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The Review

The Review

 

Published 6th April 2016

 

  • MCR’s productivity.  Outside London, MCR is the city region which, given its scale and potential for improving productivity, is best placed to take advantage of the benefits of agglomeration and increase its growth.

 

  • Productivity rankings in the UK.  London and the Southeast has the highest productivity in the UK. In the North, Manchester, Leeds-Bradford and Liverpool have higher productivity than other cities, and firms in Manchester have significantly higher productivity than firms outside these city regions elsewhere in the North.

 

  • Manchester punching below its weight.  There is evidence that although MCR is characterised by relatively high agglomeration economies, firms in the region do not exploit these as effectively as firms elsewhere in the UK. Their productivity is lower than we should expect given the size of MCR’s economy, and the region is therefore punching below its weight in terms of productivity.

 

  • Agglomeration economies exist arising from a large, diverse urban region.  There is no evidence that the clustering of particular sectors, with one or two exceptions, is important for productivity. On the contrary, the agglomeration economies available relate to the benefits of being in a large and diverse urban environment. Firms’ productivity, investment spillovers and innovation all depend on the rest of the supply chain, rather than on competitor firms in the same sector.

 

  • Explanations for productivity differences.  The productivity differences are largely explained by the extent of agglomeration economies, skills, and to a lesser extent access to transport within the city region.

 

  • Importance of skills. Skills are a large part of the explanation for the productivity gap between the Southeast and the rest. Manchester does well in terms of skills compared to other cities in the North, but not compared to the Southeast and Bristol; and the productivity of its skilled workers is lower than that of skilled workers in the latter two comparators.

 

  • Transport links.  Inadequate transport networks within MCR are an important cost of increasing the size of the city, and improvements would provide the largest economic payoff. There may be net economic benefits to investment in some external links to other cities such as Leeds, which could become more connected to the MCR economy, but a rigorous analysis of such proposals was beyond the scope of this Review.

 

  • Housing.  This is the other main cost of increasing agglomeration, and the evidence from house prices is that there is an avoidable mismatch between supply and demand. In other words, there are not enough houses in the places people want to live.

 

  • No rationale for redistributing economic activity from south to north.  This will seem too obvious to be worth stating, but we include it as a counter to the rhetoric which occasionally emerges. There is no rationale for supporting policies which try to redistribute activity in some places at the expense of others which are more productive.

 

  • Neighbourhood outcomes are increasingly polarised.  All local authority districts in MCR have seen rates of worklessness reduce until the very recent past, but with increasingly polarised neighbourhood outcomes.

 

  • Deprivation arises at individual level, not neighbourhoods.  It is impossible to disentangle the causes from the consequences of economic and social deprivation at the neighbourhood level, as neighbourhoods are a very imperfect indicator of the characteristics of the individuals living in them. The data do not exist to analyse the causality at individual level. However, from an extremely large and growing body of other research on relative deprivation, we know that individuals’ life chances are largely determined at the pre-school and primary stages.

 

The Reviewer's deleloped a series of 10 key policy recommendations arising from these findings, which are fully outlined in the Reviewers report.

 

Documents

  1. MIER Review [702.22 kb]