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16/03/2017

Balance of power: What's happening in the Northern Powerhouse?

Words: Huw Morris

The Northern Powerhouse is the government’s flagship programme for rebalancing the UK economy. How has the voyage gone so far and what lies on the horizon?

As an entrepreneur with enormous business, infrastructure and property assets across the UK and the north of England in particular, John Whittaker likes to cite a Japanese proverb: Vision without action is a daydream. Action without a vision is a nightmare.

“Put action and vision together and you get an explosion of economic activity,” says the chairman of the Peel Group, who with his partners has invested £5 billion across the North. 

Peel’s extensive interests include MediaCityUK, airports such as Doncaster Sheffield, Durham Tees Valley and Liverpool John Lennon as well as Newcastle’s intu Metrocentre. The North, he says, “has been our focus for several decades” and will remain “at the heart of what we strive for”. 

Whittaker sees a “new impetus on promoting international trade and investment with local, national and international partners” after Brexit. The launch of a UK industrial strategy will “help to focus all our minds on what we in this country are good at and what new local and global opportunities we can build on”.

“Put action and vision together and you get an explosion of economic activity"

Whittaker’s words are an enormous vote of confidence in the Northern Powerhouse. At around £317 billion annually, the Northern economy contributes a fifth of the UK’s output. The Northern Powerhouse Independent Economic Review estimates that raising its performance to the UK average would make it £37 billion bigger today.

The idea of a regional economic ‘powerhouse’ was championed by ex-chancellor George Osborne to create a Northern rival to London and the South-East. 

“We should not deny the importance of the former chancellor in raising the Northern Powerhouse as a policy priority and putting it firmly on the agenda,” says Bob Wolfe, honorary secretary of RTPI Yorkshire, and chair of the Great North Plan Project Group.

After his departure from office, Osborne wondered whether the policy had suffered a “wobble”. Lord O’Neil, the minister in charge, resigned saying that while the strategy would “certainly continue to get a lot of policy priority” the Northern Powerhouse may not get “sole attention relative to other regions”. Lord Kerslake, now president of the Local Government Association, says the Northern Powerhouse is at a “fork in the road” requiring “more local leadership to succeed”.

Prime Minister Theresa May’s answer to these issues generates as much heat as light. The government’s industrial strategy promises to direct infrastructure investment to rebalance the economy and tackle deprived areas of the country. This is accompanied by a £556 million package for 11 local enterprise partnerships in the North.

Ironically, this funding highlights challenges facing the Northern Powerhouse. The first is Brexit. Between 2007 and 2013, the three Northern regions received nearly €2.9 billion from the European Regional Development Fund (ERDF) and the European Social Fund (ESF) – out of a UK-wide total of €9.8 billion – to support infrastructure, regeneration and training. More than 70,000 jobs were created as a result of EU investments in the same period. 


The Great North Plan – the planning profession’s response

The Great North Plan (GNP) is a joint initiative between IPPR North and the RTPI to show how planning can bring together the building blocks of an economic strategy for the region. The RTPI is calling on local authorities, government and businesses to make full use of the region’s planners and plan-making process.

“Local authorities in particular need to use their combined local planning, economic development and regeneration powers to guide private sector investment and to lead the process of change,” says head of policy Richard Blyth. 

“For any approach to successfully deliver the Northern Powerhouse vision we must have the community’s support and input. It is critical we properly incentivise the delivery of housing by assuring communities they will get money for health, transport and schools if they sign up for housing in their area.”

Wolfe says the GNP is wider than city regions or local enterprise partnership areas and not about reinventing regional spatial strategies. However, the GNP could be a vehicle to achieve cooperation across administrative boundaries. The GNP seeks a role for all places, not just cities, which it can be argued, will or can look after their own destiny, he adds.


Warning signs

Manchester university professor of spatial planning Cecilia Wong says £556 million “seems a lot of money but it’s really a gesture”. She adds: “London is overheating with a shortage of housing, land and high traffic levels among other things and we need to find another place to grow.” 

Brexit may also mean the government will in the long run ‘prop up London’ as money will be used to rescue the market there first.

“If the Northern Powerhouse is successful, who will take up the jobs, considering the skills of the labour market? We can’t recruit people even in the universities to do certain high-skill posts. 

“The government is saying we will give you infrastructure and you will grow, but we need people to drive this forward and we don’t know where they will come from. We need to have people with the skills and relationships between different places so they can see they are a part of this growth,” adds Wong.

Leeds City Council economy and regeneration chief officer Tom Bridges says tens of thousands of jobs locally depend on overseas firms. The city attracts massive investment from China, France, Germany, Spain and Estonia among others, as well as hundreds of students to its universities. 

“A major challenge will be supporting businesses and key institutions, particularly the availability of talent and workforce,” he says. “This is particularly important for the digital, construction and finance industries among others, but also universities and key public services like the NHS and the council.

