A Manchester-Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group 20 March 2009
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Contents
1: Introduction .......................................................................................................................... 1 2: The Manchester–Liverpool growth corridor concept and reality ................................... 6 3: Quantitative evidence........................................................................................................ 15 4: Stakeholder views.............................................................................................................. 15 5: Growth assets in the Study Area ..................................................................................... 15 6: Conclusions ....................................................................................................................... 15
Four supporting annexes to this report are provided in a separate document.
Contact:
Luke Delahunty
Tel:
0161 475 2106
Approved by:
Simon Pringle
Date:
March 2009
email:
lbdelahunty@sqw.co.uk
Managing Director
www.sqw.co.uk
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
1: Introduction
Background to the research and headline findings from the initial scoping work 1.1
In April 2008, a consortium led by SQW Consulting (SQW) was commissioned by the North West Development Agency (NWDA) to undertake a study into the economic potential of the spatial corridor running between the two core cities of Manchester and Liverpool. The project was led by a senior-level Steering Group1 including representatives from the two cityregions of Manchester and Liverpool, Cheshire and Warrington, the Environment Agency and various policy teams within the NWDA.
Study rationale 1.2
The study built on previous research, including the 2000 Liverpool Manchester Vision, the 2002 Mersey Belt Study, and more recently, the headline analysis undertaken by the North West Regional Economic Forecasting Panel (REFP), exploring patterns of growth within the region over the last decade. The significant body of REFP research appeared to suggest that there was a potential spatial corridor of economic growth running between the region’s two major cities. The rationale for this study, therefore, was to explore this apparent area of growth further so that policy makers could better understand the level of growth occurring, where this was taking place, what was driving it, and what was impeding it.
1.3
The timing of this study was also an important factor. The research was designed to contribute to the emerging evidence base that was being collated by the NWDA and its partners to underpin the new North West Regional Strategy. The study was undertaken in parallel with other key pieces of research, such as the Manchester Independent Economic Review (MIER), work commissioned by the NWDA on the Environmental Considerations of Sustainable Economic Growth (ECOSEG) and the Utilities Infrastructure, and on the economic impact of Higher Education Institutions in the region; where possible, this study’s research team sought to cross-reference the emerging findings from these and other ongoing studies. Further, at the time the study was commissioned, Peel Holdings had announced its ambitious Ocean Gateway scheme. The vision for Ocean Gateway is to ‘maximise the potential of the North West as a globally significant region and major driver of the UK economy, using the Ocean Gateway as an economic powerhouse and environmental asset to enhance, strengthen and bring together the Liverpool and Manchester City Regions’ (Peel Holdings, 2009).
1
Members of the Steering Group included: Tracy Mawson (NWDA), Rebecca Riley (NWDA), Ian Wray (NWDA), Simon Nokes (NWDA), Richard Tracey (NWDA), Angela Burrows (NWDA), John Thompson (Environment Agency), Rupert Greenhalgh (Manchester Enterprises), David Horstead (Cheshire and Warrington Economic Alliance) and Ian McCarthy (Liverpool Vision). 1
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Study objectives 1.4
1.5
The study objectives were crystallised in five over-arching research questions that the research was tasked with addressing: •
Is there a growth corridor between the core cities of Manchester and Liverpool?
•
What has been driving recent GVA growth in the Study Area?
•
What might drive GVA growth in the Study Area in the future?
•
Overall, what is the economic growth potential of the Study Area?
•
What are the potential barriers to growth in the Study Area?
Crucially, as agreed with the Steering Group through the initial scoping exercise, the research team was not tasked with developing a new growth Strategy or Action Plan. Indeed, the work was not designed to replace existing policy commitments or give rise to new governance arrangements – rather it was designed to help inform and shape future policy decisions by strengthening the regional evidence base. Messages from the scoping exercise
1.6
In scoping the research, the five objectives presented above were overlaid with feedback from the Steering Group members, which was captured through a short and focused scoping exercise prior to the formal inception of the project. Nine bilateral consultations were carried out in total.
1.7
The findings from these discussions are summarised below sequentially under each of the five main headings used during the consultation process: objectives; emphases; geography; politics; and personalities. •
Objectives - In terms of the primary objectives for the study, scoping consultees were generally in agreement that they expected the work to contribute a robust piece of research to test the validity of the notion of a Manchester-Liverpool Growth Corridor concept. In short, Steering Group members reported that they were looking for the research to reinforce the economic importance of this part of the region and specifically, to make the case for a more strategic, joined-up and co-ordinated approach across this geography - complementing existing sub-regional/city-regional agendas. This would subsequently support the development of an ambitious and long-term shared vision for this part of the region. “We need to develop a compelling case for a different way of working”. Some members of the Steering Group indicated that the objectives for the study should also include the identification of any key barriers to growth as well as emerging opportunities
•
Emphases - There was broad agreement amongst the nine Steering Group members about the main emphases of the work. The general view articulated was that the study needed to focus on the development of a robust evidence base that captured - at as fine grained level as was practical - what had been happening in economic terms within the functional economic geography of the Study Area. In addition, the study 2
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
needed to consider the key constraints, opportunities and associated issues, but it should not provide detailed solutions at this stage. A number of scoping consultees stated that it was important for the study not to get “side-tracked by politics or difficulties associated with specific projects or actions”. •
Geography - There was general agreement on the spatial coverage of the Study Area amongst Steering Group members. The scoping consultations revealed that adopting a fairly tight geography for the core analysis would be sensible, i.e. focusing on the area running from Manchester/Stockport to the East through to Liverpool in the West, although different LADs were suggested. However, members of the Steering Group also suggested that there should be sufficient flexibility within the analyses so that a wider geography reflecting commuter patterns could be explored. More generally, consultees made an important distinction between those areas where jobs growth had occurred in the past and was forecast to occur in the future. For example,, the two city centres, parts of Warrington and Cheshire as well as East Wirral and South Sefton, and those areas outside the Study Area, which housed skilled labour or provided a potential labour pool for a Corridor, i.e. parts of Cheshire, North Sefton and West Wirral
•
Politics - A number of specific political issues or potential difficulties linked to the study were highlighted by various consultees during the scoping phase. These are grouped and summarised as follows:
•
The study must be positioned as a piece of independent research led by the NWDA, to inform future regional strategy
The study should avoid getting into the detail of potential actions or governance issues as this would help to minimise political risks
The challenge should be to set out the overarching rationale for a Corridor in economic terms.
Personalities - Scoping consultees were broadly happy with the make-up and shape of the study Steering Group and no additional or alternative candidates were proposed.
Study approach 1.8
The study was progressed through two complementary stages of research activity: •
Stage 1, following an initial scoping exercise, focused on finalising the geography for the Study Area with the Steering Group and testing the evidence for an economic growth corridor concept, as well as refining the broader research questions for the study. The Stage 1 work had two purposes, namely to:
undertake a preliminary characterisation of the economic performance and interactions between the key employment nodes within the Study Area
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•
discuss the implications of these findings and any significant evidence gaps for the Stage 2 work.
Stage 2 tested the data and evidence base in far greater detail. It had three primary purposes, namely to:
review and update existing baseline information for the agreed Study Area, and to complement this with additional secondary data, including econometric employment and GVA projections to 2016
investigate the Study Area’s economic importance, both absolutely and relatively. This included undertaking a comprehensive audit of the Study Area’s main economic assets, as well as in-depth case study work to learn the lessons from successful economic areas elsewhere (the M4 Corridor, the Eindhoven, Leuven, Aachen Triangle (ELAT) Technology Triangle, and the Oresund Science Region)
define the current and future economic potential of the Study Area – and the scope for spill-over benefits to flow into surrounding areas – as well as identifying key barriers to its future growth and actions and activities that would support growth in the future.
Method 1.9
In order to answer the core research questions, the research team undertook a detailed work plan, which drew upon four main strands of evidence: •
a mixture of 40 face-to-face and telephone consultations between the research team and senior-level stakeholders from across the Study Area
•
a detailed review of the available literature, carried out to assess the patterns and drivers of socio-economic change in the Study Area and in the surrounding districts
•
an in-depth secondary data analysis, focusing on the ten-year period 1995-2005 as well as GVA/employment projections from 2005 through to 20162
•
three in-depth case studies looking at economic areas that had successfully responded to the various challenges of globalisation.
Study process 1.10
This draft Final Report forms the main output from the research process and presents the overall findings from the work. This report also includes the three case studies, which are presented as one of several supporting annexes. Additionally, there is a separate technical Data Report, which has been prepared for policymakers and analysts.
2 2005 is the base year for the projections. The analysis of recent data trends, therefore, takes place over the tenyear period 1995 to 2005 – this is the same time period used in the REFP maps showing change in GVA shares. In the Experian model, 2016 is the last year in which projections data is provided, hence the analysis of future growth prospects covers the period 2005-2016.
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1.11
This draft Final Report will be circulated to Steering Group members for comment in January 2009 and, subsequently, to wider partners and stakeholders, including all those who participated in the study.
Structure of this report 1.12
1.13
The remainder of this report is structured as follows: •
Chapter 2 sets out the characteristics of an economic growth corridor, explores this concept in relation to Manchester – Liverpool, and defines the Study Area spatially
•
Chapter 3 provides a thorough quantitative economic analysis of the Study Area, assessing its key past performance as well as taking a future facing perspective
•
Chapter 4 examines the views and opinions of a broad mix of stakeholders who have been consulted as part of the research
•
Chapter 5 presents an analysis of the key challenges and opportunities facing the Study Area
•
Finally, Chapter 6 offers a set of conclusions from the research.
In addition, there are four supporting annexes to this report, which are available as a separate volume: •
an audit of key economic assets in the Study Area
•
reports on the three case study areas reviewed
•
a list of consultees
•
a list of references to documentary evidence used during the study.
Acknowledgements 1.14
We would like to thank all those individuals who assisted us with our work. We have had considerable buy-in and engagement from busy people for which we are extremely grateful.
1.15
The findings and views expressed in this report are those of SQW Consulting’s study team, and do not necessarily reflect those of the NWDA.
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2: The Manchester–Liverpool growth corridor concept and reality
Purpose 2.1
This Section of the report starts by introducing the main characteristics of modern and dynamic growth corridors. It then goes on to set out the theoretical and policy underpinnings to the study and the spatial definition of the Study Area, which has framed the work throughout the research process. Finally, it concludes by offering objective and independent evidence on whether the economic growth corridor functionally exists, or otherwise.
What are economic growth corridors and what do they actually look like? 2.2
The concept of a geographical corridor of growth implies a linkage between economic places that goes beyond administrative boundaries in order to optimise the economic performance of the inter-connecting space. It does so by best utilising the assets of the area for wider benefit than the independently defined geographical locations. In this sense, corridors are concerned with functional rather than pre-defined economic geographies.
2.3
Priemus and Zonneveld (2003)3 suggest that as a starting point we ‘can imagine corridors to be bundles of infrastructure that link two or more urban areas’. Yet for the purposes of this study, the research team has considered that there is more to the corridor concept than simply the physical infrastructure that brings Manchester and Liverpool together. The research team has taken the view that the study must take into account the potential workforce and also encapsulate the non-tangible features of the Study Area, such as innovation systems and access to skills, to gain the best possible shared economic advantage. Initiatives focusing on the Study Area ought to exploit the predominant source of growth potential ensuring that inter-sectoral linkages are made to maximise the potential of the area. It is within the scope of this broad definition that the research team has questioned whether there is an economic growth corridor between Manchester and Liverpool. Lessons from elsewhere
2.4
In considering the economic growth potential of the Study Area, it is instructive to look at similar initiatives taking place in other parts of the country and internationally. For this reason, we have produced four summary pen portraits of comparator areas to serve as an indication of what has been achieved. In addition, four separate in-depth case study reports are available in Annex B. However, the summary pen portraits offer useful headline characteristics and can be used as a sensible staring point for comparing the conditions and 3
‘What are corridors and what are the issues? Introduction to special issue: the governance of corridors’ - Hugo Priemus and Wil Zonneveld. (2003)
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prospects in the Study Area with other established functional geographies. The key messages in relation to the Study Area are summarised at the end of each pen portrait. Table 2-1: The Thames Gateway Background The Thames Gateway – Europe’s largest regeneration project – stretches along 40 miles of the Thames from Canary Wharf (London) to Southend (Essex) and Sittingbourne (Kent). Developments around the Gateway intend to utilise its strategic location as the gateway between London and Europe, developing the local and national economy and improving the quality of life for local communities. The Thames Gateway is different to the Manchester Liverpool Growth Corridor in that it focuses growth in, and around, a single global city as opposed to the bi-nodal nature of the Study Area. Key statistics: Economy •
Between 2001 and 2005, employment has grown by 9%, exceeding that of the UK
•
By 2016, it is expected that there will be 225,000 new jobs in the Gateway
•
It is anticipated that activities around the Gateway will provide around 6 million m2 of new and improved commercial floor space
•
Realising the economic potential of the Thames Gateway will boost the UK economy by an estimated £12 billion annually
Demographics •
1.5 million people reside within the Thames Gateway area.
Strategic priorities: Three driving forces for positive change around the Gateway are identified. These are: •
a strong economy
•
improvements in the quality of life for local communities
•
the development of the Gateway as an eco-region.
Activities supported: The Gateway is committed to delivering: •
sustainable improvement in the economic performance of the Thames Gateway economy, with developments focused on Canary Wharf, the London Gateway, Ebbsfleet Valley, and the Olympic Park with Stratford City
•
enhanced education and lifelong learning to establish a skilled workforce
•
an effective transport system
•
an increased quantity and quality of dwellings in ten priority areas, delivering 100,000 homes by 2016
•
improved quality of life for local communities
•
a showcase of ambitious environmental interventions, including establishing the Gateway as an eco-region.
Six distinct areas will be prioritised in terms of spending allocation: Stratford; the Lower Lea and the Royal Docks; London Riverside; Greenwich Peninsula and Woolwich; Thurrock; Kent Thameside; and Medway. Alongside these, Sittingbourne and Swale, Barking, Basildon, Erith and Southend will receive assistance to achieve urban renewal. Key assets: Progress to date has seen the development of a number of key assets in the Gateway, including : •
The establishment of two new universities at Southend and Medway, adding 5,000 further and higher education places to the area’s learning capacity
•
Further improvements to transport facilities, including the completed High Speed Link operating between Stratford and Ebbsfleet
•
Planning permission granted for the London Gateway – deep-water port and business park
•
The O2 concert venue, located on the Greenwich Peninsula, has been opened
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Permission for the development of the Olympic Park has been granted and construction is now underway.
Sectors that have been identified as having the potential for growth in the Thames Gateway are: financial and business services, creative and cultural industries, environmental technologies and services, global ports and logistics, high value-added manufacturing, and sustainable construction. Key messages for the Manchester – Liverpool Study Area: The Thames Gateway is distinct from the Manchester-Liverpool Corridor in that it is an area contained within a much larger and more internationalised economy, i.e. London and the wider South East. The overriding aim of the Thames Gateway is to realise the economic potential of the area to contribute more to the wider regional and national economy. Nevertheless, it does highlight some important messages to take forward in the development of the ManchesterLiverpool Study Area. Crucially, it points to the importance of gaining support from the Government and business community in driving forward investment in the area. It is vital that developments planned or in the pipeline in the Corridor also receive support, provided they meet the economic, social and environmental objectives for the area. Sources: HM Government, 2007, The Thames Gateway Delivery Plan and Environment Agency, 2007, Briefing on the Thames Gateway Delivery Plan
Table 2-2: The Glasgow-Edinburgh Collaboration Project Background Glasgow and Edinburgh are Scotland’s two largest cities, situated 46 miles apart across Scotland’s central economic belt. The facilitation of a corridor between the two cities was thought to offer a number of considerable economic benefits, particularly within the context of city regions as economic drivers. Collaboration between the cities is intended to deliver scale advantages to those locations unable to marshal certain strategies in isolation; diversification of the offer to firms; inward investors, workers and visitors; reinforcement of the rationale for investment in key infrastructure, and offer new brands to introduce to mobile investors. Key statistics: Economy •
Together, the cities contribute around one third of Scotland’s GDP
•
Between 1995 and 2005, Glasgow and Edinburgh’s GVA per capita grew at a rate double that observed in Scotland as a whole4
•
The two cities provide around a third of all Scotland’s jobs
•
250,000 of these jobs are held by incommuters to the cities5.
Demographics •
Around 1 million people live within Glasgow and Edinburgh’s municipal boundaries and around 3 million people live within their combined regions.
Strategic priorities: The Glasgow - Edinburgh Corridor has four main objectives. These are to: •
accelerate the achievement of the cities' shared economic development objectives
•
compete more effectively with top cities internationally
•
contribute disproportionately to enhancing Scotland's economic performance
•
establish, at a national level, the role and importance of cities as generators of sustainable economic growth.
Activities supported: The Glasgow-Edinburgh Collaboration Prospectus identifies three action areas for the corridor, these being: •
connectivity, both physical (a proposal for a high speed rail link between the cities is being considered) and
4
BAK Basel Economics (2005), as referenced in Collaborating to Compete: Glasgow and Edinburgh, Scottish Enterprise Edinburgh and Lothian & Scottish Enterprise Glasgow (2007) 5 ABI 2004 and Census of Population 2001, as referenced in Collaborating to Compete: Glasgow and Edinburgh, Scottish Enterprise Edinburgh and Lothian & Scottish Enterprise Glasgow (2007) 8
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virtual •
key sector development schemes
•
international openness/promotion and talent attraction.
Key assets: Glasgow has developed a strong service economy with many companies engaged in knowledge-intensive and high value-added activity. Edinburgh, too, is home to much knowledge-intensive activity, based upon a number of key sectors (such as financial services) and a highly skilled labour force. Taken together, the two cities account for around three quarters of Scotland’s jobs in the financial services sector, and provide the majority of private sector jobs to new graduates. Glasgow and Edinburgh are important international gateways, with the airports in both cities serving a range of international destinations. The two cities are also important tourist and business destinations and account for half of Scotland’s income from overseas visitors. Key messages for Manchester-Liverpool Study Area: Much like our Study Area, Glasgow-Edinburgh is based around two core cities which drive their respective regional/national economies. The success of both of these economies is strongly based around promoting growth in the core cities, whilst ensuring that the surrounding areas are able to benefit from and engage in the economic opportunities. International openness is a key element of collaboration between Glasgow and Edinburgh and the ManchesterLiverpool Study Area must not be introspective in its economic ambitions. Sources: Glasgow-Edinburgh Collaboration: the ‘business case’, Collaborating to Compete: Glasgow and Edinburgh, Scottish Enterprise Edinburgh and Lothian & Scottish Enterprise Glasgow (2007) and Economic Collaboration Between Neighbouring Cities International Case Studies and Review, Greg Clarke (2007)
Table 2-3: The Øresund Science Region (OSR) Background The Copenhagen city region (Denmark) and the Malmo city region (Sweden) make up the main components of the Øresund Science Region (OSR). Collaboration – first recognised in 1999 - between the two city regions was born out of the realisation that collaboration would attract larger investment projects and accelerate economic development, particularly with regard to high technology activities and scientific activities including medicine and biotechnology/life sciences. Key statistics: Economy •
The Øresund region accounts for 25% of Sweden and Denmark’s combined GDP
•
GDP per capita in the OSR has consistently been above the national averages in Denmark and Sweden between 1995 and 2002
•
The biotechnology industry in OSR employs around 40,000 people, of which 4,000 are academic researchers
•
There are 10,000 IT and telecoms companies located in the OSR, employing 104,000 people
Demographics •
There are 3.6 million inhabitants in the OSR.
Strategic priorities: The aims defined by the OSR and its Board are to promote: •
economic growth
•
productivity increases
•
regional integration, including the creation of the Øresund Link in 2000, spanning the strait between the two cities.
Activities supported: Collaboration within the OSR region has focused on three main areas: •
Academia – initiatives included a successful institutional innovation through the creation of Øresund University,
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a consortium of 14 universities and higher education institutes. This allows students to construct a curriculum incorporating courses from a range of universities within the region •
Life sciences – including Medicon Valley, a transnational biotechnology cluster accounting for 60% of Scandinavia’s life science output and the Medicon Valley Academy (a partnership between universities, hospitals and the private sector)
•
Information Technology – this includes the Øresund IT Academy, a networking forum and informational hub for expertise and contacts for Danish and Swedish businesses.
Key assets: Key assets within the OSR included: •
Four defined clusters (ICT, environment, food and medical biotechnology) and three emerging clusters (logistics, design and the events economy)
•
14 universities, home to 140,000 students and 10,000 researchers, some of which specialise in medical and biotechnology research
•
Novo Nordisk, Lundbeck, LEO Pharma, Ferring, AstraZeneca and Gambro are all major international companies located in the region with research centres
•
There are also six science parks, five airports and 29 hospitals in the region.
Key messages for Manchester-Liverpool Study Area: The OSR is an example of a successful economic growth region based upon clearly identified science strengths, helping to establish the region as a major high technology area – within Europe, it ranks fifth in terms of scientific output per capita and third in terms of R&D in medicine and biotechnology/life science. The Manchester-Liverpool Study Area is of a similar size to the OSR (in population) and could learn a lot from its development. In particular, the need to indentify the Corridor’s sectoral strengths and opportunities, ensuring that these are fully exploited by effective collaboration, based upon developing formal and informal links and networks, between the Corridor’s key research institutions and businesses. Source: SQW Consulting, with information courtesy of Nick Miles and Economic Collaboration Between Neighbouring Cities International Case Studies and Review, Greg Clarke (2007)
Table 2-4: The Eindhoven Leuven Aachen triangle (ELAt) Background ELAt, spanning three countries, sits at the apex of North West Europe’s most important economic centres – the Flemish urban network, the Ruhr valley and the Dutch Randstad. It contains a population of approximately 1 million people in the metro area. The principal aim of the establishment of ELAt was to create an area which would be recognised on an international scale in terms of technological advancement, innovation and knowledge based industries. The project is being led by the Eindhoven regional government.
Strategic priorities: The rationale behind the establishment of ELAt included the benefits to be gained from: •
the exploitation and development of synergies
•
the exploitation of complementarities
•
achieving critical mass
•
establishing constructive competition and co-operation
•
avoidance of parochial responses to globalisation.
