Sign up for our newsletter and stay updated on UK regional policy changes. Every morning, we’ll send you a comprehensive email, myFT Daily Digest, with the latest news in UK regional policy. Unfortunately, since the 2008 crisis, the UK has struggled to regain the high levels of productivity growth seen in previous decades. One of the contributing factors is the underperformance of major cities outside of London. While London’s productivity levels rival those of Paris, cities like Manchester and Birmingham fall behind their European counterparts like Hamburg and Milan.
A concerning fact is that it takes workers in the second and third-largest cities in the UK almost five days to match the productivity of a worker in London who accomplishes the same amount in just three days. This productivity gap stems from the inability of businesses in Birmingham and Manchester to effectively tap into extensive labor markets. Commuters in these cities heavily rely on cars, resulting in congested roads that limit accessibility to job opportunities.
Improving access to city centers is crucial, especially considering the concentration of businesses in these areas, particularly within knowledge-based industries like fintech and AI. In 2020, the center of London alone produced three times more output than the entirety of Manchester, despite having only 1.5 times the number of workers. Manchester and Birmingham’s centers rank among the lowest in terms of total output share among large UK cities.
To address this issue, it is imperative to enhance connectivity within cities, as it is estimated that £23 billion in potential productivity gains is lost each year. However, the challenge doesn’t end at transportation. Housing policies must also work in harmony with transportation policies to improve job access. The UK’s preference for low-density housing contributes to long commutes for many individuals. Interestingly, only 2% of homes in Birmingham and Manchester are located in the city centers, compared to 5% in London. Progress is being made, with one in every eight homes built since 2011 in both cities situated in the city centers. Additionally, high-density developments in suburbs that are easily commutable, such as the Salford Central regeneration project in Manchester, will expand the urban labor pool.
There are other barriers to growth that major cities, excluding London, face. These cities are still grappling with the repercussions of their industrial legacy, which has hindered their transition into productive economies. Birmingham, in particular, employs 9% of its workforce in the manufacturing sector, and its employment rates are below average. Each city requires targeted policy interventions to bridge the gap with London, but transport remains a central focus. For Manchester and Birmingham, connecting their city centers to a more skilled workforce is crucial in attracting businesses, workers, and investments. While there is still a long way to go, local leaders are taking steps in the right direction. An example is the return of Manchester buses to local government control by early 2025. These great cities, once centers of prosperity and industry, need assistance in creating a cycle of growth that boosts productivity and helps them realize their full potential.
Methodology:
For the purpose of this analysis, cities are defined using the Office for National Statistics’ travel-to-work areas, which encompass the majority of each city’s workforce. Job accessibility was determined by comparing Census data for population at the output area level with employment data for workplace zones, utilizing the TravelTime API. City centers are identified based on the definition provided by the Centre of Cities.
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