There is no doubt that Britain has one of the most unbalanced economies in the world. Measured by the difference in size between the first and second city, we lean more heavily on our London and the surrounding area, in terms of population and growth, than most other nations. The impact of this has been deleterious for the UK as a whole. For Londoners there is the high cost of living, driven by sky-high rent and property prices and where London weighting, particularly for public sector workers fails to keep pace with rents and mortgages. For other regions of the UK, there has been insufficient job growth and business investment, with too often the state being the only major employer. This has to change and politicians of all parties agree on the need for a joined up regional growth strategy. But what should this include?
Private equity and venture capital is well placed to contribute to this debate, since we are significant investors in the regions, with a strong presence of fund managers investing in local businesses in places like Manchester, Nottingham, Newcastle, Bristol and Aberdeen. BVCA research has analysed in detail some of these business clusters and the secret to their success. Key drivers include a labour force with the right skills, access to willing finance providers, strong infrastructure and a meaningful network, grown organically, to support growth and drive investment. So what should the role for government be in supporting this agenda further?
The debate has moved on sufficiently from the 1970s for us to talk more comfortably about a meaningful industrial strategy. The key is to understand where and when a government intervention should come. Much has been said about not ‘picking winners’ and this is of course correct. Actually what needs to be done is pick people and sectors who are already winning. This doesn’t mean corporate welfare for multinationals. It means working with the grain of existing success in order to supercharge growth in sectors where we are already doing well. It should not be about trying to create new ones or supporting sectors or businesses that are already in difficulty. An example of best practice is the Graphene facility in Manchester. This has emerged organically from a very strong university, with a culture of commercialising research and intellectual property. It has rightly been singled out for a further boost in government support. But it needs more to be able to retain its status as a world leader. In South Korea, the state is supporting their Graphene facility with a much larger contribution as well as a partnership model with Samsung. We need to aim just as high.
Interventions that fit this mould are a safe and effective way for the state to boost regional growth. Whether it is boosting the commercialisation of research, investing in more and better infrastructure in areas of regional success or direct investing via state supported fund vehicles, policy must work with the grain of existing commercial activity. Trying to impose policy against the grain of economic geography will not work. But if done well, an industrial strategy can boost regional growth and turn local success stories into global ones.
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Tim Hames is the director general of the BVCA and on Monday he’ll be speaking at:
Locally led growth: how can we build a regional recovery?
7.30pm, Monday 23 September
Brighton Media Centre, 15-17 Middle St, Brighton BN1 1AL (just outside the secure zone)
Andrew Adonis shadow infrastructure minister
Tim Hames Director General, BVCA
Cllr Nick Forbes Leader, Newcastle City Council
Anna Turley Senior Research Fellow, IPPR North and PPC for Redcar
Chair: Alison McGovern MP Vice Chair, Progress
Register your place for this event below.