Activities supported: The principal aim of ELAt was the creation of a joint innovation strategy for the technology triangle requiring the involvement of knowledge institutes, businesses and public bodies. It aims to encourage knowledge institutes to work together to apply the combined knowledge they have developed in prototypes, 0-series and production
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equipment. The development of physical and virtual connections between the triangle was considered to be an essential precondition to its success. Key assets: The ELAt focused on supporting technology clusters and those mutually reinforcing clusters such as ICT and healthcare. Key assets in the area include five top ranking European universities with around 100,000 students and research institutes, such as the Frauenhofer Institute. Other corporate research and development institutes include the Ford research centre, Aachen and Eindhoven. Key messages for Manchester-Liverpool Study Area: Unlike the Manchester-Liverpool Study Area, the ELAt spans three different countries in North West Europe. As with the OSR, the ELAt is based strongly around the area’s competitive advantage in high technology industries and sectors, relating closely to its key assets in academia and business. The growth within this corridor has been focus on innovative and high technology-based activity. The other key lesson highlighted by the ELAt is the need to ensure that there is strong connectivity within the growth area, in both physical and virtual terms, and that this is promoted. Certainly, there is much scope to improve physical connections, especially road and rail links, within the Study Area. Source: SQW Consulting
Table 2-5 : The M4 Corridor Background The Thames Valley area of the M4 covers Heathrow, West London and Reading, Newbury in the West, the M40 in the North and Basingstoke in the South – and falls within the South East regional boundary. The Corridor is home to one of Europe’s largest ICT, electronics and communications clusters, with the highest density of ICT professionals and the highest density of IT professionals in the whole of the UK. The Governance structure for the area is provided by The Thames Valley Economic Partnership (TVEP), which was set up to maximise the economic benefits arising from major opportunities within the M4 corridor area that come from existing assets, especially around Reading and Heathrow. Key statistics: Economy •
The M4 corridor generated £23.6bn in GVA in 2005, which accounted for 15% of the South East regional GVA total.
The area is expected to experience the following growth. •
3.3% pa growth in GVA (2001-2026), compared to 2.9% pa for the South East
•
2.5% pa growth in productivity (increasing to £83,000 per employee by 2026), compared to 2.3% for the South East (2001-2026)
•
0.79% pa growth in employment levels, compared to 0.71% pa for the South East.
•
It was envisaged that future growth would primarily be driven by indigenous growth through innovation and enterprise (especially by high-tech and high growth SMEs), and that 75% of employment growth would come from business services (followed by 16% from the communications sector).
Demographics •
974,600 (2006) live within the M4 corridor area.
Strategic priorities: The TVEP identified the following priority areas for action to help encourage economic growth: •
Attracting new investment
•
Transport Infrastructure Improvements
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Encouraging innovation.
Activities supported: •
the TVEP acts as an inward investment body providing support in areas such as market research, suitable commercial business premises and residential accommodation, recruitment, local market information, and introductions to industry forums and peer networks
•
Lobbying for key transport improvements
•
The establishment of the ‘Innovate Thames Valley Initiative’ in 2006, facilitating the exchange of ideas and good practice between innovators and entrepreneurs.
Key assets: The M4 Case Study area has developed a number of key assets that have supported, and will continue to support, positive economic growth. These include: •
A Business Base that includes company HQs and strong MNC presence that has benefited from extensive FDI
•
High R&D Expenditure
•
National and international Research Centres
•
A highly skilled resident Population
•
Home to, or in close proximity to universities with internationally recognised research capabilities
•
Heathrow Airport - the world’s busiest airport
•
Stockley Park - which provides a concentration of large, mainly IT and telecommunications companies.
Key messages for Manchester-Liverpool Study Area: A key lesson for the Study Area ought to be that transport congestion is identified as beginning to impact negatively on the M4 corridor’s success. Within the Manchester-Liverpool corridor, traffic congestion is worsening and rail hubs are reaching capacity. Without significant collective lobbying to address these issues, along with the need to improve the range and quality of housing to attract skilled workers, economic growth within the corridor could be inhibited. TVEP has recognised that the public purse cannot stretch to meet all of its requirements in relation to infrastructure and is therefore working to prioritise its key needs and consider private sector funded solutions
2.5
Bringing the headline messages about how growth corridors function and what led to their development together from the pen portraits, it is worth highlighting the following issues: •
The importance of focusing economic growth around the Study Area’s key growth sectors and assets, i.e. those which are engaged in knowledge-intensive, high technology and innovative activities
•
The importance of ensuring that there are strong physical and virtual links within the Study Area, particularly in linking together its key assets and employment sites (including linking academic institutions and research centres with its leading private companies)
•
Finally, it highlights that the Study Area must remain open to the national and international economy by not adopting an introspective approach to economic growth, but an outwardly facing one.
Theoretical and policy underpinnings of the research Messages from the academic literature 2.6
The observation that spatial form and economic performance have a functional bearing on one another has been widely recognised by economic geographers since the work of Marshall and Weber (in the 1890s and 1900s on industrial location), Christaller and Losch (in the 1930s 12
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and 1940s on central places) and, more recently, Paul Krugman and others linked to the ‘new economic geography6’. It has been argued that the economic advantages of cities can be articulated in terms of agglomeration effects, or more simply put, the competitive benefits deriving from clustering and spatial proximity. 2.7
SQW’s recent work to develop a framework for urban collaboration in the East of England7 reported on the different sources of agglomeration effects identified within the literature: urbanisation economies reflect the benefits of scale (through, for example, bigger labour markets and the options these provide for businesses and employees alike), localisation economies result from specialist forms of clustering within and between particular industry sectors. Hence, whilst there is a fairly (although not wholly) straightforward correlation between the size of an urban area and the extent of urbanisation benefits, the geography of localisation economies is more difficult to anticipate.
2.8
Agglomeration effects can, potentially, be stretched spatially, and in this context, high speed transport connections and electronic forms of communication are playing an increasingly important role, for example, in the growth of the digital and creative industries. However – despite early expectations to the contrary – there is little evidence to suggest that better digital communication is reducing the importance of face-to-face dialogue in business, and hence the significance of agglomeration effects is, if anything, increasing – even if their geography and form may be changing over time.
2.9
But there are costs to agglomeration, demonstrated most obviously in the costs of congestion: specifically, increasing intra-urban travel times. Equally, there are situations in which knowledge spillovers are seen as a threat rather than a benefit; these arise particularly where businesses are seeking to protect valuable intellectual property (and the highly dispersed geography of the motorsport industry is a good example which is largely explicable in these terms).
2.10
BERR’s first economics paper8, looked at new evidence available on selected policy areas that impact on UK productivity levels. The paper makes reference to the work of Rice and Venables (2004)9, who argue that there is a strong correlation between productivity levels across the UK and distance from economic mass. Although the authors do not identify individual forces in operation, they consider the importance of positive spillovers of knowledge, best practice and innovative ideas and processes to employees and firms. For example, they report that doubling the working age population within 80 minutes drive time increases productivity in an area by 3.5 per cent. Alternatively, they estimate that a ten per cent reduction in journey times throughout Britain would raise productivity by 1.12 per cent and by nearly twice as much for places with good access to cities.
6
Paul Krugman (1991) Increasing returns and economic geography Journal of Political Economy 99(3):692-705 http://www.eera.gov.uk/Documents/About%20EERA/Policy/Regional%20Governance/SQW%20Study%202006/ 2007-06-01%20Final%20Non%20technical%20summary.pdf 8 BERR Economics Paper No. 1 (2008) BERR’s role in raising productivity: new evidence available at http://www.berr.gov.uk/files/file44504.pdf 9 Rice, P. and Venables, A. (2004), ‘Spatial Determinants of Productivity: Analysis For The Regions of Great Britain’. Journal of Economic Literature. 7
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2.11
The evidence presented by Rice and Venables supports the view that improving connectivity between different areas of economic mass, such as the two city centres of Manchester and Liverpool in the Study Area, could deliver significant productivity gains. Policy observations
2.12
It is clear from reviewing the literature that there is also a growing policy-related evidence base which suggests that agglomeration effects are integrally related to strong economic performance and indeed, functional economic growth corridors. It is also clear that these effects need to be better understood by policy makers in order to support stronger growth. Indeed, the Sub National Review (SNR)10 published by HM Treasury in July 2007 tasked the RDAs with developing integrated Single Regional Strategies to bring spatial and economic planning and development together – and to take greater account of functional economic geographies within the North West region as opposed to being confined by administrative boundaries.
2.13
Over recent years, the economic importance of urban areas, cities, city-regions and the linkages between these has been reinforced within public policy. At a central government level, the Department for Communities and Local Government (CLG) has funded a number of influential research reports, most notably the State of English Cities11 and the Framework for City-Regions.12 Spurred in part by the development of the Northern Way programme and the Core Cities group, cities have gained the attention of HM Treasury and – particularly since the 2006 Budget – the links between cities and the cross-departmental Public Service Agreement (PSA) target on Regional Economic Performance (REP) have been made strongly.13
2.14
The Northern Way agenda (launched in 2004) also called for closer collaboration between the main cities and regions of the North of England, in order to improve the sustainable economic development of the North towards the level of more prosperous regions. It is an interesting example of how RDAs are working together to address inter-regional issues. The initiative is being taken forward through a partnership between the three northern Regional Development Agencies, but involving close collaboration with local authorities, universities, the private sector and other central government departments.
2.15
This process has manifested itself in the Study Area with the production of City Region Development Programmes (CRDPs) for Manchester and Liverpool city regions, an approach driven by the Northern Way Growth Strategy.14 It is generally accepted that local authorities have deepened their working relationships with one another through the CRDP process. As stated in the Review of the CRDPs, ‘Every city region felt that they had developed a growing maturity and independence in their city region as the process developed, both at official and political levels’.15 Additionally, HM Treasury’s The UK Economy: addressing long-term 10
See http://www.hm-treasury.gov.uk/media/9/5/subnational_econ_review170707.pdf State of English Cities: A Research Study by Professor Michael Parkinson et al for ODPM, March 2006 12 A Framework for City-Regions by Simon Marvin, Alan Harding and Brian Robson for ODPM, February 2006 13 Devolving Decision-Making 3 – Meeting the Regional Economic Challenge: The Importance of Cities to Regional Growth – published by HM Treasury, DTI and ODPM, March 2006 14 ‘Moving Forward: The Northern Way. First Growth Strategy Report: Summary’, Northern Way Steering Group (September 2004) 15 Northern City Visions: A Review of City Region Development Programmes, PwC (July 2007) 11
14
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strategic challenges, published alongside the Pre-Budget Report in November 2008, highlights the importance of agglomerative city regions such as Liverpool and Manchester in terms of delivering further growth and competitiveness. The Manchester and Liverpool City Region Development Programmes separately presented a set of clear strategic priorities and actions designed to support economic growth within these areas. Through the work of the Northern Way and indeed the two city regions, there has been a noticeable shift in policy towards functional economic geographies as opposed to standard administrative areas. 2.16
Most recently, a commission of economists and business leaders from across the Manchester city region has been working on the Manchester Independent Economic Review (MIER). The MIER has been developed to provide a shared evidence base which can be used to underpin policy choices regarding future priorities for strategic investment and to bridge some of the persistent gulfs in understanding what exists in the Manchester City Region - and in other City Regions - about how regional economies grow. Discussions are currently taking place across the Liverpool city region about options for replicating the research there.
The development of corridor thinking in the region Revisiting an old idea 2.17
The idea or concept of establishing a ‘growth corridor’ within the North West is not a new one. Indeed, commentators have referred to an ‘M62 corridor’ running between Liverpool and Hull for decades. In more recent times, the Liverpool Manchester Vision study was commissioned by the NWDA in 2000, as one of six studies supported by the European Commission to explore the ways in which city areas across Europe could improve their ability to respond strategically to the economic, social and institutional challenge. The study resulted in a final strategy and action plan including proposals for projects and processes that were designed to promote continued closer collaboration between the two cities, in order to produce added value and a stronger regional ‘product’. A Concordat between Manchester and Liverpool was produced shortly after the Vision study, and things have progressed subsequently in some key thematic areas, such as transport, particularly through the Northern Way Transport Compact.
2.18
Later, in 2002, the NWDA chaired a Steering Group tasked with overseeing the Mersey Belt Study, which proposed a concept for growth focused around the M56 route and regeneration of the two core cities. This work recognised the significant and high value growth that had been achieved within the largely non-metropolitan areas to the south of the River Mersey, together with the need for the sustainable regeneration of the metropolitan areas largely to the north of the Mersey. The recent drive towards a growth corridor in the North West The North West Regional Economic Forecasting Panel
2.19
The notion of a potential growth corridor between Manchester and Liverpool was recently given fresh impetus by work undertaken by the North West Regional Economic Forecasting
15
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Panel (REFP).16 The Panel produced a series of maps which, at NUTS3 level, implied that economic growth in the North West region had become increasingly concentrated in an area running from Greater Manchester South, through to Warrington and Halton, East Merseyside and Liverpool over recent years – see Figure 2-1 for details. 2.20
This spatial corridor of growth generated 43% of regional GVA output in 200517, and has accounted for 50% of growth in regional output over the last ten years. Showing the percentage change in Gross Value Added (GVA) proportions over time, the REFP GVA share growth map has been based on annualised figures for GVA. These data first became available in 1995 for what statisticians define as NUTS318 spatial areas – each of which comprises several local authority districts. Figure 2-1 Percentage change in regional GVA share (1995-2005)
Source: ONS and NW REFP
2.21
For example, the Greater Manchester South NUTS 3 area includes the districts of Manchester, Salford, Trafford, Stockport and Tameside. Halton and Warrington local authority districts together form another NUTS 3 area called Halton and Warrington, and Knowsley and St Helens are combined as part of the East Merseyside NUTS 3 geography. Liverpool forms its 16
See http://www.nwriu.co.uk/aboutus/111.aspx for details on the work of the Panel Provisional ONS figures for 2005 18 This is a technical term used by statisticians. It refers to Nomenclature of Territorial Units for Statistics and there are three separate levels. It is largely used by Eurostat and European Union bodies 17
16
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
own NUTS 3 spatial area. In contrast with other parts of the region, year-by-year these data have shown a clearly marked concentration of economic growth in the North West in an area running across the southern part of the region. This is especially the case when looking at GVA growth occurring between 1995 and 2005. Northern Way research
2.22
Earlier this year, the Northern Way produced research19 that identified a ‘growth belt’ extending from Chester and Liverpool in the west, through northern Cheshire and southern Greater Manchester, and across to Leeds, York and Sheffield. The researchers reported that although the bigger city regions in the North have considerable labour market catchment areas, the evidence suggests that they tend to operate as ‘relatively self-contained economic entities, with firms in services, as against manufacturing, serving predominantly regional or sub-regional markets’. Further, the researchers went on to state that service businesses in Manchester and Leeds tended to largely replicate one another as opposed to interacting closely. This evidence suggests that the growth corridor presented in the REFP GVA share map may be masking a more complex and finer grained set of growth characteristics in the Study Area.
2.23
Responding to the evidence that emerged from the work of the REFP and others, the NWDA commissioned this study to draw together independent evidence about the past performance of the Study Area, to explore its economic growth potential and to identify possible constraints going forwards. Importantly, the study was also about understanding whether or not the growth characteristic that was evident through the REFP NUTS3 GVA map was common across all parts of the Study Area as opposed to specific points or nodes within the Study Area. The study team was also tasked with exploring the extent to which these areas were growing independently of one another or whether their growth was reliant upon business-to-business interactions, flows, spillovers and supply chain linkages between these different employment centres.
Defining the Study Area geography Why geography matters 2.24
It was important for the study team to agree a common spatial definition of the Study Area during the early stages of the work with the Steering Group. Although there was a general consensus on the spatial coverage of the Study Area following the initial scoping exercise, it was vital that precise local authority district (LAD) and lower super output area (LSOA) level definitions were also agreed given that relevant published contextual data was only available at LSOA and LAD levels, and/or larger units. This presented a number of immediate challenges to the research team and the Steering Group: •
19
First, functional geographies do not sit perfectly within administrative boundaries, and therefore using a spatial definition for the Study Area constructed out of administrative ‘building blocks’ would introduce a margin of error into the data
See The Northern Connection, 2008 at http://www.thenorthernway.co.uk/document.asp?id=516 17
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
analysis and, if not adequately taken into account, would present a potentially misleading picture •
Second, functional geographies overlap with one another and they often relate to different policy domains. For example, in the case of this study, there were clear concentrations of employment activity – such as within the two city centres – providing a potentially functional employment-based geography, yet there are outlying areas that are predominantly characterised by skilled pools of labour and quality housing, with housing market areas driven by very different factors.
2.25
Initially, the study team and the Steering Group sought to deal with these issues by adopting pragmatically, a tightly defined ‘demand-side’ geography and a broader ‘supply-side geography’. However, further consultation and debate revealed that this approach was confusing and that the emphasis going forward needed to be placed on understanding the flows and interactions between places within the supposed growth corridor rather than constructing lots of different, and potentially new, geographies. After consideration and reflection, it was agreed with the Steering Group that the two supply and demand side geographies would be replaced with a single Study Area geography. This final geography intentionally contained ‘soft verges’, as it sought to capture those key assets and drivers of productivity that were evident in neighbouring areas. However, in order to facilitate the data analyses, the Study Area geography was built up first using LADs and subsequently, a finer grained LSOA-level definition was over-laid on top, as shown in Figure 2-2, to allow a thorough analysis of all available evidence (see paragraph 2.31 for further details).20
2.26
In headline terms, the finalised Study Area geography is bounded by the A580 to the north, and the M56 to the south, and includes the Manchester Ship Canal, Liverpool and Manchester Airports and the major motorway networks (M62, M60, M6, M56 and M53); it also contains a number of the region’s major higher education assets in and around Liverpool and Manchester. In addition to the two core cities, the geography also captures other key economic nodes, including Daresbury, Warrington, Salford, Trafford and Stockport. Establishing a district-level definition
2.27
Using inputs provided by the Steering Group, an agreed definition of the Study Area’s geography was developed based upon the 13 local authority districts (LADs) shown in Table 2-6. Table 2-6: Study Area geography Full districts included & all Super Output Areas (SOAs) within district
Full districts included, but only a selection of SOAs within these districts
Halton
Ellesmere Port and Neston
Knowsley
Sefton
Liverpool
Wirral
Manchester 20
In general, our analysis of data and projections has been performed using the component LAD definition of the Study Area, as this is the most readily available. Where we have been able to analyse data at a lower spatial level (either using the LSOA or ward-level definitions) this is explicitly stated within the main text of this paper. 18
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Full districts included & all Super Output Areas (SOAs) within district
Full districts included, but only a selection of SOAs within these districts
Salford St Helens Stockport Tameside Trafford Warrington Source: Produced by SQW Consulting
2.28
The ten districts in the left-hand column of Table 2-6 comprise those in the growth area between Manchester and Liverpool, which emerged from the recent work undertaken by the North West REFP21. These districts have demonstrated the greatest increase in regional GVA share over the period 1995-2005.
2.29
In addition, the districts of Ellesmere Port and Neston, Sefton and Wirral were included in the spatial definition so as to capture the NWDA’s Regional Strategic Employment Sites in Wirral (plus key automotive and petrochemical sites adjacent to the River Mersey in Ellsemere Port and Neston), as well as proposed significant investments at Birkenhead (Wirral) and Seaforth docks (in Sefton), and other schemes along the Manchester Ship Canal proposed by Peel Holdings.
2.30
As alluded to earlier, the study team was cognisant of the fact that the nature of functional economic geographies is far more fluid than administrative boundaries suggest – therefore, we pragmatically ensured that the scope of the study was not restricted to these districts and their boundaries. Indeed, the study team suggests later, in Section 3 of this report, that one of the main economic drivers of the Study Area is the pool of highly skilled and talented people that reside in North Cheshire, West Wirral and North Sefton (amongst other areas). Drilling down to component Lower Super Output Areas
2.31
In order to improve the resolution of the Study Area and to allow important datasets to be included within the study, a lower SOA level definition was also constructed. LSOAs are a geographical layer which allow time-series analysis of small area statistics. They are areas that are of consistent size and whose boundaries do not change22 (unlike electoral wards). Hence, they are useful in understanding the characteristics of the Study Area at a finer resolution.
2.32
Because they represent a much finer spatial level than LAD boundaries, the use of LSOAs also enables the boundaries of the Study Area to be shaped to better suit the underlying functional economic geographies. The LSOA-level definition largely follows the 13 LAD boundaries, albeit with the following exceptions:
21
Long term forecast reports produced by the Regional Economic Forecasting in 2005-8, available at http://www.nwriu.co.uk/aboutus/111.aspx 22 Taken from National Statistics at http://www.statistics.gov.uk/geography/soa.asp#3layers 19
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
•
In the Sefton district, a line has been drawn from the M57/M58 junction across to the coast to include Peel’s investment at the Seaforth Port Terminal – all LSOAs south of this line have been included (the remaining LSOAs to the north have been excluded, as this area is predominantly residential, with little economic activity – except for Southport)
•
In Wirral and Ellesmere Port and Neston districts, all LSOAs have been included to the north east of the M53, and north of the M56 (the LSOAs to the west and south have been excluded as these are predominantly residential with little economic activity)
•
Four LSOAs have been included from the Vale Royal and Chester districts to ensure that all land around the M56/M53 junction is included, as well as the Manchester Ship Canal (part of which covers a single LSOA in the Vale Royal district).
2.33
In addition, a ‘best-fit’ ward-based spatial definition for the Study Area was also developed by mapping Census wards onto the LSOA-based geography. This enabled the study team to use 2001 Census data in its analysis, including travel to work flows.
2.34
The finalised geography for the Study Area is presented in Figure 2-2. Figure 2-2: The finalised boundaries of the Study Area
Source: Produced by SQW Consulting. Map Data provided by © Ordnance Survey, Crown Copyright, License number 100019086 and Digital Map Data © Collins Bartholomew Ltd (2008)
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A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
The important spatial dimension of the Study Area 2.35
As stated at the beginning of this Section, it was crucial that the researchers did not view the study area as being an economy in isolation. Its links to the surrounding districts and wider North West are essential in understanding the Study Area economy.
