, and the neighbouring areas as the most affordable. For example the corridor of affordable housing stretching from Liverpool in the west to Hull in the east and in close proximity to Manchester, Leeds and Sheffield.

Our analysis shows there has been a shift in the labour force in Manchester, Leeds, Liverpool and Sheffield, away from manufacturing towards professional, scientific and technical industries; the trend is most pronounced in Manchester.

This flexibility of industry and workforce, seems to contribute to the growth of these five cities. This is proven when we analyse business and enterprise performance. Looking at the business and enterprise profile of cities in the UK show that when comparing the number of new businesses and new patented apps, performance was much higher in the five cities than the district average. Manchester particularly performs well.  

One of the most interesting trends when looking at this data is the rise of the digital industry in Leeds, Liverpool, Manchester, Sheffield and Newcastle. As demonstrated by Figure 2, the number of digital technology companies in these cities outstrips the national average, with Leeds and Manchester leading the pack.

Figure 2 - Number of digital technology businesses

Figure 2: Number of digital technology businesses

Finally, Figure 3 shows Gross Value Added (GVA) per job. GVA is an indicator of economic activity by measuring the productivity per person. Overlaid on the graph is the connectivity score, which measures the proximity to, and presence of, transport links. Out of our five cities Manchester has both the highest connectivity index and GVA, which suggests it is making the most from its transport links and includes the busiest airport outside of London.

 Figure 3: GVA per job and connectivity score of each city

Figure 3: GVA per job and connectivity score of each city

From our analysis, affordability of housing, connectivity and the embracing of digital technology are contributing to growth. If these cities and those surrounding them want to unlock further growth creating a Northern Powerhouse, businesses and public sector organisations need to ensure they build on these strengths. One example would be working together to improve connectivity across the North. Collaboration may be the only way for the economy of the north to maximise its potential and become a true powerhouse for the UK.

Written by Simon Hardman, Senior Manager, Local Government Advisory. First published in The Municipal Journal. Read more about CFO Insights data tool.