Innovation is the key for Northern cities like Leeds to flourish - David Sainsbury

West Yorkshire is no stranger to innovation.

Its cities were the driving force behind the Industrial Revolution as the region’s booming textile industry saw it named the “wool capital of the world”. At the same time Leeds became the UK’s most important centre for the production of state-of-the-art railway locomotives that were exported across the globe. The success of northern cities throughout this era led to a golden age for British manufacturing that lasted well into the 20th Century.

However, in recent decades western countries such as the UK have faced fierce competition from fast-developing countries with lower wages such as South Korea, Taiwan and China, and as a result, industries in northern cities have been hit hard.

At the same time, they have struggled to create new high value-added industries and to reinvent their economies.

Leeds. Pic: Bruce Rollinson.

The way to increase the economic growth rate of our cities in today’s highly competitive global economy is not to try to compete by cutting the wages of the workforce in a ‘‘race to the bottom’’. Instead we need to increase our rate of innovation and create new high value-added jobs which pay high wages in a ‘‘race to the top’’.

Some cities in the North have managed to raise the rate of innovation of their companies and create new high value-added jobs. In West Yorkshire, for example, while the proportion of manufacturing jobs has fallen by 75 per cent since 1981, there has been a significant boost in the number of people doing highly-skilled jobs. Since 1981, West Yorkshire has seen the number of jobs in knowledge intensive businesses (KIBs) rocket by more than 150 per cent – the biggest increase in the country.

However, while this success should be celebrated, it is still not enough to make up for the huge losses the region has suffered among its traditional industries over the last 50 years. Despite the substantial increase in high-skilled jobs, wage growth in West Yorkshire’s cities has been weak. In 2019, the average weekly wage in Leeds was £554, in Wakefield it was £523, in Bradford it was £496, and in Huddersfield it was £464 – each of these significantly below the national average of £574.

Clearly, more needs to be done to create the best environment for new industries, and today I will be in Leeds, speaking at the Centre for Cities’ Realising Regional Growth conference alongside West Yorkshire Mayor Tracy Brabin about how central government and metro mayors can work together to harness innovation in northern cities and boost their economies.

To ensure a prosperous future, cities should be committed to creating or attracting new high value-added per capita businesses, in industries such as high-tech manufacturing or financial services. This would in turn generate further jobs for low-skilled workers. Reinventing cities across Yorkshire and the North in this mould will be no easy feat. It will require a concerted effort from both Westminster and local leaders.

The Government will need to increase the resources it gives to these regions. At the same time, more powers must be devolved to metro mayors, who will then need to coordinate these resources at a city level to create the best possible environment for high value-added per capita businesses. There is no point in trying to do so at a national level, where government is both very siloed and largely ignorant of the opportunities and difficulties faced by specific cities.

To level up areas like West Yorkshire, Westminster will need to make three policy changes. Firstly, more powers should be given to metro mayors to enable them to join up transport and planning at a city-region level.

This will help make commuting cheaper and quicker, which would in turn widen the labour market of a city and allow businesses to cluster in areas where they have the best access to knowledge and skills.

Secondly, metro mayors should be given more responsibilities that enable them to efficiently coordinate the courses run by further education colleges with the labour market needs of a city.

Thirdly, investments from the Strength in Places Fund – which helps develop clusters of high-tech businesses across the country – should be increased and the processes for allocating funds should be improved, with metro mayors given a greater role in coordinating bids with local plans.

Once these policies are in place, they should serve as the foundation for a range of other initiatives to ensure cities across the North can create the high-paying industries of the future. If we do not get this right, our great Northern cities will only fall further behind.

- Lord Sainsbury of Turville is speaking today at the Centre for Cities’ Realising Regional Growth conference in Leeds.