Leeds LEP Chair calls for radical new approach to investment in the North
Speaking at the 'Convention of the North' (13 September) Roger Marsh OBE, Chair of the Leeds City Region LEP and Chair of the Northern Powerhouse 11, calls for a radical new approach towards investment in the North. His speech in full:
"I am delighted to see people from across the North gathered here today for this vital discussion about the North’s role in the UK’s future.
The fact that people from all parts of the North are represented here today – business leaders, council leaders and elected mayors, young people, education and third sector leaders and central government – is testament to the passion we all share for seeing our combined region and its people reach their full potential.
I’m certainly passionate about the North, which is why I’ve spent my 40-plus year career championing the North’s interests – from my early career in the Teesside steel industry, to Senior Managing Partner at PwC in Leeds and more recently as Leeds City Region LEP Chair and the Chair of the NP11, which brings together the 11 local enterprise partnerships across the North.
The North as the solution, not the problem
I’m sure I speak for many of you when I say it’s a no-brainer that the North should be front and centre of Government’s plans for UK competitiveness and prosperity beyond Brexit.
Our great towns, cities and rural areas are collectively home to nearly a quarter of the UK’s population and together we contribute over £300 billion a year to UK plc. The scale of our economy is such that if the North were an independent nation, it would rank among the top 20 in the world.
Confidence in and around the North has grown in the five years since Government first adopted the Northern Powerhouse as policy. This agenda gave the North the greatest national prominence I’ve seen in the past 40 years.
Devolution is making a real difference where local politicians and business leaders have come together to set an ambitious agenda for their area, winning new powers and investment to deliver on that agenda as a result.
And we’ve seen major companies establish and strengthen their presence in the North – Siemens, the BBC, Nissan, BAE, GlaxoSmithKline, Channel 4 and of course McLaren Automotive here in Sheffield City Region, whose Executive Director Ruth Nic Aoidh I am very much looking forward to hearing from.
That the North has a significant role to play in the UK’s future is therefore beyond question. Yet despite the clear economic opportunity the North represents, the North-South divide continues to widen, holding back our economy, our productivity and people’s opportunities.
The time for bold leadership and a radical new approach
There’s a poem by Ian Horn from my native Teesside that goes: “We built the world; every metropolis came from Ironopolis”. Although the poem is about the Teesside steel industry, it applies to the North as a whole. We became the most economically productive place on the planet because we had greater scale and specialisation than anywhere else. The building we’re now in is a symbol of that industrial might.
But our economy has changed fundamentally from the days when this building produced steel that was shipped all over the world.
No longer are innovation and productivity forged from iron ore, coal or wool. In today’s developed economies the raw ingredients that power growth are knowledge, ideas and human capital. Left unchecked, those economies that will do better are those where knowledge, innovation and people come together naturally. This risks some areas being left behind – which, as we’ve seen recently, is not economically, socially or politically sustainable.
Until recently, policy making and investment has struggled to keep pace with these economic shifts, so gaps between North and South have emerged in areas such as skills, earnings, productivity, R&D, health and infrastructure spending.
The opportunities of closing these gaps are obvious: a more prosperous, productive UK economy as a result of the North and other regions levelling up; better living standards and opportunities for the people of the North; and a better quality of life for those in the Southeast as well thanks to a more balanced national economy that eases development and cost-of-living pressures.
Realising these opportunities though requires a new way of thinking – by Government, by northern leaders, and by business.
For Government it means a radical new approach to how investment is allocated. Although market forces have played a part in the North’s changing fortunes over the past few decades, an imbalance in Government spending has exacerbated the issue.
Despite recent welcome progress in some areas through devolution deals, public spending on the economy remains stubbornly skewed towards the Southeast. According to Treasury figures. Yorkshire for example has seen a 0.4% increase in spending over the past four years to £568 per head, compared with a 47% increase for the Greater Southeast to £901 per head.
It hardly needs an economist to point out (though I am an accountant by trade) that levelling up is no small feat when the imbalance is this stark.
As northern leaders, we need to look to new ways of partnership working in pursuit of mutual benefits. International examples clearly highlight that the best conditions for productive growth based on knowledge and innovation are created through strong, empowered leadership and collaboration between the public and private sectors.
Indeed, you don’t need to look overseas or even to London for evidence that devolved leadership and collaboration works – it can be seen right here in the North in those places that have come together to agree bold devolution agreements in return for directly accountable metropolitan leadership.