2.36
Using travel-to-work (TTW) movements into the Study Area, the data reveal the number of residents in districts that are employed in the Study Area (using the LAD definition). The data show that the influence of the Study Area, in terms of commuting patterns, extends far beyond its immediate geography. Unsurprisingly, the strongest links are with those districts lying immediately adjacent to the Study Area, in particular Wigan, Macclesfield and the four districts in Greater Manchester, which lie outside the Study Area’s boundaries: Bolton, Bury, Rochdale and Oldham. It is evident that the Study Area’s performance is important to people living in these areas, and to local businesses that depend on incomes earned by residents working in the employment centres. 23 Figure 2-3: TTW movements into the Study Area (2001 Census)
Source: Produced by SQW Consulting using 2001 Census data. Map Data: © Ordnance Survey. Crown Copyright. License number 100019086
23
The travel to work analysis includes all economically active people in April 2001. While it provides a detailed dataset it is also slightly dated. However, travel to work patterns are relatively stable unless there are factors such as the opening or closure of major employers, large volumes of new house building and the opening of major new transport infrastructure. All are obvious and can be accounted for. The data cannot account for the activities of people who are not economically active. 21
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2.37
Figure 2-4 provides further insight into the spatial nature of the Study Area geography and its surrounding areas by linking the region’s key employment locations24 (defined at the LSOA level) with where the working age population reside (at the LAD level). It shows that, whilst there are a number of key employment locations outside the Study Area, a very large proportion lie within its boundaries. It also shows that a number of large employment locations lie just outside the most heavily populated districts – the most obvious examples being the LSOAs in Trafford and Salford (i.e. where Trafford Park and Salford Quays are situated respectively) which lie within very close proximity to the Manchester LAD boundary.
2.38
Overall, the data show that there are two primary locations for employment in the Study Area. We have used 2001 Census wards to define these according to ‘best fit’ so that we can map TTW movements into these locations later in the report. As shown in Figure 2-4, the two primary locations are: •
Manchester city centre – a proxy for this is the Manchester central ward which contained 130,400 employees in 2006
•
Liverpool city centre – as a proxy, we have combined the Everton and Abercromby wards in Liverpool; together, these had 95,600 employees in 2006.
Figure 2-4: Working age population in North West districts and the region’s largest employment locations (defined at LSOA level), 2006
Source: Produced by SQW Consulting using data from the APS and data from the ABI. Map Data: © Ordnance Survey. Crown Copyright. License number 100019086 and Digital Map Data © Collins Bartholomew Ltd (2008)
24
By highlighting the top 2.5% and top 1% of LSOAs in the region which have the largest number of employees 22
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
2.39
2.40
Underneath these are a number of key secondary employment locations, most notably including: •
Warrington centre – a proxy for this is the Bewsey and Whitecross ward, where 34,400 employees were based in 2006
•
Salford Quays – as a proxy, we use the Ordsall ward in Salford, accounting for 25,000 employees
•
Woodhouse Park ward – containing Manchester Airport. In 2006, this ward had 23,200 people employed within its boundary.
In summary, the Study Area contains a number of the region’s key strategic employment centres with their important supporting infrastructure.
So, is there an economic growth corridor between Manchester and Liverpool? 2.41
The Study Area is characterised by the following dimensions: •
Overall GVA measuring £50 billion, contributing 49% of the regional economy25
•
A total population of 3.2 million people
2.42
As we explain more fully in Sections 3 and 4 of this report, the evidence considered as part of this study suggests that there is no tangible integrated growth corridor between the two core cities in the North West region. Evidence presented in the Data Report, and summarised in Section 3 of this report, shows that the growth performance between districts has been much more variable than the coarser grained NUTS3 data at first suggest, and that the picture becomes far more fragmented when we look at what has been happening in the smaller Super Output Areas (SOAs). Patterns of employment by sector across the Study Area - and indeed in contiguous areas – reveal a patchwork quilt of activity, some of which at the SOA level are clearly influenced by individual large business establishments, or sites. Further, the evidence appears to reinforce the view that recent growth witnessed in the Study Area has, in the main, taken place in isolation. The evidence presented later in the report indicates that there does not appear to be strong supply chain and other economic linkages across the Study Area’s key economic nodes and therefore, growth in one centre is not necessarily dependent on growth in another.
2.43
Although this evidence is not fully conclusive, and despite the obvious clustering effects – predominantly around financial and professional services within the two city centres, and maritime-related service activity in Liverpool, as well as some specialised manufacturing activities such as automotive - there has been limited agglomeration taking place within the Study Area. As described in Section 4, some consultees have suggested to us that there has been some embryonic clustering taking place around Warrington in terms of distribution and logistics, although the Study Team argue at this stage that this can be better explained by good transport connections both north-south and east-west. 25
2005 figures, taken from Experian Business Strategies Limited © 23
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
2.44
Further, because the main high value employment centres within the Study Area have not yet reached a critical mass in terms of pricing lower value activities out to surrounding areas (such as the outsourcing that has occurred in and around London over recent decades), there has to date been limited spill-over benefits to neighbouring districts. Nevertheless, the Study Area has created employment opportunities for many skilled workers living in such districts and these induced impacts result in increased demand, thus helping to sustain businesses close to where they live. Is agglomeration taking place?
2.45
Jobs in some sectors, particularly in certain services, have clear concentrations in the centres of the two major cities and other settlements in the Study Area. Some are located among centres of population, others not. At this level, what appeared to be a clear growth Study Area at the NUTS3 level becomes far more fragmented locally if we drill down to finer grained data. Further, consultations with key regional stakeholders have revealed that there is limited evidence of agglomeration effects taking place within the Study Area and therefore limited benefits to firms in terms of competitive advantage derived.
2.46
As revealed in more detail later in this report, it is the view of the study team that at present (and over recent years), there are limited economic interactions occurring between businesses located within or close to the Study Area. Clearly, there are specific examples of clustering and other agglomeration effects taking place here – such as the concentration of suppliers in close proximity (or indeed adjacent) to the major automotive manufacturing sites in the Study Area or the development of financial and professional ‘quarters’ within the centres of Manchester (Spinningfields) and to a lesser extent Liverpool, which has benefited over the last five years or so with significant new commercial development activity around Old Hall street. However, in the main these are notable exceptions. This issue of agglomeration is revisited later in the report, when we consider the potential for spill-over benefits in surrounding areas of the Study Area and indeed displacement effects.
2.47
Nevertheless, it is clear from the data we present in the next Section, as well as wider evidence in the Data Report, that the Study Area contains about half of all economic activity and employment in the region and just under half of its population. Additionally, some places within the Study Area geography have performed extremely well since 1995 both in employment and GVA growth terms. Further, the Study Area also contains a significant concentration of economic, educational, research, environmental, strategic transport, employment and labour market assets as well as a concentration of stubborn socio-economic and environmental challenges often linked to high levels of deprivation and the legacy of heavy industries. What do the travel to work data show?
2.48
Another way of looking at the Study Area is to examine travel to work patterns for those employed in its districts. Maps, such as Figure 2-3, and the data that accompany them, reveal that quite a high proportion of those who work in most of the Study Area’s districts either live there, or in adjoining districts, and therefore many seem to have relative short journeys to work. However, this is clearly not true of Manchester, as the region’s major commercial
24
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centre. Nor is it true of Knowsley, into which many people now drive daily to access jobs in manufacturing and services on its industrial estates, which benefit from their close proximity to the M57 motorway. 2.49
Overall, the travel to work data show that significant numbers still commute fair distances to jobs in various parts of the Study Area, often from surrounding districts, many of them occupying higher level jobs. What is the overall risk of displacement from economic agglomeration in the Study Area?
2.50
Following on from the previous point, as places within the Study Area continue to develop and there are growing agglomeration effects within its major centres, it is plausible that some higher value employment in surrounding areas could either be attracted to these areas or indeed lost as it is displaced by firms in the Study Area. For example, there is already some evidence emerging, which indicates that some financial and professional jobs in and around Chester have been relocated to Liverpool and/or Manchester. However, given the current uncertainty within the financial and professional services sector as a result of the global credit crunch, it is also likely that some jobs within the region could be lost altogether. On a more positive note, the current climate may well provide opportunities for the Study Area to exploit as firms seek to reduce their costs by relocating from the South East to cheaper locations.
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A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
3: Quantitative evidence
Purpose 3.1
Having established the geographical coverage of the Study Area in the previous section, we now turn our attention to its key economic characteristics. This section sets out the main quantitative evidence used to underpin the research. It presents an overview of the past performance of the Study Area, including an analysis of what has been driving growth, as well as econometric projections on the future performance of the Study Area in employment and GVA growth terms and consideration of the key role that the Study Area plays in terms of the wider regional economy.
Headline economic indicators in the Study Area 3.2
It is worth reminding ourselves that the Study Area comprises an extensive and dynamic economy within the North West region, the UK and indeed internationally. At present, the area: •
generates around £50 billion in GVA each year26 (2005 figures)
•
employs approximately 1.4 million full-time equivalent workers within its borders
•
contains 74,800 VAT-registered businesses27.
3.3
The economy of the Study Area is crucial to the North West; it accounts for almost half (49%) of regional GVA28, a proportion which has steadily expanded over recent years (although the change has been slight). Its economic dominance is based around the two urban centres of Manchester and Liverpool, and their wider city regions.
3.4
This situation is highlighted in Figure 3-1, which shows that those districts which contribute the most to regional GVA (over 3.5%) all lie within the Study Area geography (except for Wigan and Bolton). Warrington, Trafford, Stockport and Salford each contribute over 3.5% to regional GVA, with Manchester and Liverpool accounting for the highest proportions in the region, 9.7% and 6.5% respectively.
26
According to both the Experian and Cambridge Econometrics datasets Source: NOMIS VAT registrations & stocks 28 In 2005 – the 49% figure is true in both the Experian and Cambridge Econometrics datasets 27
26
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group Figure 3-1: Proportion of regional GVA accounted for by selected North West districts, 2005
Source: Produced by SQW Consulting using data provided by Experian Business Strategies Limited ©. Map Data provided by © Ordnance Survey, Crown Copyright, License number 100019086 and Digital Map Data © Collins Bartholomew Ltd (2008)
3.5
Table 3-1 sets out the latest data29 on some key economic indicators in the Study Area, compared to the North West as a whole and a national comparator (either the UK or England dependent on data availability). The table outlines the prevailing economic conditions in the Study Area at a headline level, which serves as a useful context for the rest of this report. It shows that, generally speaking, the Study Area’s economic characteristics are very similar to those of the North West region as a whole, not overly surprising given that the Study Area accounts for half of the regional economy.
3.6
Across some indicators – notably GVA per head, employment in knowledge-intensive industries, and net capital expenditure per business unit – the Study Area displays a higher level of activity/performance than the rest of the region30 and, in some cases, is above the national average. Where the Study Area tends to fall slightly behind the regional average is on residence-based indicators, most notably skill levels and rates of employment. To some extent, this reflects commuting patterns, with a number of higher and highly-skilled employees travelling into the Study Area geography to work, but living outside. It also suggests that the Study Area has a relatively greater importance as an employment location than as a residential one, though the balance may change with the increased push for city centre living, and the longer-term challenge of sustained commuting patterns.
3.7
The data also indicate that while the Study Area is the main centre of production in the region, worker productivity (as measured by GVA per employee) is not significantly above the North West average, and is in fact below the national average. Given the critical mass of 29 30
At the time of undertaking the initial research, October 2008. As measured by the geography of the ‘North West minus Study Area’ 27
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
economic activity that occurs within the Study Area, this suggests that there is either limited agglomeration taking place or, in the main, it is focused on relatively low productivity sectors. Table 3-1: Headline economic indicators in the Study Area and comparator geographies Indicator
Year
Study Area
NW minus Study Area
North West
England31
Headline Economy GVA per head (Experian Business Strategies Limited ©)
2005
£15,970
£14,150
£14,980
£17,350 (UK)
GVA per employee (Cambridge Econometrics)
2005
£30,230
£30,280
£30,260
£33,280 (UK)
GVA per employee (Experian Business Strategies Limited ©)
2005
£30,480
£30,240
£30,360
£33,930 (UK)
% of resident WAP in employment
2006/07
70%
75%
72%
74%
% of employment in high-level occupations of residents 32
2006/07
40%
40%
40%
43%
VAT registrations per 10,000 WAP
2006
39
43
41
49
VAT-registered stocks per 10,000 WAP
2006
373
478
430
517
% of resident WAP with NVQ4+
2007
25.4%
25.3%
25.4%
28.3%
% of resident WAP with level NVQ2+
2007
63.2%
64.6%
64%
64%
% of all employment in knowledgeintensive industries
2006
10.7%
8.6%
9.7%
10.6%
Net capital expenditure per business unit
2005
£45,000
£29,000
£36,000
£33,000
Labour Market
Business and Enterprise
Skills
Innovation and Investment
Source: Various, as referenced throughout this report
Travel to work patterns 3.8
The Study Area is not a monolithic or homogenous economy – there are significant and wide variations in socio-economic and environmental characteristics across the geography. Nor is it an economy which functions in isolation from other ones – both in the UK and internationally.
3.9
Figure 2-3 in the previous section maps TTW movements into the Study Area geography. Put simply, it reveals the number of employees in each district that are employed within the Study Area.33 The data show that the influence of the Study Area, in terms of inward commuting patterns, extends far beyond its immediate geography. Unsurprisingly, the strongest links are 31
The data in this column refers to England unless stated otherwise High-level occupations are defined as including managers and senior officials; professional workers; and people employed as associate professionals or in technical occupations 33 Using the LAD definition of the Study Area 32
28
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
with those districts lying immediately adjacent to the Study Area, namely: Bolton, Bury, Rochdale and Oldham (all of which are within Greater Manchester) as well as Wigan and Macclesfield. This illustrates the importance of the Study Area economy to people living just outside its boundaries, as well as to the local businesses that depend on incomes earned elsewhere. This provides further evidence of the important economic role played by the Study Area within the wider North West region, and the potential to prioritise economic growth there. 3.10
To provide further insight into the spatial dynamics and the various flows across the Study Area, Table 3-2 presents the proportion of employment in each district which is selfcontained (i.e. employees that live and work in the same district), the proportion which are commuters from adjacent districts, and the proportion that are commuters from further afield.
3.11
Some of the more remote districts in the Study Area, such as Sefton and Wirral, draw a relatively high proportion of their employees from within the district and adjacent areas – few people travel long distances to work in these areas. By contrast, the region’s largest district economy, Manchester, has the lowest rate of self-containment, although a large proportion of its workers (47%) are drawn from adjacent districts. This trend may be associated with effective transport links into Manchester city centre from within the wider Manchester City Region34. It is also related to Manchester’s strong business base, which provides considerable employment opportunities for people living within the city region and beyond.
3.12
Levels of self-containment in Liverpool are significantly higher than in Manchester, suggesting that the city exerts a relatively weaker pull on commuters from surrounding areas.35 Table 3-2: TTW movements as a proportion of total employment in the 13 Study Area districts (2001 Census) Total number of workers
Self-containment
Proportion from adjacent districts
All other districts
Manchester
267,400
36%
47%
18%
Liverpool
203,700
56%
32%
12%
Stockport
118,800
65%
22%
14%
Trafford
113,000
48%
24%
28%
Warrington
102,500
59%
23%
18%
Salford
102,300
48%
32%
20%
Wirral
100,600
84%
7%
9%
Sefton
95,200
73%
19%
8%
Tameside
74,900
72%
19%
9%
St Helens
58,200
70%
20%
11%
34
This could be strengthened through an improved Metrolink service across Greater Manchester. The failed bid for funding through the Transport Innovation Fund (TIF) had planned to make major extensions to the existing Metrolink service. 35 Although this data does relate back to the 2001 Census and therefore does not reflect the growth and development that has occurred in the city centre over recent years. 29
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Total number of workers
Self-containment
Proportion from adjacent districts
All other districts
Knowsley
53,100
44%
45%
11%
Halton
52,800
60%
25%
15%
Ellesmere Port & Neston
34,400
53%
30%
16%
Source: 2001 Census
3.13
In terms of travelling patterns, the data suggest that most people have relatively short journeys to work, either by working in the same district as they live or commuting from adjoining districts. However, this is clearly not true of Manchester, reflecting its commercial density or of Knowsley, where many people now drive daily to access jobs in manufacturing and services on its various industrial estates, which are located close to the M57 motorway.
3.14
Stakeholders who were consulted pointed out that historically, in many places where housing had been built around mills and other large employment sites, a culture had developed of preferring to walk to work. It was reported that there had been a reluctance to travel significant distances, or to give up much time in travelling backwards and forwards to work. While such preferences are said to have been breaking down, sometimes because of the lack of availability of affordable decent housing, which has necessarily led many younger people to become more mobile; they are still prevalent in some areas of the Study Area. Remnants of this kind of culture are still thought to influence the willingness of some people to travel, for instance from parts of Northern Greater Manchester into the centre, especially when there are limitations on transport to reinforce this effect.
3.15
Consequently, the situation is complicated at a very localised level. For instance, some commentators have consistently sought to characterise parts of the Study Area (for example North Liverpool and North Greater Manchester) as deprived. Although in the main the data suggest that this is true, the reality is that at a fine spatial level parts of these areas have more access to opportunity than others - such as those commuting from Saddleworth or Bury into Manchester City Centre - and have managed to benefit from the growth occurring within the Study Area. Nevertheless, particularly in parts of North Liverpool, there are real socioeconomic challenges associated with very low urban densities, resulting in low levels of demand and private sector investment.
3.16
Elsewhere in the Study Area, however, living in one place and working in another some way away is not a new phenomenon either. Skilled people have for decades commuted from areas of quality housing (such as that found in North Sefton, West Wirral, North Cheshire, South Manchester, and even out as far as Blackpool) to employment centres in the Study Area. Flows have been predominantly into the two city centres, where jobs and transport links were located, but increasingly to other employment centres such as Warrington, Manchester Airport, Salford Quays, Trafford Park, Daresbury, Stockport and the Speke/Garston area of Liverpool.
3.17
The travel to work maps presented in the Data Report show that significant numbers still commute fair distances to jobs in various parts of the Study Area, often from surrounding districts, many of them occupying higher level jobs. Despite the 2001 Census data indicating rather modest flows between the two ends of the Study Area, the numbers of those who
30
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
commute in either direction between Liverpool and Manchester appears to be increasing according to several stakeholders – including Merseytravel, which has argued that rail commuter flows between Liverpool and Manchester are 40% higher than between Manchester and Leeds, despite there being a poorer service between the two North West core cities36. Key sectors 3.18
Figure 3-2 presents a location quotient (LQ) diagram of the Study Area’s employment structure compared to the North West and UK in 2005. The chart is interpreted as follows: •
The horizontal axis shows how concentrated sectoral employment in the Study Area is relative to the North West region as a whole. Put simply, sectors to the right of the vertical axis (i.e. above a value of one) are relatively concentrated in the Study Area compared to the region as a whole and those to the left are relatively less concentrated
•
Similarly, the vertical axis shows concentrated sectoral employment in the Study Area relative to the UK. Sectors above the horizontal axis (i.e. above a value of one) have a relatively high concentration in the Study Area economy compared to the UK, whilst those below the horizontal axis are relatively less concentrated.
Figure 3-2: Employment structure in the Study Area by broad sector, compared to the North West and UK, 2005 (NB: size of bubble reflects employment in the Study Area in 2005) 1.5
LQ: Study Area vs UK
Metals, Minerals & Chemicals
Distribution, Hotels & Catering
Transport & Communications
Financial & Business Services 1.0 0.5
1.0
1.5
Other Manufacturing Engineering
Other (mainly public) Services
Construction 0.5
LQ: Study Area vs North West
Source: Experian Business Strategies Limited ©
3.19
The diagram shows there are two broad sectors in which employment in the Study Area is high relative to the North West - Transport and Communications, and Financial and Business services. This indicates that the Study Area is the principal location for these activities within the region. This is significant economically given that the Financial and Business Services sector is recognised as having a particularly high value-added element, despite the obvious recent difficulties associated with the ‘credit crunch’. However, it has been suggested that, within this sector, there is a predominance of lower-level rather than higher-level jobs in the Study Area, an issue which could severely affect productivity going forward. Further, 36
See for example http://www.networkrail.co.uk/browse%20documents/rus%20documents/route%20utilisation%20strategies/north% 20west/consultation%20responses/m/mersey%20travel.pdf 31
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
research carried out by SQW and Cambridge Econometrics in 2006 for the NWDA37 looking into the productivity gap between the North West and the UK in professional services revealed that the Wider South East (WSE) has far more higher level workers than the North West. Additionally, those people working in higher level occupations in the WSE enjoy considerably higher average earnings than comparable workers in the North West. Nevertheless, it is also important to acknowledge that differences in regional prices also account for a significant proportion of the North West’s productivity gap. 3.20
Later in this section, we look more closely at the dynamic nature of the Study Area’s sectoral base, by analysing shifts in output and employment, and future projections, by sector. The Sections also ‘dig down’ below the broad aggregate sectoral level to analyse changes in the 30 sectors included in the Experian econometric model. Research presented in the separate Data Report identifies nine of these 30 sectors as being ‘very important’ to the Study Area’s economic growth potential: Business Services, Banking and Insurance, Health, Communications, Transport, Hotels and Catering; Other Services;38 Retailing, and Wholesaling.
Recent growth trends 3.21
Next, we set out the nature of recent growth trends in the Study Area economy, looking at which districts and sectors have driven growth in GVA, output and employment terms over the last ten years, as presented in the Data Report.39 We also look at what has driven growth within the Study Area during this period, and what might be done to drive growth in the future. GVA growth
3.22
As a first step in this analysis, it is helpful to highlight the extent and nature of GVA growth within the Study Area compared to recent regional and national trends. Two datasets, produced by Cambridge Econometrics and Experian Business Strategies respectively, are used to provide a comprehensive and robust overview of recent growth trends.
3.23
In looking at comparisons of this kind, it is worth remembering that economic forecasters begin with GVA estimates from the Office of National Statistics provided in current prices – these need to be deflated so that results appear in constant prices.40 However, there is very little published information about relevant prices and their movements and fluctuations below the national level, meaning estimates have to be used instead. In addition, district-level GVA data has to be estimated in the models using other data, such as employment numbers, as a guideline . Since there are clearly matters of judgement in deriving data of this kind, legitimate differences can, and often will, arise. This will need to be kept in mind when estimates are used for policy and planning purposes. 37 SQW and CE, (2006) Validation of the Productivity Gap between the Northwest and other Regions, and between Northwest Sectors 38
‘Other Services’ include: sewage and refuse disposal, sanitation and similar activities; activities of membership organisations not elsewhere classified; recreational, cultural and sporting activities; and other service activities 39 The Data Report sets out definitions of concepts, such as output and GVA . 40 In this case, in 2003 prices as quoted in this study 32
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
3.24
As part of the recent work undertaken by the North West Regional Economic Forecasting Panel,41 ten of the Study Area districts were found to have shown the greatest increase in regional GVA share over the period 1995-2005. This situation is reflected in Figure 3-3, with the Cambridge Econometrics and Experian datasets both confirming that the Study Area has experienced higher GVA growth than the North West region as a whole over this period, although it has generally remained below the UK level for the entire ten year period.