“London is overheating with a shortage of housing, land and high traffic levels among other things and we need to find another place to grow”

“It highlights the challenge to our skills and schools to get people job-ready and that they have the resilience to access opportunities in a changing economy.”

The £556 million package has led to grumbling – most of it privately expressed – about an east-wide divide within the Northern Powerhouse. Greater Manchester, way ahead in the devolution stakes, was the biggest winner with £130.1 million, followed by Liverpool with £72 million.

“Greater Manchester has always had strong, effective leadership and it’s difficult for other places that have not had it,” says Wong. “The united image projected from Greater Manchester does attract jealousy, especially when the press and outside investors then equate Manchester with the Northern Powerhouse.”

It’s a potentially toxic issue. One observer privately said part of the problem had been various parts of the North seeking to secure devolution deals and with them more control over resources, only for these to be scuppered by behind-the-scenes lobbying by local MPs who dislike the idea of elected mayors. Bridges takes an alternative view.

“We are most successful when we have made a powerful, collective case for the North. What matters is not so much what any part of the North gets in funding, but what it gets in powers and resources to grow the economy. The real story is still the North-South divide.

“It’s also about how we give communities and city regions in the North the power to drive forward. That is best done when we work together.”

His point ties in with concerns about the future of towns and communities outside the major cities – places that one observer described as “home to rugby league and lower division football clubs”. 

Another observer said there had to be a “genuine policy agenda for these places, some of which have been left behind by economic change and voted for Brexit – it can’t just be about resurgent cities”. 

Wolfe sees this as a wider opportunity for the Northern Powerhouse. “Any such strategy should be inclusive,” he says. “The real question is what happens to those towns that sit outside the major powerhouse conurbations – essential communities such as Huddersfield and Blackburn, and the rural hinterland and its economy that gives the North its identity and quality of life.”


China in the North

A major delegation of Chinese businesses visited the UK in February looking for new commercial partnerships in the Northern Powerhouse region.

Members of the China-Britain Business Council, the China Council for the Promotion of International Trade and the China Chamber of Commerce UK, met business leaders from Northern cities including Manchester, Liverpool, Sheffield and Newcastle.

The delegation was keen to meet businesses in advanced manufacturing, healthcare and aerospace, but sought opportunities in all sectors. Manchester and Sheffield have already been targets of Chinese investment. 

But Xu Jin, minister counsellor of the Chinese Embassy’s economic and commercial office, says the potential for investment elsewhere in the region is huge. 

“Cities across the north of England all have deep culture and history in a variety of different sectors and industries, including creative, trade, telecommunications, healthcare, high-level manufacturing and R&D. China remains open to business opportunities with these sectors from across the region.”


Causes for optimism

Transport is another issue. Research by the Independent International Connectivity Commission (IICC), led by Transport for the North chair John Cridland, warns that attempts to rebalance the economy will stall unless links to airports are modernised.

While the North accounts for around 25 per cent of the UK’s population, its seven airports handle just 15 per cent of all airport passengers. The IICC claims the number of air passengers in the north could nearly double to 75 million by 2050 with modernised road and rail links and new international destinations from airports such as Manchester.

Cridland says that while the North’s ports and airports are key economic assets, poor access “is holding them back, with congestion on our roads and railways making it difficult for people and goods to reach international gateways”.

“A major challenge will be supporting businesses and key institutions, particularly the availability of talent and workforce”

However, there are considerable causes for optimism. The region has huge experience of successful cross-boundary working, with a litany that includes the Northern Way and Transport for the North. International investors, particularly from China, are very interested in the aftermath of Brexit, a decline in prime stock in London and the fall in sterling (see box, China in the North). 

Real estate specialist CBRE says 81 per cent of office deals under offer in 2015 in the Big Six (led by Manchester and Leeds and including Birmingham, Bristol, Edinburgh and Glasgow) concerned international investors. “The Northern

Powerhouse is a strong brand that travels well overseas,” says Bridges. “It offers a safe, globally recognised investment.”

The planning profession is also coming to the table. The RTPI is working with the Institute for Public Policy Research North on a Great North Plan (see box, The Great North Plan). Moreover, an analysis by the British Property Federation (BPF) and GL Hearn in the autumn found planning authorities in the Northern Powerhouse decided 22 per cent more major applications per resident than their Greater London counterparts last year. 

BPF chief executive Melanie Leech says it is “encouraging to see the North live up to its ‘powerhouse’ moniker, and to be powering ahead with its development pipeline”.

The flagship policy looks like sailing for some years to come. One major investor in the region says: “The Northern Powerhouse has always been there – it’s just a case of what it’s called.” Wolfe says its destiny lies close to home. “Essentially its success is in the hands of those who live and work in the North,” he says. “We have said that any planning ahead must be with the consent of those who are in the North. When government or industry says it has money to spend on projects or infrastructure, there needs to be a clear view of the investment priorities and how towns and cities can shape up for the future.”

Illustrations | Tobias Hall

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