‘Job done’ complacency on Greater Manchester’s economic revival is badly misplaced

Greater Manchester is still at the foothills of its economic revival, and progress needs turbo-charging because on current trends it will take almost a century to reduce its productivity gap with London to a reasonable point, according to major new research published today (Tuesday).

A Tale of Two Cities: Part 2, Greater Manchester – the 43^rd report from The Economy 2030 Inquiry, funded by the Nuffield Foundation – examines how to boost prosperity across Greater Manchester, from expanding its highly productive city centre to ensuring that the gains from growth are shared across the wider city region.

The report notes the popular view that Greater Manchester is now booming, and that attention should shift elsewhere, is based on the sight of cranes in central Manchester not the economic evidence.

That’s because while Greater Manchester has outperformed every other British major city region bar Glasgow since 2002 in terms of productivity growth, its output per worker remains – at £51,956 – far below the UK average of £58,871. This is not what success looks like in an advanced service-based economy like Britain, where major cities are expected to be the centres of high productivity activity, say the authors.

Greater Manchester also continues to have lower employment (72.9 per cent), lower weekly pay (£515) and higher economic inactivity (24 per cent) than the UK average (75.4 per cent, £533 and 21.7 per cent respectively).

The authors say that local, regional and national policy makers need to remain focused on boosting productivity across Greater Manchester, which currently has a 35 per cent productivity gap with London.

A plausible but challenging target should be to reduce this productivity gap to 20 per cent, approximately the same gap as that between France’s two largest urban areas (Paris and Lyon). Achieving this would reduce the UK’s productivity gap with Germany by 14 per cent, and boost the living standards of Greater Manchester’s 2.9 million residents. But even with the recent stronger productivity performance of Greater Manchester over London since 2002 (up 0.8 per cent and 0.63 per cent a year respectively), the city would still take 90 years to meet this goal on current trends.

The report says that complacent claims that GM’s economic revival is ‘job done’ should be rejected in favour of an economic strategy that should include:

• A bigger city centre to attract more knowledge-intensive firms in sectors like IT and insurance that tend to cluster in city centres, and highly-skilled workers. Currently, just one-in-eight workers across the region work in the city centre (compared to one-in-three in London).
• Boosting connectivity across the city region so that more people are able to access these higher-paid jobs. Currently, just four-in-ten graduate workers across the region are able to commute to the city centre within 45 minutes.
• Building 126,000 more homes, including a £2.1 billion investment to maintain Greater Manchester’s share of social housing as it expands, in order to ensure that people can afford to live in a more prosperous city region. The authors warn that failing to do this would worsen inequality and wipe out a sixth of the income gains that higher productivity will bring.

The report says the scale of change needed to boost prosperity across Greater Manchester will require far greater central government investment, and further devolution. For example, the £3 billion of existing and upcoming transport funding up to 2032 is still around £2 billion short of what is required to modernise the city region’s public transport. Tough decisions by local policy makers are also needed, such as how to balance the need for more commercial office space with housing around the city centre.

But the living standards gains to nearly three million local residents – and the boost to the UK economy (UK output would rise by 0.7 per cent) – make this productivity target worth pursuing. Reaching it would raise the disposable incomes of a typical family in Greater Manchester by £2,400 a year, and lift 24,000 children out of poverty.

Lindsay Judge, Research Director at the Resolution Foundation, said:

“Greater Manchester’s improved recent economic performance is well known. But ‘job done complacency’ is badly misplaced.

“The city is still at the foothills of fulfilling its economic potential, and on current trends almost a century away from reducing its productivity gap with London to a respectable margin.

“Greater Manchester’s city centre is at the heart of its nascent recovery, but it remains too small to power the prosperity of the city as a whole.

“Manchester’s recovery needs to be turbo-charged, not taken for granted, to boost the UK economy as a whole and raise living standards for the near three million across the city region.”

Paul Swinney, Director of Policy and Research at Centre for Cities, said:

“This report leaves no doubt that Manchester has a crucial role to play in restarting national growth.

“Addressing the city’s underperformance requires urgent intervention. For the city centre to continue growing, it will need to fix its transport system, improve skills and training, and attract new generations of workers and firms that will help expand the prosperity that the city region generates for the wider northwest and the UK economy.

“This will not be cheap. But if Government is serious about boosting economic growth, Greater Manchester requires serious investment at a scale that far surpasses what it currently receives.”