3.25
The disparity in growth rates between the Study Area and the North West is not considerable – this is partly because the Study Area represents half of the regional economy anyway, meaning we would expect economic performance in both areas to be somewhat similar. Figure 3-3: GVA growth in the Study Area, North West and UK (1995=100), 1995 to 2005 Cambridge Econometrics
Experian
135
135 Study Area
130 G VA (1995=100)
G V A (1995= 100)
North West
125
NW minus Study Area
120
UK
115 110 105 100
130
Study Area
125
North West
120
NW minus Study Area
115
UK
110 105 100
95 1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
95 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: Cambridge Econometrics and Experian Business Strategies Limited ©
3.26
At a district level within the Study Area, however, there are wide variations in recent growth trends. There are a handful of districts – Warrington, Knowsley, St Helens, Manchester and Trafford – which have seen particularly strong GVA growth over the ten-year period (both datasets confirm that these districts have seen GVA increase by more than the Study Area average). Given its economic scale, growth in Manchester will have had the greatest overall impact upon raising GVA levels within the Study Area, though Warrington and Trafford will also have had a significant impact.
3.27
By the same token, there are also a number of districts in the Study Area which have experienced relatively low growth over the period – in both datasets, Ellesmere Port and Neston, Halton and Wirral fall within the four districts which have witnessed the lowest GVA growth in the Study Area.
3.28
These differences need to be kept in mind when considering the drivers of productivity, as they provide some indication of why certain districts have been able to make a greater contribution to economic growth in the Study Area than others and will help identify future priorities so that all districts are able to make a larger contribution to growth.
41
Long term forecast reports produced by the Regional Economic Forecasting in 2005-8 http://www.nwriu.co.uk/aboutus/111.aspx 33
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group Figure 3-4: GVA growth in the Study Area districts, 1995 to 2005 Cambridge Econometrics
Experian 60
Wirral
Halton
Stockport
EP & Neston
Sefton
Liverpool
0
Tameside
10
Study Area
Wirral
EP & Neston
Halton
Tameside
Salford
Stockport
Liverpool
Study Area
Manchester
Sefton
St Helens
Trafford
Knowsley
Warrington
0
20
Salford
10
NW average = 28%
30
St Helens
20
40
Trafford
NW average = 24%
30
50
Knowsley
40
Manchester
50
Warrington
% change in GVA 1995-2005
% change in GVA 1995 - 2005
60
Source: Cambridge Econometrics and Experian Business Strategies Limited ©
Employment growth 3.29
The number of employees working in the Study Area has increased steadily over the last decade, rising from 1.2 million employees in 1995 to some 1.4 million employees by 2005, measured in terms of full-time equivalents (FTEs). Over the period as a whole, employment has risen by some 132,000 FTEs, a 10.6% rise since 1995 – above the regional growth rate of 8.8% but below the UK growth rate measuring 11.4%.42 Productivity
3.30 Productivity in the Study Area economy (measured by GVA per employee) has tended to be in line with the regional average but significantly below the national average. In 2005, productivity in the Study Area measured £30,200 to £30,500, with productivity levels in the UK around 10% to 11% higher. Data show that, over the last ten years, the productivity gap between the Study Area and the national average has remained largely unchanged. 3.31
In part, this may be due to the major growth in employment described above – with an additional 130,000 employees active in the Study Area, productivity per employee may have been deflated, offsetting any productivity gains within the existing workforce, at least in the short-term. It is also worth adding that differences in regional price levels, in the structure of occupational levels, and in what some employees in high-level occupations in London and the South East earn, will have had a considerable bearing on higher productivity levels in the UK.
3.32
At the district level, there is very little variation in productivity levels across the Study Area. However, in both datasets, Ellesmere Port & Neston, Warrington and Halton have the highest levels of productivity; moreover, all have exhibited strong growth in productivity between 1995 and 2005. Evidence from consultations suggests that in the case of Ellesmere Port & Neston, this is related to the presence of some large-scale manufacturing sites in the district, including Vauxhall, which dominate the (relatively small) employment base; in Warrington and Halton, however, it is more likely to be attributable to high-value jobs around the science and technology base in Halton (linked to Daresbury and The Heath) and the significant levels of private sector investment and relocations witnessed around Birchwood in Warrington.
42
Data Source: Experian Business Strategies Limited ©. The Cambridge Econometrics dataset does not measure employment in terms of FTEs so a direct comparison cannot be made 34
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Sectoral growth patterns 3.33
Underlying these increases in GVA and productivity are significant shifts in the amount of output generated by different sectors in the Study Area and changes in their employment levels. These are presented in Figure 3-5.43 The sectors which have experienced the most pronounced growth over the period 1995-2005 are labelled. There has been a large expansion in three sectors: communications, business services, and banking and insurance (all have seen output increase by at least 99% over the period as a whole). Given the importance of business services and banking and insurance to the Study Area economy, in terms of output,44 this is an encouraging trend which will have had a significant impact on overall growth and will continue to do so.45 However, the economic downturn in the second half of 2008 may see a retreat from this trend. Figure 3-5: Changes in output and employment by sector in the Study Area, 1995 to 2005
Adjusting sectors
Growing sectors
250
Communications
Education Transport
Percentage change in Output, 1995-2005
Business Services
Retailing Construction Public Admin & Defence
150
Other Services Other Financial & Business Services
Banking & Insurance 100
Transport
Communications
Fuel Refining
Chemicals Hotels & Catering Food, Drink & Tobacco Paper, Printing & Publishing
Wholesaling 50
Hotels & Catering
-80
-60
-40
-20
Machinery & Equipment Transport Equipment Gas, Electricity & Water
Other Financial & Bus Services
0 -100
Banking & Insurance Health Wholesaling
200
Retailing
Business Services
0
20
40
60
80
Electrical & Optical Equipment
100
Metals Minerals Other Manufacturing NEC
-50
Shrinking sectors
Rubber & Plastics Fuel Refining Textiles & Clothing Agriculture, Forestry & Fishing
-100 Percentage change in Employment, 1995-2005
Wood & Wood Products Other Mining Oil & Gas Extraction
Source: Experian Business Strategies Limited ©
3.34
It is evident that the Study Area economy has undergone significant re-structuring over the last ten years in terms of its sectoral make-up. There are two key developments which have taken place which require more detail: the concentration of high-level services, and the outsourcing of supporting functions. Concentration of high-level services
3.35
There has been a concentration of high-level services in the economic cores of the Study Area (Manchester and Liverpool) and this has contributed significantly to recent growth. The concentration of these activities appears to have been driven by the advantages which firms providing high-level services gain by being located near to their clients and competitors. Having activities concentrated in such a way helps to create a range of opportunities for skilled employees. As a result, these employees are more likely to be attracted and retained to 43
For the 30 sectors included in the Experian model The size of the bubbles in the chart represents the output generated by that sector in the Study Area in 2005 45 Please note that these trends are generally confirmed by broad CE data 44
35
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
work in economic centres that offer them, and perhaps their partners, choice and a degree of security in their future employment – this process creates a pool of skills from which local firms in turn can draw. 3.36
It is evident from the literature that if a critical mass of related economic activities can be achieved, agglomeration effects can begin to take hold and result in further self-reinforcing growth. Recent growth experienced in Manchester, and what interviewees say are the reasons for it, suggest that such a critical mass may have been achieved in a small number of sectors or indeed specialised sub-sectors, particularly in the city centre and around Manchester Airport. Further, there is evidence more recently of similar effects beginning to take shape in Liverpool, again within certain sectors and sub-sectors, although to a lower extent. However, the draw of London (and to a lesser but growing extent, international centres) is a limiting factor for the two urban centres. In Section 4, the researchers draw on evidence provided by interviewees to consider the extent to which growth within Manchester and Liverpool city centres may be dependent on each other. Out-sourcing of supporting functions
3.37
Second, lower costs, and the prospect of a supply of suitable labour, have encouraged nationally organised firms to outsource supporting functions to places outside London and the South East; importantly, this includes locations within the Study Area. The REFP has argued that the downturn in relevant markets in London in 2001 contributed to an increase in outsourcing. The subsequent transfer of jobs to the Study Area was partly responsible for a period of unusually high employment growth in financial and business services, which peaked in 2004, complementing similar employment growth in public services. It remains to be seen whether current economic difficulties, particularly for parts of the financial sector based in London, will encourage further out-sourcing, and whether the Study Area will again be favoured.
Explaining performance in the Study Area 3.38
This sub-section explores those factors which have driven economic growth and productivity gains within the Study Area over last ten years to 2005. Importantly, this helps to explain, first, the extent to which growth in the study Area is coming from individual places being successful in their own right, as opposed to being enabled as a consequence of being specifically located in the Study Area, and second what will drive economic growth within different parts of the Study Area in the future. The analysis presented below has been structured using the Government’s five ‘drivers of productivity’. Enterprise
3.39
Enterprise – the creation and growth of firms – increases ideas, knowledge and skills, providing incentives for others to innovate through raising competition.46 Hence enterprise is intimately linked to efforts to drive economic growth. Within the Study Area, a number of initiatives have been introduced aiming to boost levels of enterprise and develop a more entrepreneurial culture. There is a well-developed policy agenda aimed at improving levels 46
Productivity in the UK 7: Securing long-term prosperity, HM Treasury (November 2007) 36
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
of enterprise across the Study Area, focusing on different segments of the market. For example there is a large regional high growth business support programme led by the NWDA and Business Link North West and other more targeted initiatives such as incubation facilities, which support innovative technology firms. Part of this has been the ongoing development of incubation facilities in the Study Area including: •
the Manchester Bioscience Incubator, which opened in 1999 to support biotechnology R&D activities, housing start-up companies, pharmaceutical satellite companies and biotechnology service companies
•
the £25m Core Technology Facility, opened in 2006, which sits alongside the Manchester Incubator building to provide additional incubator space and grow-on space for biotechnology and high technology SMEs
•
the Daresbury Innovation Centre which houses over 75 high-technology companies within the biomedical, digital/ICT and engineering sectors (opened in 2005)
•
MerseyBio, located on the University of Liverpool campus within the city’s developing knowledge quarter, opened in 2004 to provide technology commercialisation and business support to new start-up companies in the life sciences and chemistry sectors
•
Liverpool Science Park, located in the City’s Knowledge Quarter, is one of the newest and fastest growing science parks in the country. It has recently expanded through a new phase 2 development and now offers around 80,000 sq ft of high specification office and laboratory incubation space.
3.40
Although in relation to the whole Study Area the number of firms graduating from these incubation facilities is small, these companies tend to be higher value and therefore these facilities are strategically important.
3.41
However, trends in secondary data (VAT registrations and business start-ups) provide a mixed picture in regard to whether there has been any discernable change in levels of enterprise activity within the Study Area. To some extent, there may be a time-lag involved in how long it takes for the various initiatives to have an impact on enterprise levels. VAT registrations
3.42
Figure 3-6 shows recent trends in the number of businesses registering for VAT each year – weighted to the size of each economy’s WAP – in the Study Area, North West and England. It appears that levels of enterprise activity in the Study Area are not different from that in the North West in general (approximately between 35 to 45 registrations per 10,000 WAP each year) and are significantly below national rates.
3.43
However, in making comparisons with England, it is worth noting that the North West has a lower price level than nationally. This makes it somewhat easier for micro-businesses to keep within the VAT threshold, avoiding the burdens of VAT, whilst generating an acceptable standard of living. Evidence from interviews suggests that this incentive should not be disregarded. Indeed, Barclays Bank plc estimates that the number of business start-ups is 37
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
significantly higher than VAT registrations (see below), thereby indicating the importance of businesses operating below the VAT threshold. In 2006, for example, 17,900 businesses in the North West region registered for VAT; in the same year, the number of business start-ups, according to Barclays, was some 58,800 firms. 3.44
It may also be the case that, as a consequence of firms’ restructuring programmes, a significant number of professionals who previously commuted into the Study Area are now self-employed and working from home at a level that requires VAT registration, but the data can provide no indication of this. Bearing these issues in mind, although business and enterprise activity in the Study Area appears to be relatively low – suggesting this has not been a major factor driving recent growth – there may be some issues with the VAT registrations data used that prevent the full extent of activity from being demonstrated. Figure 3-6: VAT registrations per 10,000 WAP in the Study Area, North West and England, 1995 to 2006 VAT registrations per 10,000 WAP
55 England 50
45 North West 40 Study Area 35 1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: NOMIS VAT registrations & stocks and ONS mid-year population estimates
3.45
Some of the individual districts, however, have recorded particularly high rates of VAT registrations over the period shown. For example, Trafford has, on a consistent basis, achieved a much higher rate than even the national average (at around 65 to 70 registrations per 10,000 WAP each year). Districts that have consistently achieved a rate above the North West average include Manchester, Salford, Stockport and Warrington. The scale of registration activity in these districts, located towards the eastern end of the Study Area, is likely to have provided a significant boost to growth in the Study Area economy. Business start-ups
3.46
Evidence presented in the Data Report shows that, across a number of Study Area districts, business start-up rates have consistently been higher than the regional average (which has tended to fluctuate between 11 and 14 new firms per 1,000 people of working age each year between 2003-07) particularly in Manchester and neighbouring Salford.47 Other areas with high levels of start-up activity include Trafford, Sefton and Warrington. As with the VAT registrations data, the bias towards the eastern end of the Study Area is evident, confirming that this area has a more dynamic and well-established base of enterprise and business formation activity.
47
Using estimates of business start-up rates provided by Barclays Bank plc 38
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Skills 3.47
As has been the case across the country, the Study Area has witnessed a substantial upward shift in skill levels over the past few years. Particularly important has been the growth in the higher-levels skills, as these ‘allow workers to generate new ideas, adapt to the changing economic environment and facilitate the implementation of new technology’.48 Between 1999 and 2007,49 the number of people, of working age, in the Study Area qualified to NVQ level 4 or above has risen from 344,000 to 495,000, a 44% increase (compared to 35% in the North West and 34% in England). Manchester has provided the real driving force behind this growth – in this district alone, the number of residents with NVQ level 4 or above has more than doubled (increasing by some 50,400 people) over the period (see Figure 3-7). Figure 3-7: Change in the number of people with higher-level skills (NVQ4+) 1999 to 2007 Change in the number of residents with NVQ4+ in the Study Area, NW and England (1999=100)
% change in the number of residents with NVQ4+ in the Study Area districts 140
Study Area North West England
140
% change in number of WAP with NVQ4+
130 120 110
120 100 80 60 NW average = +35%
40 20
2005
2006
2007
Wirral
Liverpool
Sefton
Trafford
Halton
EP & Neston
Stockport
2003
Knowsley
2002
Study Area
2001
St Helens
2000
Warrington
1999
Salford
90
Tameside
0
100
Manchester
Change in number of WAP with NVQ4+ (1999=100)
150
Source: APS/LFS
Innovation 3.48
The previous chapter set out the Study Area’s assets with regard to its innovative capacity. Establishing how this capacity translates into innovative and knowledge-based activity is not an easy task due to the difficulty in measuring such a concept. However, the study team has used employment in knowledge intensive businesses (KIBs) as a proxy for the scale of innovative activity.50
3.49
As shown in Figure 3-8, total employment in KIBs has expanded significantly since 1998 in the Study Area geography, well above the increases in comparator geographies. Measured as a proportion of total employment, the Study Area also has a higher rate of knowledgeintensive employment (10.7%) than the region as a whole (9.7%). This implies that the Study Area geography is the preferred location for KIBs in the North West, with activity rates particularly high in the districts of Manchester, Halton and Warrington, followed by Stockport and Liverpool (see the right-hand diagram).
48
Productivity in the UK 5: Benchmarking UK productivity performance, HM Treasury (March 2004) Please note that 1999 is the earliest year for which data is available, hence we have not been able to adopt a tenyear perspective in regard to this dataset 50 Knowledge intensive industries are based upon the OECD definition. It includes the following industries defined by 3 digit SIC 2003 codes in the ABI: pharmaceuticals; office machinery and computers; aerospace; precision instruments; electrical engineering; telecommunications; financial intermediation; insurance and pension funding; activities auxiliary to financial intermediation; computer and related activities; R&D; other business activities; motion picture and video activities; and radio and television activities. 49
39
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group Figure 3-8: Employment in knowledge-intensive businesses (KIBs), 1998 to 2006 Proportion of employment in KIBs in each Study Area district, 2006 16
100
8 6 4 2
2004
2005
2006
Salford
2003
Liverpool
2002
Study Area
2001
Stockport
2000
Halton
1999
Warrington
1998
Manchester
0
95
St Helens
105
NW average = 10% 10
Wirral
110
12
Tameside
115
14
EP & Neston
England
120
Sefton
North West
Knowsley
Study Area 125
Trafford
130 % of employees in KIBs, 2006
Number of employees in KIBs (1998=100)
Change in the number of employees in KIBs in the Study Area, NW and England (1998=100)
Source: ABI
Investment Headline statistics
3.50
3.51
Study Area districts have managed to attract significant levels of investment over recent years, as they continue to develop and modernise their economies and infrastructure. Analysis of investment trends (as presented in the Data Report) has confirmed that the Study Area acts as a magnet for investment into the regional economy. Some headline statistics provide strong evidence of this: •
In 2005, net capital expenditure in the Study Area measured some £4.7 billion, 54% of the regional total.51 This investment was heavily concentrated in Manchester, although Trafford, Liverpool and Warrington were also important locations
•
Between 2002 and 2007 (inclusive) public expenditure in terms of new construction orders stood at £2.1 billion, 56% of the regional total.52 This expenditure (57% of the Study Area total) has been heavily concentrated in Manchester and Liverpool
•
Private commercial expenditure in the Study Area over the period 2002-2007 (inclusive) has amounted to £6 billion, accounting for the majority proportion (70%) of such expenditure in the North West.53 Manchester alone attracted £2.5 billion
•
The regional UKTI office is able to identify approaching £4.4 billion54 of foreign investment into the Study Area and neighbouring districts between 2004/05 and 2007/08, supporting around 30,000 jobs in the process. Greater Manchester alone saw investment of over £1.5 billion over the three years, whilst the sectors attracting the most investment have been biotechnology and life sciences, creative and digital industries and business and professional services.
Large-scale investment of this kind, particularly around the economic cores of Liverpool and Manchester, provide the Study Area and its constituent city regions with significant growth opportunities, over and above the rest of the region.
51
Source: ABI Source: BERR at http://www.dtistats.net/construction/neworders/tables/additionaltables.asp 53 Source: BERR at http://www.dtistats.net/construction/neworders/tables/additionaltables.asp 54 These data exclude an investment of a reported £8 billion by Astrazeneca in the acquisition of Medimmune in 2007/08. Medimmune is a global medical technology firm with sites across the US, Europe and the UK. 52
40
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Commercial developments
3.52
A further key driver of growth has been the rise of the commercial property sector in Manchester and Liverpool, responding to the rise of the financial and professional services sector within the Study Area. Corporate occupier demand, particularly at Spinningfields, Manchester, in the form of Royal Bank of Scotland and the Bank of New York Mellon, has buoyed the market and established Manchester as the primary location for the FPS sector outside London and the South East. Indeed, the 2007 UK Cities Monitor states that Manchester has become the best city in the UK in which to establish new company headquarters and back-office functions.
3.53
In Liverpool, the market for commercial property has also grown considerably over recent years, driven by growth in the public sector, professional services and finance and business sectors. This has been recognised in a major study,55 which identified Liverpool as one of the fastest growing office markets in the world, and as the fastest growing office market in the UK (well ahead of any other UK regional city). City centre renewal
3.54
Part and parcel of attracting employers, and skilled people to work for them, is the quality of the public realm and the shops and services that are also there, adding to the general rewards of working in one place rather than another. A supply of city centre accommodation can also help to attract and retain young professionals. Both the centres of Manchester, especially after rebuilding work following bomb damage in 1996, and of Liverpool, resulting more recently from large scale private as well as public sector investment, have gained in this way. Interviews reveal that such improvements have contributed to the increased confidence in the Study Area, as well as supporting economic growth. Competition
3.55
As stated in a recent HM Treasury paper,56 competitiveness is closely linked to having an open and lightly regulated economy. This is a difficult concept to measure at the sub-regional level given that decisions which directly affect the competitive environment (such as trade and regulation) are most often taken at the national level.
3.56
However, from business interviews contained in other studies, it appears that in addition to some locally controlled businesses that have remained independent, nationally organised banks, accountancy houses, law firms, and so on, compete against one another fiercely in major economic centres such as in Manchester and Liverpool. In addition, there can be little doubt about the intensity of competition manufacturing firms face from overseas markets (particularly the low cost ‘BRIC economies’ of Brazil, Russia, India and China as well as Eastern European countries). This competition from trade in manufacturing and local rivalry in services helps drive productivity in the region.
55
The CBRE Global Market Rents survey. As reported in ‘Liverpool Business in the Capital’, Liverpool Vision (Autumn 2008). 56 Productivity in the UK 5: Benchmarking UK productivity performance, HM Treasury (March 2004) 41
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
3.57
Furthermore, building on historic ties, Liverpool has a place at the World Expo in Shanghai 2010 and it is the only UK City to have a dedicated space apart from London.57 Such linkages provide important opportunities for the Study Area, but businesses and other stakeholders must ensure that these are fully seized.
Other important underlying factors 3.58
Alongside the drivers of productivity are certain underlying factors, which have the capacity to create the conditions for sustainable economic growth. The research team has identified these factors as population change, labour market conditions, regional prices, planning issues and connections. In this closing sub-section, we look at how these factors have changed over the period 1995-2005, and assess whether or not they have created a supportive environment for growth within the Study Area. Population change
3.59
Changes in population size, as well as wider demographic changes, create both challenges and opportunities for economic growth. Indeed, population growth is one of the possible explanatory factors behind the increase in overall GVA reported for the Study Area between 1995 and 2005, given that the size of the labour market is strongly influenced by the size of the working age population (WAP).
3.60
In 1999, there were some 1.84 million people of working age living in the Study Area; by 2006, the number had risen to 1.87 million people, a 2% increase. Over this period, population growth within the Study Area (in terms of the WAP) has been above the regional average, but significantly lower than the national average (as detailed in the Data Report). Growth has been centred on the Manchester district, driven in part by the development of city centre flats, which coincided with strong net growth in new jobs. Labour market conditions
3.61
Between 1999 and 2006, the number of people in the Study Area classed as being ‘economically active’58 has risen faster, in relative terms, than the North West and England, with particularly strong growth occurring after 2003. By 2006, the size of the Study Area’s economically active population stood at 1.4 million people (around 75% of the WAP). This is not simply the direct result of an increase in the size of the WAP, as previous paragraphs have shown that the Study Area has witnessed lower than average growth (at least compared to the national average) on this particular measure.
