Leveling up needs billions more than government supply, think tank says

Piccadilly Gardens in central Manchester. The Resolution Foundation stated that Manchester would need tens of billions in investment and 300,000 extra workers to close the gap with London (Anthony Devlin/PA) (PA file)

Leveling up the UK’s cities will require investments that go “far beyond anything currently contemplated” by the government, a think tank has said.

A report published on Monday by the Resolution Foundation found that income differences were “significant” and “persistent”, with only traditionally poorer areas of central London such as Hackney and Newham significantly improving their position over the past 25 years.

At its extreme, the report found that income per person in the richest part of the country, Kensington and Chelsea, was 350% higher than income per person in Nottingham, the poorest part.

Even at less extreme levels, the difference remains stark. Per capita income in Oxford, in the top 25% of local authority areas, is still 20% higher than in Torbay, in the bottom 25% of areas.

Meeting this challenge will require Britain to completely turn around its poor investment record, make hard-headed decisions about where that investment should be prioritized, and for cities to embrace growth.

Henry Overman, LSE

These gaps are reinforced by differences in investment returns. In 2019, residents of Camden received an average of £9,135 of investment, while those of Knowsley – one of the most deprived boroughs in the country – received an average of just £806.

Lindsay Judge, Director of Research at the Resolution Foundation, said: “Britain is beset by huge economic gaps between different parts of the country, and has been for many decades. While progress has been made in closing employment gaps, this has been offset by an increase in investment income among wealthier households in London and the South East.

“People worry about these gaps and want them closed, as does the government through its ‘capping-in’ strategy. The key to closing these gaps is to increase the productivity of our main cities outside of London, which will also lead to stronger overall growth.”

But closing these productivity gaps will be challenging and expensive.

In another report to be released on Thursday, the Resolution Foundation will argue that current government policies do not go far enough.

Taking Manchester as an example, where productivity is 30% lower than in London, the think tank said closing that gap would require tens of billions of pounds of investment, more graduates working in the city and 300,000 more workers moving to Greater Manchester.

Huyton in Knowsley, where the average return on investments is more than 10 times lower than the wealthy Camden (Peter Byrne/PA) (PA file)

Huyton in Knowsley, where the average return on investments is more than 10 times lower than the wealthy Camden (Peter Byrne/PA) (PA file)

Henry Overman, professor of economic geography at LSE, said: “Those looking for Britain’s productivity problems may find them in our underperforming big cities.

“Meeting this challenge will require Britain to completely turn around its poor investment record, make stubborn decisions about where that investment should be prioritized, and for cities to embrace growth.”

A government spokesperson said: “We welcome this report and its findings, which highlight the vital importance and urgency of leveling all parts of the UK.

“The Out Leveling Up and Regeneration Bill will enshrine our commitment to closing the pay and productivity gap between regions.

“By investing in the areas that need it most, improving schools, supporting regeneration and creating better-paying jobs, we will improve the lives of the poorest in areas of the UK.”

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