New Start, NEF and CLES have launched a new report on a project which has spent the last year visiting ten UK cities to map and activate alternative approaches to local economic development.
According to the report in the UK’s cities, traditional economics is not working. While a minority of people experience increased affluence, many are struggling to get by. The benefits of economic growth are not being spread evenly around the country, or within places. It found that “doughnuts of deprivation” – inner city areas where the economic picture has not changed for 40 years – are part of the fabric of our major cities as inequality and poverty become more entrenched. In Birmingham 37% of children live in poverty; in some parts of the city that figure rises to 80%.
In Manchester, street homelessness has seen a six-fold increase in the last five years. In Glasgow, where you live is a strong determinant of how long you live for, with a life expectancy gap among men of at least 13 years between those living in rich and poor areas of the city.
The report says there are multiple reasons behind the growth of poverty and inequality: some post-industrial places have not recovered; big business has been strengthened at the expense of working people; the knowledge economy favours the highly skilled; structural shifts have produced an economy of low wages and under-employment; public sector cuts have radically reduced local support.
And such high levels of poverty and inequality not only harm the people and places affected by them, but also hold cities back and hamper their growth, prosperity and resilience. High levels of welfare and support create dependency on local and national government, and poverty reduces the local tax base and local spending power. Poor people lead to poor places. “In each of the ten cities visited for this project, the same message came across: “things have never been so bad””.
At the heart of the problem, the report says, is the mainstream economic model on which UK cities depend and which limits the response to poverty and inequality by local government and local practitioners. Traditional economics – inward investment, regeneration programmes, enterprise zones, the prioritisation of economic growth and reliance on trickle down – has had some successes. It has brought in investment and improved the infrastructure of the UK’s major cities, turned city centres into hubs of culture and tourism, and – over decades – prevented places from sliding further into decline.
But this agglomeration model – the dominant local economic model for UK cities – creates as many losers as winners and is an outdated approach to city economies that are currently experiencing huge social, technological and environmental change. This dominant model favours city centre economies, skilled workers and high-end jobs. It starts with the physical – buildings and infrastructure – rather than the needs of people. It encourages people to move or commute to areas of opportunity rather than creating jobs close to the neighbourhoods in which they live. It creates pollution and gentrification and incentivises big business at a time when the majority of UK businesses employ fewer than 10 people, and self-employment and micro-businesses are in the ascendancy. In its focus on economic growth and building scale, it leaves behind the low skilled and those living on the peripheries of cities.
Financialisation – the emphasis on making money from money – has shifted the focus from the ‘real economy’, where goods and services are produced and sold, toward the prioritisation of financial markets. The shopping centres, hotels and cultural icons in our city centres attract tourists and create an illusion of prosperity but that illusion does not travel far geographically.
The agglomeration model nevertheless remains dominant and attractive and fits with the Treasury’s version of the role of local economies in the UK. According to this model, local economies can be boosted by the introduction of a new train line, by signing a City Deal or by enticing in foreign investment. This so-called ‘boomgoggling’ – believing that investment and infrastructure alone can halt poverty and create jobs for the low skilled and that growth will eventually trickle down – is still the mainstream economic approach to places.