3.62
More detailed analysis for the REFP shows that this increase has largely been confined to the increased participation of women. The participation of men has changed very little, becoming increasingly made-up of younger men as many older male employees have fallen victim to the processes of restructuring in many of the Study Area’s traditional industries. However, since the participation of women in the region is now at, or close to, the national average – which in turn may be influenced by cultural choices and family responsibilities – and given 57 58
‘Liverpool Business in the Capital’, Liverpool Vision (Autumn 2008) Measured by the number of people who supply, or want to supply, their labour to produce goods and services 42
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
the difficulties in encouraging many younger excluded men into the workplace, increased participation rates cannot be relied on to meet all of the increase in labour demand implied by the GVA projections contained in this study. The balance will need to be supplied by shifts in net migration within the UK, and especially by shifts in net international immigration, potentially from EU Accession countries – the REFP believes this is what happened during the period of rapid jobs growth that peaked in 2004, although this is clearly not sustainable in the medium-term – particularly given the current jobs market in the UK as a result of the economic downturn. Regional prices 3.63
Previous research undertaken by SQW and Cambridge Econometrics59 highlighted that regional price differentials can explain a significant part of the productivity gap between the North West and England. This must be borne in mind when we consider differences in productivity levels, and GVA, between the Study Area and the UK.
3.64
The study found that consumer prices in the region were some 4.5% lower than the national (England) average, a difference which reflects the fact that house prices were 28% lower than in England (as house price differences affect the housing cost element of consumer prices60 and also feed into wage differences that are reflected in the prices of non-tradeables). These differences in prices will affect earnings, and also play directly into profits and rents; as a result, they will feed into regional variations in GVA and productivity. Indeed, the study provides broad evidence to suggest that perhaps half, or even more than half, of the measured productivity gap (at the level of GVA per hour worked) may reflect price differences. Planning
3.65
A key decision taken by the government in the early 1970s to limit urban sprawl by drawing fairly tight boundaries around the main metropolitan areas, especially Merseyside and Greater Manchester, has tended to concentrate activity within the geography of the Study Area. For example, Merseyside came into existence as a metropolitan county in 1974, following the Local Government Act in 1972. It was formed from previous parts of the administrative counties of Lancashire and Cheshire, along with the county boroughs of Birkenhead, Wallasey, Liverpool, Bootle and St Helens. In 1968, Warrington was formally designated as a New Town and in 1973 a New Town Outline Plan was developed, which set out an ambitious plan to increase the town’s population from 120,000 to 200,000 by the year 2000. Although the level of growth has fallen just short of this target, and some of the supporting transport infrastructure has not been put in place, the New Town has evolved into an important economic engine of the Study Area.
59
‘Validation of the Productivity Gap between the North West and other Regions, and between North West Sectors’, SQW and Cambridge Econometrics (31 May 2006) 60 The price index now used for the national inflation target, the CPI, excludes most owner-occupier housing costs, and so the influence of housing costs is only reflected in its rents element. The ONS prepares a range of regional price indices. The definition of the regional indices that has been used in the present study is the one that includes owner-occupier housing costs (mortgage interest payments, depreciation and Council Tax), with common (national) weights for the regions. See 'Relative regional consumer price levels in 2004', Economic Trends February 2005, ONS. 43
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
Connections 3.66
As presented earlier in Chapter 2, a set of natural and man-made conduits – the River Mersey, Manchester Ship Canal, the M62 and M56 motorways (as well as the A580 East Lancashire Road) and east-west railway infrastructure - have provided increasing means for west-east and east-west interactions within the geography of the Study Area. These are crossed by further links, generally running north-south, including the west coast main line and the M6, A49 and A6 routes, which make movements within the Study Area and its hinterland very complex indeed. At the same time, this developing network of strategic transport links has improved access to markets to the north and to the richer and more densely populated south, and across the Pennines, now principally via the M62, and also by rail. In addition, the motorway network between the major centres and around Manchester has also provided international connections though Manchester Airport, and through Liverpool’s expanding Port and John Lennon Airport; and the intersection of motorways near Warrington has made it a natural centre for warehousing, distribution, logistics and other transport related activities. Peel Holding’s Ocean Gateway proposals, as well as the Stobart Group’s planned investment in a new inter-modal freight terminal in Widnes, will ensure that there is significant further growth in these transport-related sectors in the Study Area.
3.67
This chapter has reviewed some of the trends operating in the Study Area and the drivers of productivity. It has shown a mixed picture with growth greatest around Manchester, followed by other parts of the Study Area, such as Warrington and Liverpool.
Future growth prospects of the Study Area 3.68
Next, we look at the future growth prospects of the Study Area economy, using projections provided by Cambridge Econometrics and Experian Business Strategies, over the period 2005 to 2016 (because 2005 is the base year behind the projections and 2016 is the latest year for which data are available for both datasets). GVA growth
3.69
The projections (rather than forecasts) of GVA growth contained within the datasets provided by Cambridge Econometrics and Experian Business Strategies illustrate what might happen based on past experience. They do not include the impact of planned developments, such as MediaCityUK or those developments falling under the Ocean Gateway scheme, nor do they include the impact of the economic downturn which started in the second half of 2008. If planned developments were included, these would undoubtedly have a major impact on raising GVA and employment within the Study Area, particularly in Liverpool, where there are a number of major strategic developments ongoing or in the pipeline. If the recession was factored in, this would have a dampening effect on output and total GVA, but its impact on employee productivity is less easy to predict – it may lead to a rise. For these reasons, the study team has sought to ‘test’ the projections against its own knowledge of what is happening in the Study Area economy, overlaid with and calibrated by, the views of stakeholders.
3.70
Projected GVA growth for the Study Area is estimated to occur in line with, albeit slightly above, regional growth rates according to both datasets, at around 2.2% to 2.3% per annum. 44
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
This means that the importance of the Study Area to the regional economy is expected to increase marginally over the period 2005-2016. However, growth rates fall some way short of national (UK) growth rates of 2.6% per annum over the same period. If GVA growth in the Study Area economy could match the national projections, its share of regional GVA would rise from: •
49.2% in 2005 to 50.6% in 2016, rather than the 49.3% (projected by Cambridge Econometrics model)
•
48.6% in 2005 to 51.3% in 2016, rather than the 48.9% (projected by Experian).
Figure 3-9: Projected GVA growth in the Study Area, North West and UK, 2005 to 2016 Cambridge Econometrics
Experian
135
135
130 GVA (2005=100)
125
GVA (2005=100)
Study Area North West UK
120 115 110
130
Study Area
125
North West
115 110
105
105
100
100
95
UK
120
95 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Cambridge Econometrics and Experian Business Strategies Limited ©
3.71
At the district level, projected GVA growth rates vary significantly across the Study Area (see Figure 3-10). Both datasets confirm that the strongest growth, in relative terms, will occur in five districts: Manchester, Trafford, Salford, Stockport and Warrington (all of which have projected GVA growth rates above the regional and Study Area averages). Figure 3-10: Projected GVA growth in the Study Area districts, 2005 to 2016
20 10 Sefton
Wirral
EP&Neston
Halton
Liverpool
Knowsley
Tameside
Study Area
0 St Helens
Wirral
EP & Neston
Halton
Sefton
Tameside
Liverpool
St Helens
Study Area
Salford
Stockport
Trafford
Warrington
0
Knowsley
10
NW average = 26%
30
Stockport
20
40
Warrington
30
50
Manchester
NW average = 29%
Salford
40
60
Trafford
50
% change in GVA 2005-2016
Experian
60
Manchester
% change in GVA 2005 - 2016
Cambridge Econometrics
Source: Cambridge Econometrics and Experian Business Strategies Limited ©
Employment growth 3.72
Employment growth will be a key factor influencing the GVA projections. Comparing the two sets of projections in Table 3-3, it is noticeable that Cambridge Econometrics is significantly more optimistic about the prospects for employment growth across all three geographies over the period 2005-2016. Both models predict employment growth in the Study Area to be stronger than the regional average but below the national (UK) average, though the Cambridge Econometrics dataset projects a smaller growth deficit between the Study Area and UK. Based on the research team’s own knowledge of developments and initiatives taking place in the Study Area geography, as well as the evidence garnered through the stakeholder consultations, we suggest that the Cambridge Econometrics projections are
45
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
more realistic in this respect, although these do not take account of the current recessionary pressures. Nevertheless, given the current recession, the research team suggests that it is better for policy makers to adopt a cautious approach when interpreting any projections, and it is evident that some of the proposed developments in the Study Area are likely to be delayed or scaled back, thus making both the projections and any growth on top of them hard to foresee in the immediate future. Table 3-3: Projected growth rate in employment, 2005 to 2016
61
Cambridge Econometrics
Experian
Study Area
6.0%
2.9%
North West
5.6%
2.1%
UK
7.1%
6.5%
Source: Cambridge Econometrics and Experian Business Strategies Limited ©
3.73
At the district level, both sets of projections confirm that Manchester and Trafford will witness strong growth in employment over the period as a whole; Salford and Stockport are also expected to see significant increases in the Experian dataset. Unlike Experian, Cambridge Econometrics project that Warrington will witness the greatest overall increase in employment – of some 16,100 additional employees, representing a 12.7% rise.
3.74
Within the Experian dataset, a number of districts are projected to experience negative total employment growth, including Halton, Wirral, Sefton and Ellesmere Port and Neston (noticeably, all of these are located towards the western end of the Study Area geography). Cambridge Econometrics project that Tameside will be the only district which will lag behind and experience declining total employment between 2005 and 2016. Figure 3-11: Projected growth in total employment, 2005 to 2016
12 10 8 6 4
NW average 2.1%
2 0 -2 -4 EP & Neston
Wirral
Sefton
Halton
Warrington
Liverpool
St Helens
Knowsely
Study Area
Tameside
Trafford
Stockport
-6 Salford
Wirral
Tameside
EP & Neston
Sefton
Halton
Salford
St Helens
Liverpool
Study Area
Stockport
Trafford
Knowsely
Warrington
4 2 0 -2 -4 -6
14
Manchester
NW average = 5.6%
% change in employment, 2005-2016
Experian
14 12 10 8 6
Manchester
% change in employment, 2005-2016
Cambridge Econometrics
Source: Cambridge Econometrics and Experian Business Strategies Limited ©
Productivity 3.75
These projected changes in GVA and employment will lead to significant shifts in the levels of productivity (measured in terms of GVA per employee) across the Study Area. Both sets of projections confirm that productivity growth in the Study Area, over the period 2005-2016, is expected to be in line with the regional average. Furthermore, the productivity gap relative to the UK is expected to remain and in fact widen slightly – from 10.1% to 11.6% in the Cambridge Econometrics data, and from 11.3% to 12.8% in the Experian data. 61 The growth rate is over the period as a whole, i.e. Cambridge Econometrics project that employment in the Study Area will increase by 6% between 2005 and 2016, in total
46
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
3.76
District-level projections show that differences in productivity between Study Area districts are relatively small. Nevertheless, in the Cambridge Econometrics model, Tameside and Salford are expected to see the largest gains in productivity, whilst in the Experian model, the comparable districts are Warrington, Salford (again), Trafford, Halton and St Helens. This is displayed in Figure 3-12 below. Figure 3-12: Projected change in productivity in the Study Area districts, 2005 to 2016 Experian
15 10
Sefton
Liverpool
Stockport
Knowsley
Manchester
Wirral
Tameside
0
EP & Neston
5
Study Area
Wirral
EP & Neston
Liverpool
Warrington
Knowsley
Sefton
St Helens
Halton
Study Area
Trafford
Stockport
Salford
0
Manchester
5
20
Halton
10
NW average = 23.4%
25
St Helens
15
30
Salford
20
35
Trafford
NW average = 21.9%
25
% change in productivity (£000s per employee) 2005-2016
30
Tameside
% chnage in productivity (£000s per employee) 2005-2016
35
Warrington
Cambridge Econometrics
Source: Cambridge Econometrics and Experian Business Strategies Limited ©
Getting underneath the projections 3.77
What these projections show is that districts to the eastern end of the Study Area around Manchester (Manchester, Salford, Trafford and Stockport) are projected to grow somewhat more rapidly than the region over the period through to 2016 – so too is Warrington, and perhaps St Helens. However, the districts towards the western end around Merseyside are generally expected to experience relatively slow growth compared to the region, indicating that there is a risk of further polarisation within the Study Area without further investment. However, growth prospects in the western end do vary widely – Liverpool and Knowsley are close to the regional average in terms of projections of GVA growth, whilst Ellesmere Port and Neston, and perhaps Sefton tend to fare the least well out of the 13 Study Area districts.
3.78
However, projections data do not take account of the possible economic impact of major developments and initiatives which have yet to have an actual effect on output and employment. This includes office buildings and sites that have been completed, but are yet to be occupied, as well as other projects and key policy interventions that are likely to be delivered in the future, over the period under analysis (through to 2016).
3.79
Prior to the current recession, SQW and Cambridge Econometrics undertook a forecasting exercise that took account of such factors in the Liverpool City Region,62 as well as the impact of displacement and some of the key constraints on growth (such as skills). This research found that growth and employment prospects for many of the districts towards the western end of the Study Area were much more positive than the two sets of projections provided for this study (produced by Cambridge Econometrics and Experian) would suggest (as set out from paragraphs 3.69 to 3.76). By running two additional projections, on top of the baseline projections, it found that: •
62
around 120,000 gross jobs are expected to be generated over and above trend in the Liverpool City Region by 2020, 33% of which will be situated in Liverpool
Liverpool City Region Economic Projections and Prospects, Cambridge Econometrics and SQW (October 2007) 47
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
•
3.80
by factoring in the impact of displacement and excluding all ‘pipeline’ projects, 62,000 net jobs are expected to be generated over and above trend in the Liverpool City Region by 2020; of these, 38% of which will be in Liverpool.
To back up this evidence, the research team’s knowledge of planned activity in Liverpool and its wider city region – especially key physical developments such as those included as part of the Ocean Gateway concept and further city centre mixed use developments – indicates that there are significant opportunities to raise the growth prospects of these districts. Understanding the spatial dimension
3.81
Our research has indicated that we should not think of the Study Area in terms of a rigid spatial area defined by administrative boundaries. The Study Area is a flexible concept, based around a number of important growth nodes and a concentration of key assets in different areas. It is linked to a high quality housing offer in some suburban and rural areas and it also contains areas – especially some inner-city areas – with very high concentrations of deprivation as shown in Figure 3-13 below (see the Data Report for further detail). Figure 3-13: IMD 2007 rankings of LSOAs in the North West
3.82
Therefore, the boundaries of the Study Area need to be understood as flexible constructs, responding to the functional nature of the thematic issue or policy domain in question. For example, we would expect the housing market of the Study Area to cover a significantly
48
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group
wider area than the core business locations. Policy makers need to be aware of these spatial differences when making decisions which will affect the Study Area economy. 3.83
As an example, we set out below the growth prospects of the Study Area using an alternative spatial view to the one which has been used throughout this report, based upon nine highgrowth districts.63 Projections data indicate that the growth prospects, in terms of GVA and employment, for this alternative spatial view are in line with national (UK) projections, suggesting that this is an area of particularly high growth in the North West.
3.84
Figure 3-14 shows that GVA growth projections under this alternative view are significantly above the North West projections and the Study Area projections, and only just below the national (UK) growth projections. The projected rate of growth for these nine districts is 2.5% per annum over the 11-year period, higher than the regional rate (2.3% per annum) and only slightly below the national rate (2.6% per annum). Figure 3-14: Projected GVA growth in the Study Area, the Alternative Spatial View, North West and UK, 2005 to 2016
GVA (2005=100)
135 130
Study Area
125
Alternative Spatial View North West
120
UK
115 110 105 100 95 2005
2006
2007
2008 2009
2010
2011
2012 2013
2014
2015
2016
Source: Cambridge Econometrics
3.85
Similarly, the level of employment for the alternative spatial view is projected to grow by 7.3% between 2005 and 20016, slightly above the national employment increase (7.1%) and well above the regional increase of 5.6%. As Figure 3-15 shows, employment growth in the alternative spatial view of the Study Area is expected to accelerate away from the regional trend in 2009.
63
These are: Manchester; Liverpool; Warrington; Sefton; Knowsley; St Helens; Trafford; Salford; and Stockport. 49
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group Figure 3-15: Projected employment growth in the Study Area, the Alternative Spatial View, North West and UK, 2005 to 2016 110 Employment (2005=100)
Study Area 108
Alternative Spatial View North West
106
UK 104 102 100 98 2005
2006
2007 2008
2009
2010
2011
2012
2013 2014
2015
2016
Source: Cambridge Econometrics
3.86
However, productivity (GVA per employee) in the alternative spatial view (£30,200 in 2005) is no different to productivity levels in the North West as a whole (£30,300), a situation which is not projected to alter by 2016. This suggests that GVA growth in the alternative spatial view is being driven by employment growth rather than any obvious gains in productivity.
3.87
The key message, therefore, is that policymakers must ensure that when they are defining areas, they focus on functional economic geographies and take full account of flows, interactions and dependencies as opposed to simply working around administrative boundaries or other artificial spatial constructs. Key sectors
3.88
GVA growth and employee productivity is linked to changes in the industrial structure of an area. Figure 3-16 shows the projected change in output and employment for each of the 30 sectors included in the Experian model over the period 2005-2016. It shows that strongest growth is expected to occur within the Business Services, Banking & Insurance and Communications sectors, thereby projecting a continuation of growth trends over the last ten years (refer back to Figure 3-5). However, this trend is not unique to the Study Area and applies to most parts of the UK.
3.89
Other sectors expected to undergo strong growth include Hotels and Catering and the Health and transport sectors. There are also a number of key sectors expected to undergo ‘adjustment’ (i.e. a fall in employment combined with a rise in output) and, as a result, make significant productivity gains. These include the Electrical and Optical Equipment sector, and Chemicals.
50
A Manchester – Liverpool Growth Corridor? A review of the economic data & qualitative evidence A Final Report to the Project Steering Group 64
Figure 3-16: Projected change in output and employment by sector in the Study Area, 2005 to 2016
Growing sectors
Adjusting sectors 100
Business Services Banking & Insurance Health Transport
Business Services
Wholesaling Retailing
Percentage change in Output, 2005-2016
Communications
Education
Banking & Insurance
Other Services Construction Communications
Transport Transport Equipment
Other Financial & Business Services
50 Hotels & Catering
Electrical & Optical Equipment
Public Admin & Defence Hotels & Catering Chemicals
Health
Food, Drink & Tobacco Transport Equipment
Chemicals
Other Services
0 -50
-25
Electrical & Optical Equipment Paper, Printing & Publishing
Other Financial & Bus Services
Machinery & Equipment Gas, Electricity & Water
0
25
50
Metals Other Manufacturing NEC Minerals Rubber & Plastics Fuel Refining Agriculture, Forestry & Fishing
Shrinking sectors
Textiles & Clothing
-50
Wood & Wood Products Other Mining
Percentage change in Employment, 2005-2016
Oil & Gas Extraction
Source: Experian Business Strategies Limited ©
3.90
The overwhelming impression is that the economy of the Study Area is likely to continue to become increasingly service-based. Although output in manufacturing is likely to go on growing modestly on average over the ten years, its share of employment in the Study Area is likely to continue to fall, and this will have a negative impact on the area’s productivity levels.
3.91
Possibly qualifying this judgement, consultees noted that higher transport costs, especially if the price of oil shifts upwards relative to other goods and services once again, could mean that some manufacturing activities that have been conducted in recent years in the Far East might be brought back to parts of the North West. However, the general view seemed to be that relative costs would favour lower cost areas rather than places in the Study Area. Nevertheless, some stakeholders made the point that manufacturing, and modern manufacturing in particular, remains an important strand of the economy in parts of the Study Area and that this should not be lost on policy-makers.
3.92
For example, the recently published ‘Modern Manufacturing Strategy and Action Plan for the North West’65 states that, on the basis of projections, if manufacturing was just to maintain its 2006 share of regional GVA, in 2020 it would add a further £2.9bn to the regional economy. The Strategy is driven by two overarching strategic aims: •
64 65
Increasing the share of high value adding employment – based on the fact that the North West has a higher proportion of employment in knowledge-intensive manufacturing businesses than nationally, with clusters such as aerospace and pharmaceuticals displaying particularly high GVA per worker values
Size of bubble reflects output in the study area in 2016 ‘Modern Manufacturing Strategy and Action Plan for the North West’, NWDA (2008) 51
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•
Retaining ‘good’ (i.e. high productivity) employment – manufacturing in general is found to be some 50% more productive than the average job in the region, with the following sub-sectors in particular showing high productivity: food, drink and tobacco; manufacturing of fuels; pharmaceuticals; chemicals not elsewhere specified; non-metallic mineral products; electronics; motor vehicles; and other transport equipment.
3.93
Consultees for this study pointed out that some internationally oriented manufacturing (with high value-to-weight products) had been attracted to the Study Area because of the international routes available from Manchester Airport and a growing professional support infrastructure. However, while marked developments of this kind would not be captured by shift and share-based econometric projections, the Study Area is starting from a low base in comparison with the overall structure of output and employment. Further, the same applies to increased output and employment that might be associated with the exploitation of the Study Area’s science and engineering base, which also starts from a lower base on all the evidence available thus far.
3.94
Together, these considerations might mean that the prospects for manufacturing have been somewhat understated in the projections, but almost certainly not on a scale that would make a marked difference to a continuation of broad trends. However, over recent years, inward investment data provided by UKTI suggest that manufacturing and processing activities have remained important to certain parts of the Study Area and surrounding localities. For example, there are ambitious plans to create almost 1,000 textile manufacturing jobs in Wigan through a £125 million investment and an agreement with the Chinese Government.
3.95
Nevertheless, the group of sectors that make up Financial and Business Services, including Business Services and Banking and Insurance among others, seems likely to go on playing an increasingly important role in generating output and employment in the Study Area. This, given that current global difficulties do not prove cataclysmic, seems likely to be followed by Government and Other Services, a category in which Health is likely to have an increasing role, and by Transport and Communications, with output possibly being more likely to grow than employment. Further, the nexus of activities grouped together as Hotels, Catering and Distribution, in which Hotels and Catering seems likely to offer better prospects for significant employment growth, and possibly for output growth, linked in fairly clear ways to further success, especially in supplying higher level Financial and Business and other professional services, as well as gradually increasing living standards on average for the population at large.
3.96
The Creative and Digital sector will continue to flourish in the Study Area, with the MediaCityUK development presenting significant opportunities for both businesses and individuals in the media, creative and cultural sectors. The benefits will not just be felt in the immediate vicinity of Greater Manchester, but across the Study Area and beyond. Given its scale, and with the support of the BBC as a major occupier, the development will be a beacon for the sector across the whole of the North of England.
