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The Case for Agglomeration Economies

The Case for Agglomeration Economies


Published 6th April 2016


Headline findings from the report are that:


  • London and the South East are dominant, but in order to deliver a bi-polar economy for the long-term benefit of the UK, evidence suggests growth in the MCR and other northern city regions would be good and benefit the UK economy. This means policy interventions in more productive city regions will have less work to do to counter market forces.


  • Firms in Manchester have higher productivity than firms in the Northwest.


  • MCR’s skills gap is less than other northern cities.


  • The MCR is less productive than it should be and this is down to skills, housing, planning and transport infrastructure.


  • Skills: One way to raise productivity is to tackle the skills base of current residents. The second is to try to attract skilled workers from elsewhere to MCR (but this raises the cost of living and doesn’t address existing unemployment and deprivation).


  • Transport: Future travel demand encourages investment in intra-MCR projects and the case for high-speed rail links is not clear. MCR is in danger of having a transport plan that is in danger of failing to allow for the journeys that they want to make. A congestion charging system needs to be considered again.


  • Housing: Current planning decisions on dwelling types and location do not appear to be sufficiently responsive to demand. National planning of mixed communities may not fit with MCR’s aspirations.


  • Business and Sectors: Current MCR and NW plans appear to favour almost exclusive use of brownfield land despite the evidence that this may not serve the demand for firms. In short, there is a significant disconnect between the demand for and supply of buildings by both location and type.  


  • No evidence that clustering of specific industries improves productivity – benefits for individual sectors, but outweighed by importance of being in a large urban environment.


  • Demand - MCR should encourage relocation of quasi-public sector jobs, planning system provides suitable and timely business premises, deal with infrastructure bottlenecks, address issues of project financing.


  • Supply – Provide amenities favoured by the high skilled, address workers’ housing and transport demands and not focus on SMEs or particular sectors.


 ** Data Addendum **


Please note that Figure 7 on page 76 of the Agglomeration report has been amended, as it referred to a regression not discussed in the text.  Furthermore, the text in Section 4.2 of the report has been amended so that where references are made to tables in the Appendices, A2.4 now reads A2.3, A2.5 now reads A2.4 and A2.6 now reads A2.5.

We sincerely apologise for any confusion these errors may have caused.



  1. Appendices: The Case for Agglomeration Economies [628.01 kb]
  2. MIER The Case for Agglomeration Economies [4.05 mb]