Businesses meanwhile must recognise that future growth does not lie in low value strategies based on low wages and simple cost cutting. Those businesses that invest in higher value strategies based on innovation, exporting and skills development – supported by national and local government investment in transport, housing, and digital infrastructure – are the ones that will see the benefits in terms of higher profits, more loyal employees and greater resilience to changes in economic conditions.
These benefits are not just felt at the individual firm level; they create opportunity for the society in which those businesses operate, creating good quality, well-paid jobs that enable local people and their communities to thrive.
Some specific ideas to get us started…
Today we will be discussing some specific interventions to make these shifts. Ahead of those discussions, I would like to offer some of my own thoughts based on my experience as a LEP and NP11 Chair and as a proud, passionate northerner.
Firstly, we need a coherent Northern Powerhouse strategy that sets out a clear vision for where we want the North to be and an ambitious action plan to achieve it. This strategy should be designed and led by the North, working with Government, and must be long-term in its outlook – not just a collection of short-term initiatives. To be truly successful, the Northern Powerhouse must be a thread running throughout Government policy, not an idea that waxes and wanes according to political circumstances.
In particular, the Treasury could be given an explicit objective to level up the economy. This would overhaul how we prioritise investment and would make this Government the first ever to make re-balancing a specific objective of the Treasury.
We mustn’t underestimate the scale of investment needed to tackle the systemic issues and historic under-investment that prevent the North from fulfilling its potential. According to work my LEP has done, Leeds City Region alone would need annual investment of £6 billion or £2,000 per head over the medium term to catch up to the Greater Southeast.
After years of austerity many will balk at this figure, but we must be clear that if levelling up is really our goal, a step change is needed. As a starting point it would be encouraging to see a series of lines specifically about the North in the November Budget. An increase in funding for skills and education should be top of the list, as it’s only by tackling this that will we see long-term structural improvements in the North’s economic performance.
Changing the way the Treasury decides on investments by no longer spending where growth is highest but where the interventions are most needed – like the North and other less productive regions - could reap real rewards for people, our economy and the Exchequer.
This isn’t just about central Government though – we need to strengthen partnerships between the public and private sectors across the North, learning from what works, being united in our calls for Northern priorities to be delivered while maintaining healthy competition between northern regions that brings more investment and helps us all raise our game.
A properly empowered body that augments and enhances the partnership we have built – bringing together northern political leaders, business, universities and others – would give the North a single, strong voice that would be easier and clearer for Government to hear.
There are several areas where as the NP11 we believe the North can collaborate more successfully for the benefit of the UK as a whole including energy, trade and investment and innovation.
Energy – from off-shore wind in the Humber, clean energy generation in Teesside and Yorkshire, and nuclear capabilities in Cumbria, the North has the potential to be the UK’s clean energy powerhouse if we can agree sustainable funding models with appropriate Northern governance. Not only would this help the country meet its international climate change obligations, it would also create transformational economic opportunities and new skilled jobs for the people of the North
Trade and investment – the North has captured an increased share of international trade and investment in recent years, but by working more closely with the Department for International Trade we could make even more of the scale and quality of the North’s industrial assets, skills and cultural offer to compete globally for the UK alongside London and the Southeast.
Innovation – the North has world-class innovation assets. Building capacity to deliver the Government’s welcome commitment to boost research and development spending to 2.4% of GDP would mean around £14bn extra for the North by 2027. By better connecting these assets with businesses leaders, the North can unleash the spirit of innovation and enterprise that made our region the driving force of the Industrial Revolution to address the opportunities and challenges of the 21st Century and beyond.
And of course we can’t talk about the North’s future without mentioning transport investment. A modern, integrated transport network is fundamental to creating the conditions for knowledge and innovation-led growth thrive. As business leaders have made clear, HS2 is fundamental to rebalancing the UK’s economy. Britain needs both HS2 and Northern Powerhouse Rail, with a station in central Bradford, for the North and the UK economy to prosper in the decades ahead.
I’m looking forward to hearing what all of you have to say on these and other issues affecting the North’s future today. If there’s one thing you can rely on Northerners for, it’s that we tell it like it is, so I’m sure we’re in for a frank exchange of views.
If I have one goal for today, it’s that we go beyond discussion of the challenges we face and instead focus on the action we can take as northerners, working with national government, to build a North that works for everyone: for business, for people – for young people especially, who I’m pleased to see so well represented on the agenda for today – and for the country.
Today is the biggest event of its kind, bringing together everyone who has a stake in the North’s future to send a clear message to Government, and to one another, about the new North we want to create. It is our shared desire to see the full potential of the North unlocked that has brought us here today, and it is a shared commitment to bold action, united by a common vision for northern success, that will see our potential realised over the months and years ahead.