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4: Stakeholder views
Purpose 4.1
This Section of the report provides a synthesis of the key messages reported to the research team by a broad mix of senior-level stakeholders from across the Study Area and wider North West region.
Introduction and coverage 4.2
The study team undertook a number of interviews with key stakeholders from both public and private sectors representing a diverse set of policy areas (Annex B provides a list of all those interviewed). The interviews were carried out in two waves; the first in June 2008 and the second in August/September 2008. The second tranche of interviews occurred as the scale of the economic downturn was starting to become apparent – this may have affected some of the responses. Furthermore, interviewees’ awareness of the issues under investigation varied – some interviewees were members of the North West Regional Economic Forecasting Panel and, as such, were familiar with the corridor concept and the nature of the evidence pertaining to growth in the North West; others were not directly engaged in the research issues, but brought alternative views, based on their institution’s experience of recent growth.
4.3
It should be noted that the study team came to the view that some interviewees saw the study as a ‘political’ exercise, rather than a straightforward piece of scoping work; and some contributions reflected particular institutional positions that consultees wanted reflecting in the report, rather than direct answers to direct questions. Thus, not all questions received answers and some views were expressed that did not directly reflect the research questions.
4.4
The interviews explored a number of issues, including views on: •
whether there was a corridor and if there was, its importance to the interviewee’s organisation
•
the factors that had contributed to growth in the study area
•
whether the pattern of growth in the study areas was likely to continue or whether it would alter in the medium to long term – including whether there was likely to be a change in the economic sectors operating in the area
•
the challenges or constraints to growth in the study area
•
the responses to the constraints from private and public sectors.
The sections below summarise the main points from the consultations and highlight where there were different views and where there was broad agreement.
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Is there a growth corridor? 4.5
On the whole, respondents did not think there was a functional growth corridor. In some instances, the negative response was in relation to the specific map (based on NUTS3 data). Some interviewees thought the map should cover more areas – e.g. North Wales and the Astra Zeneca site; while others thought it should be narrower. Some interviewees argued the geography was a dumbbell-shaped area with Liverpool and Manchester at either end. However, in most cases the negative response rejected the corridor concept in general, irrespective of the geography concerned. A common view was that there was just a ‘patchwork of areas’ held together by commuting patterns or supply chain patterns that were mainly local, rather than corridor-wide.
4.6
Other respondents – often from the private sector – remarked on the importance of different geographies for their operations; for example, local supply chains that could deliver goods within 20 minutes, but catchment areas that went outside the corridor’s boundaries. In effect, they pointed to variable geographies for different types of issue, which may be obscured by looking at issues through the lens of a growth corridor.
4.7
Some consultees said they recognised an M62 transport corridor, but not the corridor under consideration; one respondent said he recognised a south Lancashire area that made sense as an economic area in a way that the North West region did not; another observed that crossPennine links to Leeds were important and expressed scepticism about the rationale that stayed within regional administrative boundaries. It should be noted, however, that a majority of consultees saw cross-Pennine linkages as a complication too far, both from an administrative point of view, and in terms of their economic importance.
4.8
There were some consultees who, while not seeing a corridor at present, thought it might be a useful way of developing planning frameworks or marketing opportunities to inward investors – who may wish to look at a wider mix of opportunities than those offered by single cities or boroughs and districts.
4.9
Thus, on the whole, stakeholders did not think there was a growth corridor, but a minority saw the concept could have potential as an organising and marketing tool in the future, but one that would require significant leadership in order to make it happen.
What factors have contributed to economic growth in the study area? 4.10
While not recognising a growth corridor as such, consultees did recognise there was a positive story of economic development in the study area. They highlighted a number of factors that had contributed to the growth, including: •
good national and international accessibility – with Manchester Airport seen as very important, as well as port, road and rail access
•
the legacy of the industrial revolution and the pattern of settlements and transport infrastructure have dictated the nature of the opportunities and the geography of growth – with concentrations of people and economic activity in historic centres, such
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as Liverpool with its history as a port, and Manchester with its history of commerce and manufacturing
4.11
•
Liverpool and Manchester acted as the dynamos driving the growth in the study area – this was linked to the growth of the knowledge economy, creative industries, leisure and retail and the concentration and growth of financial and business services, supported by city centre regeneration and housing growth
•
the rise of Warrington on the back of a previous ‘new town’ intervention and a ‘can do’ attitude going back to the original Corporation
•
some good transport/communication links, for example Warrington and Preston
•
a reasonably strong supply of labour – including those with professional and high level skills – with increased demand often met by inward immigration and increased participation in the labour market by women
•
a good quality of life – if sometimes restricted by the housing offer in some areas
•
good civic leadership, with Manchester setting an example for others
•
on the whole a sensible development of public policy that worked with the grain of ‘the market’ – even if there are still issues with regard to the planning system, which is seen by many in the private sector as trying to re-direct private sector activity away from its preferred locations in order to deliver more ‘balanced’ growth.
Thus, consultees recognised a strong performance over recent years that was driven by a number of factors which were shared by places, but they did not necessarily think the growth was due to any increased interaction between places or between businesses inside the study area.
Is the pattern of growth likely to continue or change in the coming years? 4.12
There were a number of different views regarding the likely pattern of growth in future years. The majority of respondents said they thought the bulk of the growth would follow previous patterns, not least as the legacy of transport infrastructure and patterns of settlement from the past would continue to influence growth patterns in the future. But, as one interviewee observed, ‘there will always be changes at the margin’. Proposed investments by Peel Holdings in Liverpool and Greater Manchester were also cited as significant factors driving future growth and as reasons why previous patterns would be continued in the future. And a number of respondents cited the planning system as the main determinant of the likely pattern of future growth, as planning restrictions, for example around Chester, limit the spaces within which growth can occur.
4.13
It should be noted, however, that views on the planning system varied – some interviewees were concerned that developments in the past had shown ‘spatial irresponsibility’ as they had been developed with the knowledge that transport infrastructure could not cope. And while the hope for some interviewees was for cities to be more self-contained and for no increase in 55
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commuting between Manchester and Liverpool, for others the scope to grow outside cities and spread the economic benefits of growth was important, as was increased density of commuting between the key economic centres in the study area. 4.14
Some interviewees – who queried the logic and/or shape of the area under investigation – pointed to employment growth in North Wales, and expected its significance to grow over time, perhaps affecting perceptions of the economic geography that should be under consideration in future.
4.15
Some interviewees commented about the nature of the growth within the study area. The dominance of the two hubs in Liverpool and Manchester was highlighted – and the concentration of higher level functions in these areas was seen as likely to continue; some even indicated it might benefit from relocations out of London as the finance sector tries to cut costs.
4.16
On a different note, some consultees thought there was competition between places, and future growth patterns may see Manchester growing faster and potentially at the expense of other areas, particularly if transport links improved so that clients outside Manchester could be served faster and more efficiently from Manchester than had previously been the case. Others observed that Liverpool, whose development had lagged behind that of Manchester, still had significant growth potential with port expansion, and opportunities in retail, culture, leisure and tourism. And some stakeholders thought there was growth potential along the M56, perhaps not of the same order as the M4 corridor, but with significant opportunities for high value-added manufacturing and offices. A common view, however, was that while the growth pattern may continue, this did not mean there was an expectation that inter-firm trading within the study area would be a significant factor.
4.17
Other interviewees observed that growth patterns after the last recession changed from those that existed going into the recession, and there was potential for this to occur again, so there may be a different geography to economic growth as the economy comes out of the current recession. Two potential changes were suggested; first transport costs may mean some production is ‘repatriated’ as importing from long distances was no longer cost effective; and there may be some relocations out of the cities to lower cost sites that are still in the region. Linked to the observation that the economic geography could change (although not always tied to it) was the view that areas outside the study area could see growth; they have similar ‘offers’ and strategies to towns inside the study area, and could benefit from spillover effects from growth inside the study area. However, improved transport links were seen as a key to this opportunity becoming a reality, and most interviewees emphasised investments to deal with congestion within the study area, rather than improving transport links to sites outside it.
4.18
Some interviewees commented on the need to note the importance of developments, such as Omega and Astra Zeneca, located outside the cities; and the likely need for similar types of developments for firms for whom city centre locations are not attractive. Others went on to note the development potential this implied for towns outside the cities where there was brownfield land available, and particularly where there was also potential (either through initiatives, such as Growth Point Status or planning) to improve the housing offer. They cited places like Halton and St Helens, as well as Warrington, as sites with growth potential for the
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future. One interviewee argued that depending on public sector policy and interventions, the next 10 years should see growth in the surrounding towns, complementing that of the cities.
What are the barriers/constraints on growth? 4.19
Stakeholder consultees identified a number of barriers to growth. They can be grouped under three main headings: transport, the planning system and leadership. Other comments were made on skills and pay levels; these are summarised at the end of the section. Transport
4.20
Transport was by far the most frequently cited constraint on economic growth. The comments reflected a need to improve links between the two main cities. The quality, speed and frequency of the train links between Manchester and Liverpool were cited as in need of improvement. Some observed that the service did not compare favourably with the Edinburgh-Glasgow service and pointed to the need to extend platforms and the length of trains to improve the commuter experience. In relation to roads, many interviewees suggested improvements were required on the M62 – for example, opening up the hard shoulder, introducing variable speed limits, and shifting freight off the roads on to water. One observer commented that the M6 was ‘b------ awful’ and improvements needed to be made – others noted the tensions that existed between the motorway network as a provider of strategic journeys and commuting journeys. They argued the latter may need to be managed off the motorway network.
4.21
It should be noted, however, that more than one stakeholder acknowledged that many of the transport issues were the concern of national bodies, such as the Highways Agency (HA), rather than regional partners. It was also claimed that the Highways Agency needed to be involved at an earlier stage in the development process than it had been in the past.
4.22
A number of comments were made with regard to the role of transport in opening up opportunities for employment in the city centres for areas of high unemployment, for example, north Manchester and north Liverpool. However, bus operators’ views on the viability of routes was one concern, and the current level of congestion on routes in to those city centres was another. At the time, consultees emphasised the opportunities that congestion charging in Greater Manchester could bring; however, the subsequent ‘no vote’ in the referendum means new thinking may be required on this issue. Planning system
4.23
Poor links between transport and spatial planning were cited as a long-standing problem. Access from the M6 and M62 for the Omega site was mentioned by a number of consultees as an example of bad planning because the development of the employment opportunity was undertaken without putting the transport links in place. Some interviewees also argued that planning controls on housing and office development were too restrictive and limited growth in the corridor by seeking to restrict the options of investors. This was seen as a particular concern, as the potential of some areas was restricted by an absence of aspirational housing, i.e. four bedroom houses, which many plans no longer favoured. 57
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4.24
Some interviewees also cited problems associated with ‘too many public sector fingers in the decision-making process’, which increased risk, uncertainty and the costs of doing business. They also mentioned the timidity of officials involved in decision-making and the problems associated with plans for administrative boundaries that didn’t make economic sense – for example, a failure to look at economic and commuting ties to North Wales.
4.25
One interviewee stressed the current difficulties in aligning public sector investment – for example, from the Homes & Communities Agency, NWDA, Transport Innovation Fund, education and health. Better co-ordination of such investment decisions would remove constraints on growth as they would limit the potential for individual agencies to raise objections to proposals at a late stage of development. The view was expressed that the corridor might provide the right level against which those investments could be assessed and co-ordinated. Leadership
4.26
When talking explicitly about the corridor concept, many, if not most, interviewees questioned whether there was the leadership capacity at the level of the corridor. They also questioned whether there was buy-in for the concept from key local leaders in Liverpool, Manchester and Warrington. One interviewee suggested the test of the concept would be whether the three Chief Executives and/or Leaders of those authorities would share a platform to discuss issues associated with the corridor. They went on to say that without such a sign of support, few other agencies would get behind the concept. Other interviewees simply said rivalry between the different areas and bodies in the corridor meant it was a ‘non-starter’. Other constraints
4.27
Skills were mentioned by some people as an issue, but in the main skill shortages were not cited as a major constraint on economic growth. However, lack of basic skills was cited as a problem that meant local people were not always benefiting from employment opportunities and that some employers were suffering, as lack of basic skills in their workforce undermined their competitive position. Furthermore, in terms of sustainable development some consultees argued local pools of labour should be retrained in order to take local jobs, thereby reducing commuting and the burdens it placed on the environment. Access to finance to assist startups was also mentioned by one consultee as a constraint on economic growth. The role of the public sector was mentioned by some interviewees. In particular the point was made with regard to Merseyside that the relative importance of public sector employment and the operation of national pay scales kept local wage rates higher than the private sector could afford.
What are the likely responses to the constraints? 4.28
A number of responses to the constraints to economic growth at the level of the corridor were suggested by consultees. These included: •
investments in specific transport projects, such as Manchester Hub, and improved East West routes and ticketing arrangements
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4.29
•
development of a transport assessment tool at the level of the corridor, so that impacts of developments are understood on a consistent basis
•
production of evidence to persuade bus operators that the corridor is a geography that makes sense for them to service
•
improve linkages between transport and the spatial planning process, in order to unlock growth potential
•
build on city-regions, especially as the service sector will focus on these and will not think in terms of a corridor, and the Sub National Review points this way
•
better alignment of public sector investments would ease the development process and lead to more sustainable development
•
better coordination between local authorities and the Highways Agency, including the Highways Agency’s earlier involvement in the planning process, to manage congestion more effectively
•
Cross-Pennine issues should not be forgotten, and should be addressed by the Northern Way (although comments on the Northern Way’s track record were often negative)
•
joint lobbying involving public and private sectors to get investment in transport
•
Mid-Mersey arrangements for housing growth may provide a platform to develop arrangements outside constraints associated with Manchester-Liverpool administrative boundaries, as they have more in common with each other than the central districts
•
more funding to incubate business start-ups would help promote growth.
In summary, on the whole consultees did not believe there was a growth corridor. The most common view among stakeholders was that there were growth nodes, supported by commuting patterns, and that Manchester and Liverpool were the main dynamos of economic growth. The view that growth in the future would follow similar patterns to that of the past was common, but some stakeholders saw the potential for a changed economic geography at the end of the current economic downturn. They saw potential for the two city centres to concentrate their positions – perhaps with relocations out of London, and the impact of proposed investments in Merseyside and Greater Manchester by Peel Holdings – and they saw potential for towns and districts outside the cities to benefit from relocations and spillover effects from the cities. There were also those that highlighted the importance of sectors that did not want to locate in city centres, as they relied on access to the transport network, and the potential attractiveness of the ‘offers’ made by towns and districts outside the corridor. A more supportive planning system and better coordination of public sector decisions were seen as vital to future growth, but improved transport infrastructure across all modes was the number one priority to unlock growth in the study area.
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5: Growth assets in the Study Area
Purpose 5.1
This section of the report summarises the key growth assets found within the Study Area and should be read in conjunction with the asset audit presented in Annex A of this report. Towards the end of the section, the study team consider a number of issues linked to deriving additional growth from these key hard and soft economic assets.
The Study Area has a significant portfolio of growth assets 5.2
Assets seem to be intimately related to agglomeration advantages. As outlined earlier in the report, there is a concentration of the region’s key physical assets within the Study Area, linked to the economy’s recent growth sectors (also see Annex A). Moreover, these assets are heavily concentrated around the key economic nodes of Manchester and Liverpool, suggesting that growth will be driven by activity around these two cities, with neighbouring areas benefiting from the spill-over effects. Spill-over may occur as a result of the decentralisation or displacement of economic activity away from the centre of the nodes (e.g. from companies seeking to extend their floorspace and/or cheaper land and property values) or of residential developments seeking better amenity standards or taking advantage of access to higher standards of schooling or other quality of life factors. Research and innovation
5.3
The key research and innovation assets in the Study Area have significant capacity and potential to really drive growth within the regional economy, but they must be utilised in a strategic and effective manner. To this end, the Northwest Science Strategy identifies four strategically important science and technology sites – these ‘strategic science sites’ are one of the Strategy’s six strategic pillars. Three of the four sites are within the Study Area and should provide the focus for an expansion in research and innovation capacity: •
Manchester Science City – which is seen as having the capacity to become a centre of global importance. In light of this, the key priorities are to establish the University of Manchester as a leading global HEI and to commercialise University intellectual property, as well as the continued expansion of Manchester Science Park (MSP)
•
Daresbury Science and Innovation Campus – has the capability to become a centre of national significance. Priorities for the campus are next stage infrastructure development, to carry through 4th Generation Light Source investment, and to increase collaboration with NHS research
•
Liverpool Science Park and Speke Biotech activity in South Liverpool – has the capability to become a centre of national significance. For Liverpool Science Park, the main priority is to obtain private sector investment; for the National Bio-
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manufacturing Centre in Speke, the main priority is to build on HEI and commercial capability. 5.4
5.5
Aligned with this, there are a number of planned and ongoing developments to the Study Area’s key research and innovation assets. These include: •
£65m expansion plans for the Daresbury Science and Innovation Campus, building two further technology centres in computational and sensor-detection systems
•
a second innovation centre (ic2) at Liverpool Science Park, providing a further 3,700 sq m of floorspace with nearly 1,000 sq m dedicated to laboratory facilities (scheduled for completion in Spring 2009)
•
the possible expansion of The Heath Business and Technical Park by a further 17,000 sq m within three years, enabling it to house a further 100 companies
•
a new biomedical research unit, to be set up from £5 million of funding awarded to the University of Liverpool and the Royal Liverpool University Hospital, which is going to be re-built in the city centre over the coming years66.
However, given the current economic downturn, there may be question marks over whether some of the more ambitious plans will be realised in practice or scaled back. Skills
5.6
If the Study Area’s economic growth potential is to be fully realised, employees will need to possess the higher-level skills demanded by high-value businesses. In 2005, 347,000 people working full-time in the Study Area were qualified to NVQ level 4 or above; by 2016, this number is projected to reach 361,000 people, a 3.8% rise over the period (to put this figure into context, the equivalent increase in the region as a whole is projected to be 2.9%).
5.7
At the district level, Stockport is projected to experience the greatest percentage increase (9% between 2005 and 2016) in the number of highly-skilled employees, with Salford (8%), Manchester (7%), Trafford (6%) and Liverpool (5%) also expected to witness significant increases. However, in terms of sheer numbers, it is (unsurprisingly) the two cities of Manchester (an additional 6,000 full-time employees) and Liverpool (3,000 full-time employees) that are projected to see the largest increases in the Study Area.
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10 8 6 NW average = 2.91%
4 2 0 -2 -4 -6
EP & Neston
Halton
Sefton
Wirral
St Helens
Warrington
Tameside
Knowsley
Study Area
Liverpool
Trafford
Manchester
Salford
-8 Stockport
% change in number of full-time employees with NVQ4+ (2005-2016)
Figure 5-1: Projected change in number of full-time employees qualified to NVQ4+ in the Study Area districts, 2005 to 2016
Source: Experian Business Strategies Limited ©
5.8
Aligned with these findings, the Study Area is also projected to see an expansion in the number of people employed in higher-level occupations67 – a 10.7% rise over the period 2005-2016 (translating into some 246,000 people). Most of this growth, in terms of workplace rather than residence, is projected to occur in the Manchester, Trafford, Salford and Stockport districts, all of which are within Greater Manchester.
5.9
Of course, it is all very well saying that economic growth projections indicate a large rise in the number of highly-skilled people within the Study Area and, associated with this, growth in higher-level occupations. The practical reality is that such people will need to be attracted to live and work in the area in order to fill these jobs, as only so much of the projected increases will be met by the incumbent population. Attracting these people will require a much more holistic approach which takes into account wider factors, especially quality of life issues such as housing and cultural/leisure offer, in addition to providing well paid, high-level employment opportunities. This is an issue covered in detail throughout this Report. Higher education
5.10
Research-intensive universities are often portrayed as more interested in national and international collaboration, but the picture is really more varied and complex than that. All institutions are building up their engagement activities with local/regional employers and through knowledge exchange with businesses. Ongoing research into the economic impact of the North West’s HEIs for the NWDA by SQW reveals that: •
Within Greater Manchester, MMU tends to focus on world class professionals; Manchester on international research; and Salford on engineering and technology (complementary roles)
•
From the RAE 2008 results, a number of diverse areas of research excellence were highlighted the University of Manchester including; Cancer Studies, Nursing,
67 Defined as managers and senior officials; professional occupations; and associate professionals and technical occupations
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Biology, Dentistry, Engineering, Sociology, Development Studies and Music and Drama68
5.11
•
Liverpool University has research collaborations with other institutions all over the world that are a major potential source of influence and intelligence. In the latest 2008 HEBCI report, the University had the most collaborative research income and was placed top in the region for KTPs. Organisations engaging with the University include Unilever, BAe Systems, Airbus, Jaguar, Pilkington, NHS, Liverpool City Council and Unison
•
From the results of the RAE 2008, a number of major research areas were highlighted for Liverpool University. Such research strengths were identified as Materials Science, Infections and Immunology, Chemistry, Computer Science and Earth & Ocean Sciences. The University also has recognised strengths in a number of other diverse subject areas including English, Irish Studies, Veterinary Science, Physics, Applied Mathematics and Health Science69
•
Liverpool University is also developing a new Materials Discovery Centre in a joint venture with Unilever and with funding from TSB, University money and EU funding. This is a model that industry quite likes, but it does make it more difficult in the future to enter into contract research agreements with Unilever who would expect activity to go through the Materials Discovery Centre. Pharmaceutical companies are also keen to be involved with university research
•
LJMU has a strong vocational identity working with industry, and linking research to the private sector. The business team’s primary role is to identify opportunities and to develop collaborations. The business team has formed a network of Enterprise Champions within each Department at LJMU which collectively provide areas of expertise to meet the demands of potential collaborative opportunities with the private and third sectors. This promotes cross-working between Faculties and Schools. Sectoral strengths include: Engineering and manufacturing; Management development and leadership; and Creative and digital.
•
LJMU and Merseyside Special Investment Fund have joined forces to launch a new programme in May 2008 to help turn academic ideas into commercial businesses. The joint Proof of Concept Funding Programme supports the commercial development of leading-edge technologies emerging from LJMU's research portfolio, allowing LJMU to fast track ideas and inventions out of the laboratory and into the commercial marketplace.
