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The Progressive Policy Think Tank

Rhetoric to reality: A business agenda for the northern powerhouse

In this paper, we seek to assess the northern powerhouse from the perspective of business. We take a hard-nosed look at the facts and figures, and examine current government policy and its potential for driving further change.

The idea of the ‘northern powerhouse’ has captured the national imagination in a way that is rare for political policymaking. Nonetheless, the prospects for its long-term success rest not on its political salience but on its potential to generate genuine economic prosperity for its businesses and citizens.

Far from giving businesses cause for despair, our analysis reveals the potential that could be derived from properly directed investment and change.

  • If the North had matched the national increase in economic output per head since 2003 then its economy would be £5 billion (1.8 per cent) bigger today.
  • If the North was able to halve the gap between its own economic output per head and the national level then its economy would be £34 billion (11.9 per cent) bigger.
  • If the North could reverse its net outflow of people to other regions then, by 2030, its population would be 264,000 (1.6 per cent) higher than is currently forecast.
  • Productivity gains arising from the HS2 high-speed rail investment could be worth £2.1–3.2 billion per annum in the north of England by 2037.
  • If the government invested the same proportion of its total research and development spending in the North as businesses do then it would spend £179 million more than it does now, or more than twice as much (112.8 per cent).

Business has a key role to play in driving the changes required to capitalise on this potential. The relationship between city authorities and businesses and the way these organisations learn from one another are key dynamics in a prosperous modern economy.

We identify four key drivers of growth in the northern economy:

  1. infrastructure and connectivity
  2. human capital
  3. innovation and business support
  4. leadership and policy development.

Business leadership is also critical. There is an important question about how businesses can or should engage across the wider geography of the North, particularly in relation to issues of connectivity, infrastructure, innovation and inward investment, which often require strategic planning at a higher, ‘mezzanine’ level. Unlike in London, for example, there are very few bodies that exist at this pan-northern level – and none representing business.

We argue that there are three things required to ensure that the rhetoric and potential of the northern powerhouse is converted into reality: investment, leadership and urgency.

Specifically, this means that:

  • The forthcoming spending review must make a step-change in commitment to the north of England, with large-scale government capital spending of up to £50 billion that can be used to leverage even greater private investment.
  • Scope exists for greater business leadership in strategic planning at a pan-northern level, particularly in areas such as transport connectivity.
  • There is an urgent need for more detail and more action to support the pan-northern vision – ‘one north, one economy’ – to ensure that business, public and civil sectors are galvanised to act now to sustain the momentum behind devolution and take advantage of this unprecedented window of opportunity.