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Levelling Up: “Much work required to create more inclusive city economies”


The last two decades has seen a renaissance in some of the UK’s cities. Certainly, the growth in the service and digital sectors and associated economies of agglomeration fuelled demand in city centre office development, whilst at the same time companies recognised the advantage of locating at the confluence of public transport routes in terms of attracting staff. There was also an increase in city centre living and this created significant new residential investment.

In some ways, this growth in city economies slightly masked the disparities in regional growth. Urban renewal in cities such as Edinburgh, Newcastle, Leeds, Manchester and Bristol created an illusion of regional economic prosperity, but significant inequality remains within these cities and between different regions more generally.

The focus on ‘City Regions’ has also created divisions in economic development with the so-called devolution deals creating some autonomy for these areas (although less autonomy than the headlines suggest) with the non-urban areas missing out. This has recently led to Town Deals and now County Deals.

Despite the shiny new office districts and residential developments within even the most successful UK cities, there is much work required to create more inclusive city economies and create greater advantage for all. In other instances, some cities would not recognise the picture painted of an urban renaissance.

Some of the more pressing aspects required across the UK’s cities are set out below – and, as is often the case, the requirements of the UK’s city economies are redolent of the requirements of the UK’s economy as a whole.

Areas of opportunity
1. Investment and regeneration
Cities continue to offer opportunities to provide residential development and a sustainable location for business. Re-developing legacy sites within cities can relieve pressure on wider greenfield development but such redevelopment is often fraught with difficulty. There is an opportunity to revisit the investment delivery models available to regeneration professionals.

Whilst individual locations have successfully created various types of special purpose vehicle or investment approach to help the private sector deliver difficult schemes there is an opportunity to introduce a national fund that helps local authorities develop more innovative investment partnerships with the private sector to aid accelerated regeneration. At the current time, potential schemes are often constrained by local authority capacity in terms of capital or resource but there is an opportunity to harness greater input from the private sector in a manner that extends the role of organisations such as Homes England (and its predecessor Homes and Communities Agency) in England and equivalent in the devolved administrations.

There is also a need for more to be undertaken in setting the scene for private sector investment. Private sector investment may be attracted more successfully by a regeneration vision that points towards improved longer term rewards where high-quality public realm, green spaces, waterfronts and vistas are included within city redevelopment areas. It is clear to all that a higher quality working and living environment is created when urban form is carefully considered, but in the world of capital appraisals such work is difficult to justify because it creates few direct outputs.

The conundrum of supporting higher quality built environment schemes, but at the same time delivering a strong capital appraisal, could be partly addressed on the basis of leveraging future private sector investment into schemes – measured by physical and job outputs of number of residential units, workspace and future employment. Greater vision may be achieved by insisting that a certain percentage of all schemes involving the public sector have 10% (or a number to be determined) spent on the wider built environment and this is deliberately removed from the development appraisal.

Certainly, city centres can continue to offer substantial win-win opportunities if greater private sector investment can be attracted in to address the more intractable problem sites and at the same time include urban form. It is clear that the intensification of some development within cities, encouraging urban living and more business, can reduce pressures on transport infrastructure, improve living standards and as a result make our places more sustainable.

2. Redevelopment
Better still in terms of sustainability, more effort, imagination and planning support is required to repurpose many existing buildings in town and city centres. Repurposing can ensure that advantage is taken of the embedded carbon of previous development and retain the character of not only the building but also the local environment.

Where the work can be undertaken cost effectively there is also an opportunity to achieve results much more quickly than through major new regeneration schemes. As with all regeneration schemes, there are needs for inbuilt safeguards to ensure that the redevelopment is fit for purpose and sensitive to location – but post-pandemic this activity could offer significant benefit.

3. Business support
Business support has been the Cinderella of economic development approaches in many locations. Multiple studies have shown that effective business support can deliver benefits not just in terms of the growth of the business but also in terms of helping to deliver economic development outputs.

Business support has, in many cases, been reduced to a signposting activity with ever reducing areas of support to be signposted towards. There is a need for greater targeting of high-growth businesses. As is so often the case, important previous studies have provided clarity on the most suitable approach but are then forgotten. Work by NESTA on ‘The Vital 6%’ recommended a focus on the most innovative businesses and that it is these businesses which generate the most job growth.

Renewing an approach based on work of this type would not only make best use of public sector resources but could also be aligned with the agenda of creating more ‘green jobs’ in the economy.

4. People centric
It may seem an obvious statement, although it is often overlooked, that all of the economic development work undertaken is intended to improve opportunity and wellbeing for people. It is important to re-state this objective against the backdrop of a narrative that can often focus on investment and business.

One of the issues involved in ensuring that policy in this area is people centric and created by considering the inter-related issues of economic development in different government departments. Despite this there is a need for stronger links between school education and wider employment and skills initiatives. School education creates a foundation for local skills base and provides the opportunity to enhance access to employment generated through local economic growth. There is an insufficient link between education and the wider economy – with school/college leavers having little idea about what the world of work can offer or what may be required.

A stronger linkage between schools/colleges and the wider economy could create greater aspiration within the education setting and lead to education choices better informed by the nature of the opportunities likely to arise in the local economy.

5. Future funding
The next important area of funding for economic development programmes across the UK will be the Shared Prosperity Fund (SPF) and there is a need to learn lessons from its predecessor, the European Structural and Investment Funds (ESIF) programme. There is a risk that the SPF results in very localised/fragmented programmes at a time when there is an opportunity to consider a smaller number of more strategic regional programmes which could offer a scale/geography to deliver economies of scale.  

For any organisation familiar with the ESIF programme it will be obvious that there is a need to ensure that the SPF does not overload local partners with bureaucracy and that access to revenue funding is also critical. Greater funding for capital schemes when the delivery agencies do not have sufficient staff resource to undertake the work required is a false economy – and any scheme that requires huge amounts of application and monitoring paperwork is burning scarce resource. It is hoped that these lessons can be learned and that the SPF creates an effective vehicle to enable some of the wider issues set out in respect of cities (and more generally) to be addressed.

David Fletcher is Director of City Development and Growth at Derby City Council, and a member of the IED. This article was first published in Levelling Up: pre-White Paper perspectives from economic development professionals.