Whilst these individual Higher Education Institutes (HEIs) are seen to conduct high quality research across a number of different research areas, there is ongoing cross-collaboration between these HEIs and other external partner organisations. Below, the research team has identified two specific examples where on the face of it, there would appear to be scope for 68 Subject areas extracted from the University of Manchester (18/12/09) (http://www.manchester.ac.uk/aboutus/news/archive/list/item/?id=4255&year=2008&month=12) 69 Subject areas extracted from the University of Liverpool Press Release (18/12/09) (www.liv.ac.uk/news/press_releases/2008/12/rae.htm)
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greater collaboration to build upon research strengths across the HEIs and partner organisations within the Study Area. A couple of examples of research areas underpinned by joint working and areas where there appears to be scope for greater collaboration are presented below: •
Bio-technology and pharma - this is a major area research strength within the Study Area, with numerous collaborative initiatives in place. For example, the North West Institute for Bio/Health Informatics (NIBHI) is a cross-HEI initiative70 to strengthen linkages between academia, industry and the health service. Similarly, The Consortium for Post-Genome Research was established in 2001, between the Universities of Manchester, Liverpool, Salford and Lancaster along with the Science & Technology Research Council. The Consortium brings together complementary and strategic areas of molecular research to build on the outcomes of the Human Genome Project.71 Furthermore, given the mix of HEIs, private sector firms and their research facilities within the Study Area, this could be a major sector opportunity for growth in the future
•
Nuclear energy – this offers another key sector opportunity for HEIs and suppliers in the Study Area given the key strategic developments in West Cumbria. The University of Manchester conducts cutting-edge research within its Dalton Nuclear Institute and likewise, at the Department of Physics within Liverpool University, international-class research is conducted. Additionally, wider partnerships now exist. For example, the Cockcroft Institute at Daresbury Innovation Park is a collaborative venture between these two universities and a number of other academic and industrial partners and the Science & Technology Facilities Council (STFC). More widely, these institutes have also forged academic and research collaborations with the nuclear sector across the wider region, such as at Sellafield on the west coast of Cumbria.
Employment land and premises 5.12
The development of employment land and suitable business premises in the Study Area will be necessary to meet its growth requirements. Future developments within the cities of Manchester and Liverpool are particularly important as these are the primary locations for business and employment. However, developments in the wider city regions and at other important nodes, including Warrington and Halton, also add significantly to the growth potential of the Study Area.
5.13
In terms of key developments in the pipeline, study research shows that Manchester city centre will need to absorb approximately 1.4 million sq ft from 15 commercial office schemes scheduled for completion in 2008 and 2009. However, there are few confirmed speculative commercial developments planned beyond 2009, and development appears to be slowing in the period to 2010.
70 NIBHI is located at the University of Manchester and linked to the Universities of Liverpool, Salford, Lancaster, UCLAN, Liverpool John Moores and Daresbury Laboratories. (www.bionow.co.uk/pages/index.php?page_id=1045) 71 See http://www.liv.ac.uk/pgcons/index.html
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5.14
In Liverpool, key pipeline developments include the Pall Mall Development Area, which will deliver 1.5 million sq ft of commercial office space and is supported by the English Cities Fund; and St Paul’s Square, which will deliver approximately 600,000 sq ft of commercial office space, which is currently in Phase Two of three phases. Alongside these, the refurbishment of 100 Old Hall Street (The Plaza) will deliver 365,000 sq ft of high quality commercial office space, the upgrading of Horton House and Walker House at Exchange Flags by UK Land and Property and Pochin, brings another 360,000 sq ft, and finally, work is currently underway at Mann Island to create an additional 140,000 of new build grade A commercial office space.
5.15
In terms of sector-specific developments, the completion of MediaCityUK at Salford Quays will provide significant employment opportunities in media and related industries. When completed, the mixed-use development will contain some seven million sq ft of business, residential and retail floorspace.72 As well as employing over 15,000 people directly on-site, a number of indirect jobs will be created from the boost it will give to the media, creative and cultural sectors in the Study Area and region. Ocean Gateway
5.16
Peel Holdings’ ‘Ocean Gateway’ scheme contains some of the largest pipeline developments to be built across the Study Area over the next few decades, and encompasses both Manchester and Liverpool. Costing an estimated £50 billion, it represents the largest private sector investment in any geographically definable part of the UK at present73.
5.17
Peel’s transformational vision is to establish the River Mersey, the Manchester Ship Canal corridor and JLA as an important source of new jobs, investment, development opportunities and environmental improvements. Key long-term projects which support this vision include: •
the Superport – based upon integrating Liverpool City Region’s Ports, JLA and Freight community, this concept incorporates a number of developments intended to establish the area as the most effective and cost efficient environment for freight cargo logistics and passenger transit within the UK74
•
Liverpool Waters – a £5.5 billion scheme to develop upon a 150 acre site in a prime waterfront location in Liverpool’s north docks. The development is expected to include two million sq m of offices, hotels, residential, supporting shops and services housing a population of 50,000 and providing around 17,000 new direct jobs75
•
Wirral Waters – the part of Birkenhead docks selected to undergo comprehensive redevelopment, lasting at least 30 years. When completed, it is envisaged that the £4.5 billion scheme will provide approximately 15,000 new homes, 27,000 new direct full time jobs and over 750,000 sq m of retail and commercial development76.
72
http://www.mediacityuk.co.uk/ Ocean Gateway brochure, Peel Holdings 74 See paragraph 5.51 for a mode detailed overview of developments around the Superport concept 75 See http://www.peelwaters.co.uk/LpoolWaters.html 76 See http://www.peelwaters.co.uk/wirralwaters.html 73
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5.18
Peel’s investments present a major opportunity for the North West – and the Study Area – to compete more effectively with other parts of the UK, and with cities and regions across the global economy. The focus of the Ocean Gateway is on raising the profile of the region in a positive way, encouraging inward investment and wealth creation, and bringing new people and businesses to currently under-performing areas; in turn, this will encourage people to make homes for themselves in the North West and to contribute to and benefit from its future economic growth. Transport infrastructure Key potential developments
5.19
Within the Study Area, there are also a number of planned major transport developments with significant potential to support significant GVA growth. These address capacity constraints in the current infrastructure (for further details, please refer to the Data Report), both within the Study Area itself and in terms of its wider regional and national links, particularly to other key economic nodes. Particularly important is the Mersey Gateway development to link Central Expressway in Runcorn with the Eastern Bypass and Speke Road in Widnes, providing an estimated £650 million worth of benefits to road users over a 30 year period.
5.20
At the time of writing, a number of these developments are still to be taken forward or committed – these include, for example, the strategically important Manchester Hub package of rail improvements or enhancements to Liverpool’s Central station. Table 5-1 lists the Study Area’s transport developments and priorities. Table 5-1: Key developments and priorities for road and rail infrastructure in the Study Area Development
Key statistics / issues
Road Mersey Gateway
A £431 million project that will provide a landmark new bridge over the River Mersey, linking the Central Expressway in Runcorn with the Eastern Bypass and Speke Road in Widnes. Subject to public inquiry, it is due to open in 2014. The bridge will have a huge impact on relieving congestion across the exiting Silver Jubilee Bridge, improving the connection between the Liverpool City Region with North Cheshire and the rest of the North West (and indeed to the UK). It will allow easier access to work and leisure facilities, as well as leading the infrastructure investments required to drive regeneration in Halton. It will lead to the direct creation of jobs as well as opportunities for local and regional businesses, in addition to an estimated £650 million worth of benefits to road users over a 30 year period77. It is anticipated that the bridge will help provide a boost to the economic performance not only of Halton, but also to the North West region as a whole.
A5036 Port of Liverpool access
Identified by the Northern Way as a key medium-term road issue to improve road access to the Port of Liverpool
M60 Junction 12 to 18
Identified by the Northern way as a key medium-term road issue, including road widening to reduce congestion.
Rail Manchester Rail Hub developments
Manchester Rail Hub is a key bottleneck on the North’s rail network – as such, it has been established as a priority for development by the Northern Way. DfT has asked Network Rail to work with the Northern Way and begin a study on how
77
‘The Mersey Gateway – The Benefits’ at http://www2.halton.gov.uk/merseygateway/content/theproject/thebenefits/?a=5441 66
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Development
Key statistics / issues best to increase the number of trains able to run through Manchester. This will potentially enable more and faster trains to operate which link and cross Manchester central stations to stations in Liverpool, Central Lancashire, Sheffield and Leeds, and through to Newcastle, Middlesbrough and Hull. Provision for major works to address the problems at the Manchester Hub identified in this report did not feature in the HLOS/SOFA prepared by DfT in July 2007 which set out the Government’s high level plans for the railway for 2009-14.
Manchester Metrolink
Extension of current tram system north and south including potentially to Manchester Airport, Stockport, Altrincham, and the Trafford Centre. Recent research for Manchester Enterprises78 suggested that the planned Metrolink expansion could generate some 3,200 new jobs in central Manchester by 2026. Facilitation of a move to more productive jobs as a result of the Metrolink and through pure agglomeration benefits, the benefits to 2026 would be a total of £139m and £20m respectively.
Merseytram
The development of a 3-line tram network is seen as a means of providing access to key employment facilities across Merseyside, as stated in the Local Transport Plan79. Line 1 of the 3-line project represents a critical component of the local Strategy and the wider City Centre Movement Strategy. At a cost of some £300m, it will provide a vital increase in public transport capacity of sufficient quality to attract car users to public transport. It is a key element of the regeneration of the Liverpool-Kirkby corridor.
Network Rail improvements and developments
Short term (to 2009): •
More peak capacity to/from central Manchester and Liverpool
•
Alleviating crowding at congested stations
•
Better links between Liverpool and Manchester
•
Better links between Manchester and Central Lancashire
•
Manchester Airport services
•
Improvements east of Manchester
Medium term (2009 – 2014) •
More peak capacity to/from central Manchester and Liverpool
•
Investment at Salford and Victoria
•
Improvements east of Manchester
•
Liverpool freight improvements
Long term (from 2014) •
More peak capacity to/from central Manchester and Liverpool
Source: SQW Consulting
5.21
Further to these developments, in late 2007, the Department for Transport (DfT) announced that £670m would be invested in transport across the North West region between 2008/09 and 2010/11. The lion’s share of investment will take place within (or around) the Study Area, particularly in Greater Manchester and Merseyside. Airports
5.22
The Study Area’s two airports – Manchester Airport and Liverpool John Lennon Airport – are two of the region’s largest economic assets. They have significant capacity for further growth and, by doing so, could make a greater contribution to the regional economy and offer greater opportunities for businesses and residents alike. 78
See http://www.manchester-enterprises.com/documents/Metrolink_Report_01-Aug-08.pdf ‘The Local Transport Plan 2006-2011’, Merseytravel, available at http://www.letstravelwise.org/ltp/localtransport-plan-2006-2011.html 79
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5.23
Forecasts suggest that by 2015, Manchester Airport could be handling some 38 million passengers a year, potentially rising to around 50 million passengers by 2030. There are no significant expansion plans earmarked for the Airport; the focus, as detailed in the Airport Master Plan to 2030, is on improving transport links (such as trains and the Metrolink) to help people get to the airport more easily. In the period through to 2015, it is expected that there will be an overall increase in demand for air travel (of between 4% to 6% per annum) and continued growth in the ‘no frills’ market80.
5.24
Strong traffic growth is also predicted for JLA. By 2015, total annual traffic throughput is forecast to reach 8.3 million and by 2030, it is expected to reach 12.3 million. European scheduled traffic is forecast to be the main source of growth, rising from around two million at the end of 2004 to 7.6 million in 203081. It has recently been announced that KLM is going to start flying from JLA to Amsterdam Schiphol in March 2009, thus linking the airport to a major global hub. This will provide access to over 100 worldwide destinations on KLM’s inter-continental network and over 650 destinations across KLM’s SkyTeam partner networks82. The Manchester Ship Canal
5.25
The Manchester Ship Canal acts an important link between the cities of Manchester and Liverpool. The canal stretches 36 miles in total from the mouth of the river Mersey and Eastham on the Wirral to Salford Quays. The seaway was first opened to cargo in 1894 and currently handles in excess of six million tonnes of freight each year. Such freight ranges from cargoes such as containers to coal, chemicals, oil and grain. In addition to the maritime activities undertaken at the Port of Liverpool and Salford Quays, there are also pockets of activity at locations such as Ellesmere Port, Runcorn Docks and Irlam.
5.26
The Manchester Ship Canal forms an important component in the ambitious Ocean Gateway plans that have been announced by Peel Holdings. The proposed investments focus on enhancing the Canal and surrounding areas as a hub for international trade, distribution and logistics and an environmentally friendly alternative to road haulage83. Liverpool Superport
5.27
As part of Peel Holdings’ ‘Ocean Gateway’ concept, plans are in place that will bring together and integrate the current strengths of the Ports, Airport, Ship Canal and Freight community in the Liverpool City Region to create a ‘SuperPort’, which will become the most effective and cost efficient environment for freight cargo logistics and passenger transit within the UK. This concept has been built around the Port of Liverpool, the Manchester Ship Canal and Liverpool John Lennon Airport, which are all under Peel’s ownership, as well as the Mersey Multimodal Gateway (3MG) site now owned by the Stobart Group and other key locally-owned infrastructure.
80
Manchester Airport Master Plan to 2030, Manchester Airport Airport Master Plan to 2030, Liverpool John Lennon Airport (November 2007) 82 See http://www.visitnorthwest.com/news/flights-from-liverpool-to-amsterdam/ 83 http://www.merseydocks.co.uk/manchester-ship-canal/ 81
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5.28
5.29
The continued physical development of the SuperPort will come from planned expansion projects including: •
the post-Panamax container terminal facility at the Port of Liverpool – this £100 million facility will be able to accommodate two new generation post-Panamax container ships, handling some 500,000 teus a year84
•
the 3MG Inter-modal developments in Halton – supported by investment of £4.3 million from the NWDA85, this will create up to 1,200 jobs in distribution, logistics and warehousing
•
the rail freight scheme at Parkside – the interchange will bring over £400 million of investment to the area, creating around 10,000 jobs on site86
•
and the development of the World Cargo Centre at JLA – by 2030, it is envisaged that this will be able to carry some 220,000 tonnes of freight a year87
•
alongside these developments, Peel Holdings is also investing/planning to invest in Port Salford, a key intermodal terminal, with a view to stimulating further growth in waterborne trade.
These developments are vital to the freight community and their customers, which include international trading companies, and will bring significant economic opportunities to the Study Area (particularly in the Liverpool City Region) and wider North West. Importantly, it will help penetrate existing freight markets further, as well as creating new ones and filling newly identified gaps in the market such as the import of consumer goods that would typically be carried on South East Asia/Far East shipping services. Housing stock and land
5.30
Projected economic growth within the Study Area is likely to put increasing pressure on the local housing market. It will be essential that the housing offer, in neighbouring districts as well as in the Study Area itself, is able to meet the needs not only of existing residents but also of potential residents and workers employed in professional and high-end occupations. Failure to do so could undermine the area’s growth potential.88
5.31
In spite of the current downturn in the housing market, which has been experienced nationally, there are a number of opportunities to take forward the Study Area’s housing offer, creating a higher quality, more diverse and more affordable stock of housing. Below, we set out the ongoing developments in the Study Area and the key policy drivers on housing.
84
‘Port of Liverpool: Introduction’ at http://www.portofliverpool.co.uk/port-of-liverpool/ http://www.nwda.gov.uk/news--events/press-releases/200801/grant-for-3mg-site.aspx 86 Parkside 2010 Plans, available at http://www.parkside2010.co.uk/plans.html 87 Airport Master Plan to 2030, Liverpool John Lennon Airport (November 2007) 88 This is a key point noted in ‘Making Housing Count in the Manchester City Region: The Prospectus’, AGMA (October 2007) 85
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Ongoing developments
5.32
Nationwide, the housing market is currently experiencing a significant downturn, which began around 2007/08. It is difficult to forecast with any degree of accuracy just how long this is going to last for. However, the housing market will rise again and when it does, provided the North West and the Study Area in particular has a good supply of residential land, it should be well placed to again attract house-builders looking for opportunities within the region.
5.33
Across the Study Area, ongoing developments and plans have been impacted by this national trend. As the market has stalled, many sites previously earmarked for large-scale housing are now under review and some developments have been mothballed. However, there are a number of key developments being taken forward which are worth highlighting. Below, we summarize the developments which are taking place in the economic centres of Liverpool and Manchester, based upon research undertaken by Drivers Jonas for this study. Table 5-2: Key trends and issues in Liverpool’s residential property market •
Many residential developments in Liverpool city centre are near completion in line with deadlines for 2008, the Capital of Culture year. Developments currently on site or nearing completion include the Jugglers Yard and Hamilton House, both in Marybone, and the Elysian House scheme in the Ropewalks area of the city centre. Developments currently on site in the city centre amount to some 1,900 new homes with another 2,900 new homes in the pipeline
•
There is evidence that development is changing in line with market trends in Liverpool. For instance, the Port of Liverpool Building, which was initially proposed to contain 18 premium apartments, is now coming forward with a reduced residential element. Plans for the Chieftain Grand Central development have also been revised and the English Partnerships’ Lime Street Gateway improvement scheme has also changed from the original plans
•
The increasing cost of borrowing and cooling of the residential market is also evident at the Baltic Triangle scheme, which initially included the development of 330 apartments and around 1,500 sq m of retail space. Work halted on the scheme in June 2006 and in April 2007 three skyscraper cranes were removed from the site
•
Another development where work has slowed is St Patricks Court, off Great Crosshall Street. Property Regeneration Homes gained planning permission for the development of 50 residential units on the site in 2005 and aimed to complete the development by the end of 2008.
•
However, evidence to suggest that a city centre residential market still exists can be found at Mann Island where only 90 of the 376 units remain despite the building works being at a very early stage. This demonstrates that high quality ‘iconic’ developments in Liverpool can weather the current economic difficulties and are still in demand.
Source: Drivers Jonas
Table 5-3: Key trends and issues in Manchester’s residential property market •
Manchester has been at the forefront of city living, as reflected in the number of new homes recently developed in its central area. In 2001, this amounted to 700 new homes; by 2005, when activity reached its peak, this had risen to over 3,000 completions
•
Despite market pessimism, headline numbers remain relatively high. Last year, around 2,300 new homes were completed in the city centre and another 2,200 are due to be delivered in 2008. However, only 1,300 units are currently underway and scheduled to be completed in 2009, and around 600 further units are earmarked for completion between 2010 and 2012. This may suggest that the development activity is slowing down
•
Nevertheless, pipeline proposals at present amount to some 13,800 units. In total, around 4,400 homes are currently under construction, a 16% rise on the level 12 months earlier when 3,800 were being progressed.
•
Some developers have taken a pragmatic stance in response to the changing market by opting to develop in phases to minimise risk. Others are tapping into various niche markets, one of which is providing iconic mixeduse schemes comprising five-star hotel standard residential amenities
•
This trend is exemplified by West Properties’ recent developments in Manchester, who having completed Skyline Central in 2006 – where residents enjoy a 20-metre swimming pool, a spa and concierge service – have now started on the Origin. This entails development of three landmark glass buildings on Whitworth Street comprising 180 luxury flats, office space, shops and a hotel
•
Despite recent historical strength, the Manchester residential market has changed and will continue to do so. Reduced house price inflation is most visible in rising vacancies, providing clear evidence that market
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confidence has fallen in comparison to this time last year. Source: Drivers Jonas
Policy drivers
5.34
In future years, the Study Area’s housing assets will be strongly influenced by the key national policy agendas of Growth Points and Housing Market Renewal.
5.35
The Department for Communities and Local Government announced a second round of Growth Points across England in June 2008, which allow for a major increase in housing provision in areas of significant demand. Within the Study Area there are three full Growth Points, in Greater Manchester (covering Manchester, Salford, Trafford and Bolton), Mersey Heartlands (Liverpool) and Halton, St Helens and Warrington. A fourth Growth Point in West Cheshire includes areas within Ellesmere Port and Neston.
5.36
Overall, these Growth Points provide the opportunity for around 24,000 extra homes over and above the emerging figures in the RSS – just under half of these additional units are accounted for by Greater Manchester (see Table 5-4). Table 5-4: Growth Points including housing growth ambitions, 2008/09 to 2016/17 Growth Point
2003 RPG (Dwellings per annum)
Emerging RSS (Dwellings per annum)
Total dwellings proposed 20082016/17
Of which additional
Percentage Uplift over draft RSS
Gtr Manchester
2,600
6,256
67,572
11,268
20%
Halton / St Helens / Warrington
1,110
1,450
18,756
5,706
43%
Mersey Heartlands
1,260
2,450
26,460
4,410
20%
848
1,317
14,553
2,700
23%
West Cheshire
Source: CLG, Second Round Growth Points Partnerships for Growth (July 2008)
5.37
The Study Area also contains two Housing Market Renewal (HMR) Pathfinders: New Heartlands across Merseyside and the Manchester-Salford Pathfinder. These will see nearly £300 million of investment by Government over the 2008-11 period (around £150 million for New Heartlands and £140 million for Manchester-Salford Pathfinder). In New Heartlands, this will deliver around 2,500 new homes, 1,500 acquisitions and around 2,000 demolitions in areas of Liverpool, Sefton and Wirral89, leveraging in major private sector investment to drive sustainable regeneration. The Manchester-Salford Pathfinder aims to have overseen the construction of over 30,000 new homes across the inner-core of the Manchester conurbation by 2018, supporting regeneration and housing market stabilisation. ICT network
5.38
In terms of ICT infrastructure in the Study Area, the development of Next Generation Access (NGA) will be key to the future expansion of, and improvements to, internet access across the UK economy, as it will be across the developed world. In the long-term (over the next five to 89
See http://www.newheartlands.co.uk/assets/_files/documents/nov_07/nh__1194261108_NewHeartlands_Business_Pla n_20.pdf 71
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ten years), this development will be crucial to realising the growth potential of the Study Area economy, by providing essential support to some of its key sectors which are reliant on such technological developments such as the creative industries, financial services, software and gaming90. 5.39
Of course, developments around this technology will take place at a much wider geographical level than the Study Area and will be strongly influenced by national Government policy and major providers such as Virgin Media and BT. Nevertheless, as a critical component of the Study Area’s future digital infrastructure, it is vital that the major players locally are engaged in ongoing developments. In this respect, the implementation of the Manchester Digital Strategy91 will be a key driver in ensuring that super-fast broadband is put in place across the city region.
5.40
Wireless connectivity on the main rail route between Manchester and Liverpool could also potentially deliver significant benefits to the Study Area economy in terms of time savings. Such an initiative is currently being taken forward through the Glasgow-Edinburgh Collaboration project92.
