Chris Hearld: We need more than fine words to build Northern Powerhouse

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IT is a year since George Osborne first spoke of the need to make the North a powerhouse to “take on the world,” saying it is not “healthy for our economy, not good for our country” if “the powerhouse of London dominates more and more”.

He’s absolutely right – the northern economy must be stimulated, for the benefit of the UK as a whole, as well as our home turf. It is therefore exciting that the Government is encouraging – and hopefully facilitating – us to collaborate for maximum strength and success.

It’s important for it to be recognised that taken together our Northern economies have the scale of London – but with more potential.

The North is home to 11.6m people and generates £200bn of economic output. This is a third bigger than London’s 8.5m population and a third less than the capital’s £300bn output.

The Northern Powerhouse is about harnessing the collective potential of the Hull, Leeds, Liverpool, Manchester, Newcastle and Sheffield city regions. They need to come together as one to become a powerful economic force that can act as a counterweight to London and the South East.

There is absolutely no reason why our northern cities should not operate as one economic hub, provided they are properly linked. Leeds and Manchester are just 40 miles apart; the distance of the Central Line, while Leeds and Sheffield’s 36-mile separation merely matches the Northern Line.

Without a doubt, transport connectivity is the number one issue facing the Northern Powerhouse initiative to fulfil the potential of the region’s economy. Infrastructure will make or break its success.

This is reflected in all the conversations I have with those who lead businesses across the North. If we cannot better link our cities by road and by rail, then it simply will not prosper as a competitive economic entity.

I can travel more quickly from Leeds to London than I can from Hull to Liverpool, despite it being a greater distance by more than 60 miles. This must change.

It is a real positive that the Government recognises, on a national canvas, the importance of infrastructure spending, with £116bn earmarked for nearly 2,000 projects in the UK’s construction pipeline.

But the balance of that spend is heavily skewed towards London and the South East. Almost 10 times as much is spent in London per person than in Yorkshire, according to the Institute for Public Policy Research (August 2014). In fact, 62 per cent of the country’s total infrastructure spend in 2014 went to London compared Yorkshire’s four per cent.

I’m convinced that numbers like these are a factor behind London’s economic success. The capital’s economy grew nearly twice as fast as the North’s between 2004 and 2013.

Over the last 12 months there has been high-profile Government recognition that the lack of funding for transformational infrastructure change in the North is creating a significant drag on the potential of the economy. This has been music to the ears of businesses, which grapple with tough investment decisions, influenced by transport and connectivity.

So, it was certainly a blow that, almost a year to the day from the Government’s introduction of the Northern Powerhouse, Transport Secretary Patrick McLoughlin confirmed that one of the early planks of the transport infrastructure improvements – the electrification of the rail line between Manchester and York – is on “pause”.

The only way in which this can be acceptable to the businesses of the North is if his reasoning – “current work on electrification will be paused because we need to be much more ambitious for that route” – is swiftly proved to be well founded and a resounding spending priority.

In the long term, I can see the argument for re-thinking a multi-million pound investment that only partially delivers on the improvements really needed to help transform the region.

However, this further delays any improvement to our creaking rail network, which is not fit for purpose and which urgently needs more capacity at the very least. This has negative knock-on impacts onto our roads, making travelling the M62, for example, a painful experience.

Now, businesses across the North are looking to the Budget and, beyond that, this autumn’s Comprehensive Spending Review for a markedly more positive announcement on transport investment.

When it comes to transport, the Northern Powerhouse must be more than just words. Without solid funding commitments, the ambitious infrastructure projects that could help to transform the region’s economy will struggle to get off the ground. Leaders in the North must push for investment.

After all, this is not just be a matter for politicians. We all have a stake in the North’s prosperity so businesses need to speak with one voice.

Chris Hearld is KPMG’s regional chairman for the North of England.