Brexit offers the opportunity for Britain to start doing things differently. Indeed, we have to do things differently, to innovate and raise productivity if Brexit is to be a real success.
Over the course of many decades, under both Conservative and Labour governments, billions and billions of pounds have been spent on “regional policy”, as it used to be called before “levelling up” became the fashionable phrase.
The monies have not been completely wasted, but their impact has been limited. If anything, regional inequalities in incomes and productivity have widened rather than narrowed over the years.
In essence, this is because many of the various policies have been top-down. They have involved schemes in which things are done to localities from above, instead of the areas themselves being the initiators and the doers.
Brexit enables the UK to take its own decisions. In the same way, successful levelling up must be based on actions taken locally.
This very general point is reinforced by the fact that, if it is to succeed, “levelling up” needs to take place within regions and city regions, just as much, perhaps more so than it does across regions.
Inequalities in incomes and productivity are on a geographical scale self-similar[1], to use a mathematical phrase. In other words, they look very similar regardless of the scale. The inequalities within city regions are just as wide as they are across the regions of the UK
So, in Greater Manchester, for example, the city centre has boomed. There is a further growth pole around the airport and neighbouring areas in the prosperous South West of the region. The boroughs in the North and East – Rochdale, Bury, Oldham and Tameside – lag behind.
All this means that levelling up needs to be very specific in terms of place. This in turn means that it needs to be based on identity, on the bond that people feel with a place. And this was the very basis of the Brexit vote.
A good example of this is Teesside, inspired by its Mayor, Ben Houchen. For many years, policy makers at a national level thought in terms of the “North East”. Here was a region of the UK which lagged behind and needed “regional policy” applied to lift it up.
But except in a rather amorphous sense, the North East is not the concept which attracts loyalty. It is Tyneside and Teessside, to name but two places in the region with which people readily identify.
Houchen has cemented this identity in his industrial policy. His brand “Net Zero Teesside” is brilliant. It tells investors almost everything they need to know about the types of companies the area already has and wants to attract more of. And it is a source of local pride. For decades one of the symbols of the decline of the old industrial sectors of the UK, Teesside is embracing cutting edge technology of the 21st century, building on but at the same time transforming its former strengths.
Since May 2020 I have been Chairman of the Rochdale Development Agency (RDA), the economic development arm of Rochdale Metropolitan Borough Council.
We are following a similar strategy to Teesside, with the full support of the Greater Manchester Combined Authority and its Mayor, Andy Burnham.
Rochdale was one of the areas where the Industrial Revolution began. For well over a century its principal industry was textiles. But the textile factories needed machines, and the town, along with neighbours such as Oldham, developed expertise in manufacturing machines.
Teesside is transforming itself from an energy-intensive industrial place to one where the technology needed to make industry carbon free is developed.
The strategy of the RDA, which is well advanced, is to build on Rochdale’s sense of place and history, on its centuries-old focus on producing machines. But, like Teesside, to transform this with the technology of the 21st century.
The vision is to create a mega-cluster of manufacturing innovation built around materials and machinery in a large area along the M62 motorway which runs through the borough.
The mega cluster is intended to act as the both the catalyst and the focal point for the diffusion of advanced technology across the manufacturing firms of the area.
It is well documented that there are substantial and persistent differences in productivity levels between companies in the same industry, even when the industry is narrowly defined.
Improving the performance of the so-called “long tail” of low productivity firms is essential to successful levelling up. But this is something better stimulated by local example than by central government exhortation.
In both Greater Manchester and Teesside, the devolution of powers to a local level, away from central government, is key to the strategies which are being followed.
Public money supplied by national government is certainly needed to kick start a levelling up strategy. But the decision on how it should be used to best effect needs to be taken locally.
This, after all, is the fundamental message of Brexit. Decisions should not be taken by a remote bureaucracy, but by those rooted with a sense of place and history.
Paul Ormerod October 2021
[1] See, for example, Andy Haldane, Making a Success of Levelling Up, presentation to Policy Exchange 28 June 2021, Bank of England
