North can rise again if productivity challenge addressed

An academic report into the United Kingdom’s resilience has highlighted the worsening productivity lag and the particular effects in the North.

On Resilience, a collection of articles drawing on research from University of Manchester academics, examines a range of solutions to strengthen national resilience and bolsters the calls for a clear industrial strategy, as outlined in the Invest North report launched this week by TheBusinessDesk.com.

While it concludes that the UK is vulnerable to global events and over reliant on other countries for essential resources – there are policy choices which could significantly lessen this exposure, and others, the report makes clear.

In particular, it recommends a high priority for digital transformation by leveraging digital technologies and the data they produce to connect organisations, people, physical assets and processes, to create a technologically diverse, sustainable and productive economy.

For example, the level of output per hour in both Greater Manchester and Birmingham was not only just 68% of that in London, but also almost a quarter or more below peer cities in Western Europe.

The productivity lag was just one part of the report, and authored by Bart van Ark is a Professor of Productivity Studies at the Alliance Manchester Business School, The University of Manchester.

“This diffusion and absorption of digital technologies is equally important as the actual creation of it.”

It further argues for within-region connectivity to improve access to the benefits of economic growth – often called agglomeration effects, by economists – alongside better collaboration between levels of government to build effective digital innovation ecosystems across the region.

“With the gadgets at our disposal, we need consistent policies to connect place, people and product to revive the economies of Manchester and beyond,” it concluded.

It echoes many of the recommendations in Invest North, a substantial research led project into the economy of the North by TheBusinessDesk.com.

Notably, recommendation 10 of the 12 included in Invest North refers to digital and culture, adding the practical measure of apprenticeship levy reform.

“Co-ordinating business efforts to train and recruit talent across the North with devolved skills systems empowered through Metro Mayor trailblazer deals, drawing on a more flexibly governed apprentice levy,” it said.

Bart van Ark

Professor van Ark, also the Managing Director of The Productivity Institute, an ESRC-funded nation-wide research organisation exploring the UK’s productivity shortfall and the means to improve it, said the slowdown in productivity has been a complex process.

He said: “Productivity growth has seen one of the largest slowdowns ever measured over the past 15 years. Growth in output per hour in OECD countries halved from almost 2% per year on average between 1995 and 2007 to just 1% between 2008 and 2019. There is no single explanation for this historic slowdown. The drag from the global financial crisis has been manifest through low demand and weak investment, too low interest rates causing misallocations an overreliance on cheap labour, and failing fiscal policies. There has been a weakening of globalization as measured by trade and FDI. 

Other policy challenges addressed in On Resilience include the positive roles AI and smart technology can play to mitigate risks to food production, the growing threat of antimicrobial resistance and how best to meet the UK’s critical metal requirements whilst avoiding unnecessary damage to the environment.        

The 40-page document – published by the University’s policy engagement unit, Policy@Manchester – includes a foreword from Lord Howell of Guildford, the former Energy Secretary and only Minister to have served in the Heath, Thatcher and Cameron governments.

He describes On Resilience as a “thoughtful and balanced series of essays on a subject of such vast complexity, importance and contention as our future energy supplies and their tangled relationship with oncoming climate violence which threaten us all.”

Lord Howell of Guildford

Lord Howell, also a past President of the British Institute of Energy Economists, writes: “Balance and realism are qualities very badly needed in tackling the many dilemmas and obstacles ahead, yet they seem in very short supply.”

He adds: “None of these questions can be met with neat answers or solutions. But they can be addressed with shrewd analysis and fearless posing of the issues. That is what these wise and expert essayists from The University of Manchester offer.”