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08/07/2014

Empowered cities for a sustainable recovery

Leeds city centre

As we look to our small and medium-sized businesses to spearhead economic recovery, it has never been clearer that place plays an important role in their capacity to perform.

Alexandra JonesCities are the engines of the UK economy – but the specific business environments that they provide, and the extent to which they encourage businesses in their area to pursue high-growth strategies, co-locate or invest in their workforce, have a significant impact on their economic performance.
 
The Centre for Cities annual SME Outlook identifies significant spatial variations in economic performance between Britain’s cities, which have only widened in the recession. Cities that provide the strongest environments in which to do business – where skill levels are high, and connectivity is effective – tend to encourage firms to pursue high-growth strategies, prioritise innovation and invest in workers. Firms in Cambridge, Swindon and Brighton are more likely to be productive, profitable and sustainable, delivering higher wages and supporting local and national economic growth.
 
In other instances, the regional diversity in the UK’s economic performance reflects the extent to which certain cities hold unique strengths in particular industries. The report Championing Our Clusters, produced in conjunction with McKinsey & Co, found that the UK is home to 31 economically significant concentrations of industries, or ‘clusters’, across the nation. These clusters all share certain characteristics: concentrations of industry, employment and productivity, and entrenched geographical links to a place. And they play a critical role in the recovery as, while home to only a tenth of businesses in the UK, they produce 20 per cent of total Gross Value Added (GVA) output.

"Both reports provide a powerful argument for action and a clear path forward"

Both reports provide a powerful argument for action and a clear path forward, one that rests in the empowerment of our cities. In showing that the success of our small and medium-sized companies reflects not only management decisions, but also the business conditions in which they operate, they give a wake-up call to Westminster to focus attention on boosting cities’ capacity to foster environments for enterprise.
 
If we are to make any progress towards bridging the significant regional disparities in economic performance across the UK, cities must be given the oversight and influence to address their specific strengths and challenges through targeted investment in infrastructure, skills and education. In the face of substantial budget pressures, this will undoubtedly require those in Whitehall to take bold decisions on how funding and control is allocated across the nation.
 
Alexandra Jones is chief executive of the Centre for Cities.
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