Manufacturing revival in towns and rural and coastal economies could help unlock £70bn in economic output – CPP

Analysis by CPP in its new report, Open for Business, identifies 95 ‘pockets of potential’ – hotspots of highly productive local industry across eight sectors based in 72 underperforming local economies. CPP estimates that if the areas identified secured levels of business investment in line with their potential, it would attract £70.2bn into the UK economy – around 3.8% of national GVA.

Market forces, compounded by policy choices by successive governments, have directed investment into already prosperous local economies, particularly London and parts of the wider South East. A lack of skills, infrastructure and state investment in weaker local economies like those highlighted in CPP’s analysis leaves them in a vicious cycle, unable to attract the business investment needed to support growth. The impact is far-reaching; restricting the quality of jobs available locally, diminishing residents’ living standards and driving inequalities between places on a scale that has created seismic shifts in the UK’s political landscape in recent years.

But CPP’s analysis shows many towns, small cities and rural and coastal areas with underperforming local economies contain pockets of high-potential industries, that have demonstrated impressive productivity growth in recent years. Over 80% are based in the North and Midlands, with manufacturing the largest sector among them. Examples include manufacturing in Boston, Scarborough, Stroud, Newport and Burnley; professional scientific, and technical activities in the Scottish Borders; and information and communication in Stoke-on-Trent. All the sectors make up at least 5% of output in the local economy, with a similar share of local employment, meaning they are a sufficient size that their development would have a meaningful impact.

The thinktank recommends that the government adopts a new Manufacturing Mission as part of a long-term strategy to attract more business investment into these ‘pockets of potential’. This mission would aim to grow the manufacturing sector as a share of GDP and employment. Recommendations include driving up the adoption of digital technology and other productivity-enhancing products, and supporting decarbonisation and the adoption of green products, processes and practices by manufacturing firms. CPP proposes the establishment of regional co-investment funds to support this mission, improving access to private capital by manufacturing firms as well as other high potential industries at the local level.

CPP also recommends establishing a formal Prime Ministerial target to address the UK’s long-term lagging performance on adult education, raising participation to 30% by the end of the next parliament, including introducing a new Learners’ Living Allowance, and a new human capital allowance scheme specifically for those without a university-level qualification.

With the right policy interventions, these pockets of potential could become the driving force behind the revitalisation of their local economies and help boost the UK economy at large.

Ross Mudie, Research Analyst at CPP and lead author of the report, said: “Each day, more major firms are shifting investment out of the UK and towards our competitors across the Channel and Atlantic. Government inaction means we are failing to encourage the level of private investment our economy needs, and limiting the potential for growth beyond London and parts of the South East.

“But our analysis reveals many pockets of high-potential industry in small cities, towns and coastal and rural areas across the UK, largely in the North and Midlands. Encouraging business investment into these communities could transform their economic fortunes and boost the UK economy by £70bn.

“Government has a critical role to play to create the conditions to attract business investment into these places and industries. A new manufacturing mission should be the backbone of an ambitious strategy to revitalise UK enterprise and deliver fair growth across the UK.”