5.41
More widely, recommendations for the future development of ICT infrastructure in the North West, based upon survey research undertaken by SQW and GfK NOP93, are as follows:
5.42
•
The NWDA and partners should intervene to influence increased adoption and exploitation of ICT across the SME business base, recognising that different levels and mixes of ICT are appropriate for different business segments (in terms of size as well as sector)
•
The NWDA should investigate further the factors preventing SMEs from accessing overseas markets via their websites, and consider intervention to address any market failure. At present, only a minority of SMEs are actually succeeding in generating significant export opportunities through their online presence.
Given that a large proportion of SMEs in the region are either based or have operations in the Study Area, following these recommendations will be of significant benefit to the Study Area’s growth potential. Utilities and waste infrastructure Utilities
5.43
A key study into the state of the North West’s utilities infrastructure94 has recently been completed. It outlines a number of constraints and opportunities for the development of a more competitive utilities market in the region. The opportunities can be summarised as follows: 90
Review of Barriers to Investment in Next Generation Access: Final Report, BERR (September 2008) Available at http://www.manchesterdda.com/moonkin/wp-content/uploads/2008/06/mcc-executive-reportdigital-strategy-march-08.pdf 92 See’ Wireless on the Move Study: Final Report to the Glasgow-Edinburgh Collaboration Project’, SQW Consulting (29th October 2007) 93 Northwest Business ICT Survey 2007, SQW Consulting and GfK NOP (March 2008) 94 North West Utilities Infrastructure Study: Final Report, NWDA (August 2008) 91
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•
Development of renewable energy technologies and production, linked in to the region’s well-established expertise in the nuclear sector
•
Opportunities for roll-out of newer technologies, especially the next generation of telecommunications
•
Building on existing skills strengths, particularly in the nuclear sector, as well as emerging skills in renewable technologies.
5.44
There are particular opportunities to develop tidal energy technologies off the coast of Liverpool/Merseyside. A recent report for the Sustainable Development Commission95 indentified two locations for such developments: a large-scale 700MW scheme for a tidal energy barrage across the Mersey Estuary, and a 340MW tidal energy lagoon at Liverpool Bay off the coast of North Wales96.
5.45
The water supply capacity of the North West region is considered to be sufficient to cope with current and predicted demand for the medium to long-term, to 203597. United Utilities has proposed to invest some £350 million into improving 800km of the North West’s largest water pipes over the next eight years.
5.46
Particularly important is the development of a bi-directional pipeline between Merseyside and North Manchester – the ‘West-to-East link’. The link, due to be completed by 2011/12, will further increase the integration and flexibility of supply within the ‘Integrated Resource Zone’, transporting up to 100 million litres of water every day. The new pipeline will help to maintain adequate water supplies to Greater Manchester and Merseyside. Waste
5.47
In the North West, three PFI projects have been approved (as part of the Spending Review 2004) to develop new and sustainable waste management facilities. As of 28th July 2008, all three were still at the procurement stage98: •
In Greater Manchester, a £109.5m PFI project was approved in January 2005. This will house five mechanical biological treatment (MBT) plants, two materials recycling facilities (MRFs), four in-vessel composting plants and one Energy from Waste (EfW) plant
•
In Merseyside, a £90m PFI project was approved in April 2005, providing one MBT plant and one refuse-derived fuel burner
•
Cheshire County Council had a £40m project bid approved in May 2006. As in Merseyside, this will provide one MBT facility and one refuse derived fuel burner (although both will operate at a smaller scale than in Merseyside).
95
‘Tidal Power in the UK: Research Report 5 – UK case studies’ AEA Energy & Environment for the Sustainable Development Commission (October 2007) 96 Therefore, this falls under the North Wales region rather than the North West of England 97 As reported in the ECOSEG study being undertaken by SQW Consulting 98 Please refer to http://www.defra.gov.uk/environment/waste/localauth/funding/pfi/projects.htm for more details on the specific PFI projects, including estimated capacity and operational date 73
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5.48
Although waste is still often considered a problem by policy-makers, it is now widely accepted by commentators that it can also offer an opportunity to regional and sub-regional economies, as it is essentially a resource that can be utilised. Recycling is a growth area in most regions across the UK and internationally. Further, the Study Area and the wider North West has some particular strengths to play to and much of the solid waste (municipal and industrial) can also be recycled. For example, two Resource Recovery Parks (RRPs) are planned for the North West. The RRP planned at the Ince Marshes by Peel Environmental proposes to create facilities aimed at recycling, recovery and the reprocessing of waste materials. More specifically, the development will include a Refuse Derived Power Plant, an Integrated Waste Management Facility and an Environmental Technologies Complex. Currently, planning permission for the RRP has been submitted to Cheshire County Council and is under consideration99. In addition, INEOS ChlorVinyls has been granted planning permission to operate an Energy from Waste generation plant in Runcorn. The £300 million facility will combine heat and power to convert waste to energy. It is expected that the plant will increase the incineration capacity of the region by approximately 800,000 tonnes per annum100. Environmental assets / green infrastructure
5.49
Ongoing economic development in the Study Area is likely to put increasing pressure on its environmental assets over the coming years. However, the development and adoption of more sustainable forms of production and cleaner technologies can reduce the impact of economic growth on the local and regional environmental assets. Recent research undertaken by SQW into the Environmental Considerations of Sustainable Economic Growth (ECOSEG) for the NWDA101, reported that there was a complex picture emerging in terms of the interplay between sustainable economic growth and environmental considerations. The ECOSEG research demonstrated there was a wide range of challenges and opportunities that needed to be addressed across the North West, including the Study Area. The key opportunities that were identified by the work around renewables and housing are summarised below: •
Renewable energy – renewables play an important role in the effort of decoupling economic growth and carbon emissions. Maximising the take-up of renewable forms of energy delivers a number of objectives from contributing to meeting the demand, increasing security of supply, diversifying the portfolio, utilising local/regional resources and developing a whole sector of the economy. The North West, and indeed the Study Area, is rich in renewable energy resources, including offshore wind, biomass and tidal. Waste-to-energy is another potential opportunity for the Study Area
•
Housing – while housing can be considered an important challenge for the Study Area, it also presents an opportunity in terms of regeneration, improving the overall stock performance through higher-standard new homes, locating new housing
99
http://www.incerrp.co.uk SQW Consulting, 2008, The Environmental Considerations of Sustainable Economic Growth 101 The full set of ECOSEG reports are available at the NW RIU website: http://www.nwriu.co.uk/2674.aspx 100
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strategically to both minimise environmental impact and stimulate economic growth, enhancing quality of life and the Study Area’s attractiveness. 5.50
Aligned with this, protecting and nurturing the wider region’s significant environmental assets will help ensure that places in the Study Area and surrounding districts remain attractive to current and potential residents and entrepreneurs. It is linked to an area’s overall quality of life which, as we know, is one of the key determining factors behind where workers employed in high-end occupations choose to live – this is important given that we have already established that attracting such workers will be a significant part of realising the Study Area’s full economic growth potential. Cultural assets
5.51
There exists across the North West, and within the Study Area in particular, a vast and diverse range of nationally/internationally significant cultural assets and organisations. This infrastructure plays a vital role in enhancing economic growth prospects, for instance through attracting knowledge workers and visitors to an area, as well as through direct employment. Indeed, the cultural sector was estimated to have employed 12% of the region’s workforce and contributed some £15 billion to the economy in 2003102. In this instance, the cultural sector was defined to include: arts, creative industries, heritage, museums, libraries and archives, sport and the visitor economy.
5.52
Focusing specifically within the Study Area, key recent developments include a new £70 million Museum of Liverpool at Mann Island, which is set to open in 2011. The museum is supported by an £11 million investment from the Heritage Lottery Fund and is expected to attract over 750,000 visitors per annum to Liverpool. Also, Liverpool delivered a successful European Capital of Culture programme throughout 2008, which has delivered lasting benefits in terms of raising the City’s profile and changing perceptions. One of the major new developments in the City was the recently opened Liverpool Echo Arena and Convention centre at King’s Dock.
5.53
Further assets situated in the Study Area include museums such as the Tate (Liverpool), Walker Art Gallery (Liverpool), World Museum Liverpool (Liverpool), Foundation for Art and Creative Technology – FACT (Liverpool), the Mersey Maritime Museum (Liverpool), the International Slavery Museum (Liverpool), the recently refurbished Blue Coat Arts Centre (Liverpool), the Museum of Science and Industry (Manchester), the Imperial War Museum (Trafford), the Boat Museum (Ellesmere Port) and the University of Manchester’s Whitworth Art Gallery (Manchester). The Halle and Royal Liverpool Philharmonic orchestras, the Royal Exchange Theatre (Manchester) and Manchester International Festival are also key cultural assets of note103.
5.54
In 2002 the Commonwealth Games were hosted in Manchester, with supporting events held more widely across the Study Area including, for example, at the new Manchester Aquatics Centre. Further, the Study Area’s key nodes of Manchester and Liverpool are also home to major, internationally known, football clubs – and their grounds – such as Liverpool, Everton, 102 103
Culture Northwest, 2006, Culture Guide to the 2006 Northwest Regional Economic Strategy Culture Northwest, 2006, Culture Guide to the 2006 Northwest Regional Economic Strategy 75
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Manchester United and Manchester City. Sefton hosts Aintree racecourse and the refurbished Grade 1 listed Albert Dock in Liverpool, both major tourist attractions drawing visitors and expenditure into the Study Area104. 5.55
The transfer of key departments within the BBC to Salford and MediaCityUK has been an important and much talked about recent development in Greater Manchester. The development of MediaCityUK will provide a major boost to the creative and cultural industries sector in both Greater Manchester and the wider Study Area. Further detail on the Study Area’s cultural and creative assets is provided in Annex A of this report. MediaCityUK Concept MediaCityUK will create a purpose-built media community at Salford Quays, Greater Manchester, for all media sectors, including broadcasting, film, publishing, digital, advertising, mobile and gaming. It offers the unique combination of a dedicated world-class hub for content and technological innovation within an established Digital & Creative cluster. Scale In June 2007, the BBC decided to move five major departments – Learning, BBC Sport, Radio Five Live, Children’s, Future Media and Technology – to the North West as the anchor tenant of MediaCityUK. By 2011, it is expected that 2,500 BBC staff will be employed on-site, irrespective of the indirect jobs it will stimulate. The development as a whole will contain 700,000 sq ft of office space, 200,000 sq ft of studios, and 60,000 sq ft for retail and leisure facilities. State-of-the-art facilities and infrastructure will be provided, including the largest highdefinition studios ever built in the UK. The development will include a Media Enterprise Centre, a Northern Centre of Excellence in Media Enterprise and Skills, and a Media Research Institute. Overall, the completed MediaCityUK will deliver over 200 million in additional net value-added each year, attracting private sector investment of over £300m in the first phase alone, and providing space for an estimated 1,150 media, creative and related businesses as well as employment opportunities for 15,500 people. Wider benefits The development will provide a dynamic environment for media, creative and related businesses, of all sizes, to thrive. The presence of some ‘major players’ will strengthen the supply chain, provide North West businesses with access to emerging technologies, attract new investors and encourage more of the region’s graduates to stay to participate in collaborative forms of open innovation, research and development. Fast-moving and innovative SMEs equipped with the talent, technology and capital to exploit their ideas to maximum advantage, will be presented with vast commercial opportunities to significantly expand their business. SQW Consulting
Translating assets into high value growth Growth corridor or clusters? 5.56
As set out in Section 2 and through the detailed case study reports in Annex B, focusing support on specific geographical areas where the need for diversification is perceived to be highest and/or where there is a large concentration of key economic assets, can be seen as a means to stimulate increased competitiveness in regional economies. However, this does not only relate to growth corridors. The concept of clusters also incorporates the idea of geographical concentration of inter-linked activities. However, such activities do not necessarily 'cluster' along transport corridors, or in target areas in need of regeneration.
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Therefore, measures to support the growth of high tech clusters in the North West may or may not have a geography which coincides with our Study Area. Establishing a USP for the Study Area and maximising its cluster and knowledge economy opportunities 5.57
From the study team’s extensive review of the literature during phase 1 of the work, it is clear that much has been written about the development of clusters in recent years, some of it very thoughtful, much of it confused. However, there is little doubt that genuine clusters of business can provide a major engine for economic growth, but many groupings of firms do not necessarily comprise integrated clusters. Firms in the same sector may locate in the same area for sensible business reasons, such as proximity to transport infrastructure such as Manchester Airport, or access to specialist labour markets, but in a genuine cluster you would also expect to see strong supplier and customer linkages, use of specialist business services, and both co-operation and competition among the core firms.
5.58
It is clear from the case study material that one of the key challenges for policymakers in terms of supporting the transition to a modern knowledge based economy in the Study Area, will be to identify those business areas with substantial growth potential - whether existing or embryonic - and ensure they have the requisite support for success. For knowledge based sectors this is likely to include access to research and technology, specialist business and financial services, a labour market with appropriate skills, property which suits the needs of firms and their workforce, and a good quality of services and environment. Knowledge economies make optimal use of a wide range of knowledge in science, technology, engineering, design and creativity, and foster industries which rely on this knowledge endowment for their success. The knowledge-base of an economy is determined by its capacity and capability to create and innovate new ideas, thoughts, processes and products, and to translate these into economic value and wealth.105 The results of such processes are knowledge creation, absorption, transfer and ultimately wealth creation. Knowledge economies, as demonstrated by our case study materials, are characterised by having large concentrations of industries that are focused on innovation, knowledge, information and high skill levels.
105
As cited from the UK Competitiveness Index 2008, Centre for International Competitiveness (2008). 77
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6: Conclusions
Purpose 6.1
This section pulls out some of the main issues from the preceding analysis and provides some pointers as to the potential policy implications. It is structured around the five over-arching questions that the study set out to answer: •
Is there a growth corridor between the core cities of Manchester and Liverpool?
•
What has been driving recent GVA growth in the Study Area?
•
What might drive GVA growth in the Study Area in the future?
•
Overall, what is the economic growth potential of the Study Area?
•
What are the potential barriers to growth in the Study Area?
Is there a growth corridor between the core cities of Manchester and Liverpool? 6.2
The study noted that the question as to whether there was a growth corridor between Liverpool and Manchester arose as a result of the work of the North West Regional Economic Forecasting Panel, which had remarked on the positive growth story identified by data at the NUTS3 level.
6.3
It looked at the experience from elsewhere on the characteristics of growth corridors and identified a number of key features:
6.4
•
strong collaboration between the public and private sectors and local HEIs
•
a strong sectoral focus and identity
•
anchor companies with a serious commitment to research and development
•
proximity to world class universities and research institutes and an appetite for innovation
•
governance arrangements that are clearly focused on the economic development.
The study reviewed both data and stakeholder views on the existence of a corridor to see to what extent the Study Area had these features or could be considered to be a growth corridor. The study found there was limited support for the view that a growth corridor actually existed and limited expectations that one could be developed. The most common view among stakeholders was that there were growth nodes, and that Manchester and Liverpool were the main dynamos of economic growth, although Chester and Warrington (amongst others) were also seen as being important.
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6.5
The data showed the Study Area is far from being what might be thought of as a single ‘functional economic geography’, which the growth corridor concept implies. Instead, it appears to function as a number of overlapping functional geographies that are broadly aligned along major transport routes, with workforces supplied, for the most part, by those who live locally, supplemented by others, some of whom commute significant distances.
6.6
Furthermore, the study found a multiplicity of locations for work. with concentrations of workplaces in the centre of the major cities and around intersections between transport routes.
What has been driving recent GVA growth in the Study Area? 6.7
The study looked at economic data on performance in the Study Area. It found that GVA growth was driven in part by a 200,000 rise in those in employment (1.2 million to 1.4 million between 1996 and 2005); with productivity (GVA per employee) pretty much the same as the regional average, but below the national average. Skill levels rose – in line with national trends – supporting both employability and individual productive potential.
6.8
The study also looked at which were the most important business sectors. It assessed the data on the basis of changes in employment and output and found a positive story for transport and communications, financial and business services, hotels and catering.
6.9
In terms of enterprise, the study found variation within the Study Area, with business startups higher in Manchester, Salford, Trafford, Sefton and Warrington than in other parts of the Study Area.
6.10
With regard to innovation and knowledge, the study found a greater degree of concentration within the Study Area, relative to the regional average – but particularly high levels of activity in Manchester, Halton and Warrington, followed by Stockport and Liverpool.
6.11
The study found investment concentrated in Manchester (of the £6 billion of private commercial expenditure in the Area £2.5 billion was in Manchester), along with Trafford, Liverpool and Warrington. Thus, urban renaissance contributed to growth in GVA, as well as more expected factors such as increased numbers in work and improved skill levels.
What might drive GVA growth in the Study Area in the future? 6.12
The study looked at stakeholders’ views on what might drive growth in the future. It found that the view that growth in the future would follow similar patterns to that of the past was common, but some stakeholders saw the potential for a changed economic geography at the end of the current economic downturn. They saw potential for the two city centres to strengthen their positions – perhaps with relocations out of London, and the impact of proposed investments in Merseyside and Greater Manchester by Peel Holdings, the BBC and others – and they saw potential for towns and districts outside the cities to benefit from relocations and spillover effects from the two cities. There were also those that highlighted the importance of sectors that did not want to locate in city centres, as they relied on access to the transport network, and the potential attractiveness of the ‘offers’ made by towns and districts outside the corridor.
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6.13
However, it should be noted that stakeholders wanted a more supportive planning system and better coordination of public sector decisions were seen as being vital to supporting future growth, along with a stronger unity of purpose. However, improved transport infrastructure across all modes was identified as the number one priority to unlock growth in the Study Area. Improved rail links between the two city centres were highlighted as a specific priority.
Overall, what is the economic growth potential of the Study Area? 6.14
The study looked at the growth potential of the Study Area – with consideration of the data in terms of city-region and sub-regional economies and, where appropriate, business clusters. It also looked at the assets that the Study Area has to offer potential investors and that have the potential to be developed as a means of promoting economic growth in the future.
6.15
The econometric analysis showed the potential for GVA growth of the Study Area at around 2.2% to 2.3% a year – above the regional average, but below the national average (although these projections may be revised down given further economic slowdown since they were produced). It should also be noted that these projections do not take account of major developments, such as MediaCityUK (the development based in Salford Quays, surrounding the relocation of the BBC) and Ocean Gateway (a £50 billion investment strategy to establish the River Mersey and Manchester Ship Canal corridor, supported by other major projects, including the Superport in Liverpool, and Liverpool and Wirral waterfront developments). Thus, there is a question for policy-makers of how best to prepare the ground so that major ‘pipeline’ investments are used to the benefit of the Study Area’s economic development to both counteract the recession and capitalise on the opportunities arising from them, once there is an economic upturn.
6.16
The study found that the Study Area had a number of significant assets – in terms of research capability, teaching and workforce development, inward investment opportunities, quality of life and visitor potential amongst others. These assets have the potential to offer opportunities to increase productivity within the Study Area – by increasing the working age population, upping investment in research and development and improving health outcomes to increase economic activity. In addition, access to highly skilled workers in neighbouring areas such as North Cheshire, West Wirral and North Sefton were also identified by stakeholders as being an important asset for the Study Area. The challenge for stakeholders in the Study Area is to develop the relationships between those operating and using the assets, so that value is added from the interactions between the assets and those using them. For example, by improving links between spatial and transport planning so that people can more easily ‘work’ a range of different assets, as they are easily navigable, and aligning public sector investment decisions that enhance the Study Area’s assets; and by supporting the soft infrastructure that enables professional networks to develop and generate agglomeration economies.
6.17
When testing out stakeholder views, the study found that – notwithstanding the current economic downturn – stakeholders thought the patterns of growth that had prevailed in the recent past would continue in the future. In particular, Liverpool, Manchester and Warrington were expected to continue to grow and develop as key nodes of activity – with some commentators suggesting Manchester may grow at the expense of other parts of the Study Area and some indicating that Liverpool had the greater growth potential, as it had not grown 80
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as fast as Manchester in the past and part of its infrastructure still benefited from some spare capacity. 6.18
However, there were some stakeholders who thought the sectors experiencing growth in the future may change and/or that the geographic pattern of their location and development may also change, in particular where cost considerations may mean people move to non-core areas to keep costs down. Thus, there is a question for policy-makers as to how far they aim to support the on-going concentration of economic activity in the current centres and how much they wish to track and support any shift in the pattern of economic development due to new priorities resulting from business responses to the recession.
What are the potential barriers to growth in the Study Area? 6.19
The study sought to identify practical barriers to growth and to specify market failures, where there may be a case for public sector intervention, institutional failures where there may be a case for changes to public sector intervention, and equity issues, where there may be a case for intervention based on social justice or re-distribution of either opportunities or wealth.
6.20
The study sought stakeholder views on constraints to growth. These identified transport as the key constraint, followed by the need for a more supportive planning system and leadership at the level of the Study Area (or at least across administrative boundaries). Thus, stakeholder consultations focused more on institutional failures than market failures or equity issues.
6.21
Skills were mentioned by some people as an issue, but in the main skill shortages were not cited as a major constraint on economic growth. However, a lack of basic skills was identified as a problem, resulting in local people not always being able to benefit from emerging employment opportunities. It was also reported that some employers were suffering, as lack of basic skills in their workforce undermined their competitive position – indicating a potential need for public sector intervention on the grounds of both equity and potentially market failures associated externalities. Furthermore, in terms of sustainable development, some consultees argued local pools of labour should be retrained in order to take local jobs, thereby reducing commuting distances and the burdens it placed on the environment – pointing to a case for intervention on the grounds of market failure due to externalities. It should be noted that stakeholder interviews were conducted before the full impact of the ‘credit crunch’ had become apparent, so responses did not reflect concerns over access to credit and loss of growth due to a general decline in demand in the world economy.
6.22
Stakeholders highlighted a number of interventions that they thought would be useful in overcoming barriers to or constraints on growth. These included: •
joint lobbying involving public and private sectors to get investment in transport
•
development of a transport assessment tool at the level of the Study Area, so that impacts of developments are understood on a consistent basis
•
investments in specific transport projects, such as the Manchester Hub, and improved East-West routes and ticketing arrangements between the two core city centres
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6.23
•
improve linkages between the transport and spatial planning processes, in order to unlock future growth potential
•
better alignment of public sector investments to ease the development process and lead to more sustainable development
•
build on the existing city-regions, following the Sub National Review.
Thus, policy-makers should consider how they can support the city-region development process, as part of their response to the Sub National Review. Equally, they should explore how they can encourage the development of the city-regions to ensure spatial and transport planning are more effectively co-ordinated than in the past and how different agencies can be supported in working across administrative boundaries as they increasingly focus on functional geographies. This may be most effectively thought of as the regional and subregional element of a Russian Doll that is then covered by Northern Way projects on pannorthern transport issues, innovation and private sector investment.
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