What does it take to unlock regional growth?

These changes bring the opportunity to transform place-based economies. But what will it take for place-based leaders to reignite growth engines across the country?

For decades, the UK has relied on national macro-economic levers and centrally-designed industrial policy. The UK hasn’t only favoured centralisation; at times it’s been almost anti-regional.

We needn’t dwell on the whys and wherefores – but we should consider the impact: persistent productivity gaps between places; infrastructure that doesn’t align with labour markets; and skills systems disconnected from local economies. And senior civil servants increasingly accept that the centre cannot see enough of what matters locally, let alone act on it coherently.

Regional economies continue to fall behind those of London and the South East. If our largest 12 cities outside of the capital enjoyed the same productivity as the national average, our economy would be £100 billion bigger today. And if they had the same economic agglomeration benefits as comparable European cities, this would add a further £20 billion.

Now there is a historic opportunity before us to change direction. Government is setting up a different framework for growth.

What it will take to succeed

For any regional growth strategy to be successful, our research on breakthrough innovation – drawing on our work with the UK Department for Energy Security and Net Zero (DESNZ) – shows that innovation must be the starting point.

Forget a return to the industries that once propelled prosperity. It’s about repurposing skills and capabilities to enable the industries of tomorrow to take root here, and how existing industries embrace new technologies and ways of working. Every part of the innovation ecosystem matter, from university spinouts and scale-up capital to foreign direct investment (FDI) and the diffusion of innovation.

Then, the strategy must be rooted in place. Humberside, for example, has the geography, infrastructure, and expertise to be a leading centre of innovation in the hydrogen industry. It has the pipelines, dual-fuel power stations, and grid connections needed for blue and green hydrogen alike.

Next, place-based and national growth strategies must complement each other. National intent provides a policy and funding compass, meaning that aligned place-based strategies are more likely to attract direct funding, procurement decisions, the cooperation of national public sector organisations, and targeted infrastructure spending.

To succeed, there must be input from and alignment with stakeholders across the private sector, academic institutions, community organisations, and government at all levels and a clear, visible leader to drive and orchestrate it.

They have the scale and mandate to address growth in a way which local leaders do not, as well as the proximity and capacity to stay focused on their place’s growth needs in a way that Westminster and Whitehall cannot.

To be effective, strategic authorities need the devolution of sufficient powers and funding. It took nine years and six deals for the Greater Manchester Combined Authority (GMCA) to acquire the powers and funding structure contained in the 2023 trailblazer deal. Other mayoral strategic authorities must be able to follow this path faster – and create new routes.

With the above in mind, there are three things that could help ensure faster devolution that more effectively supports growth:

1. Pragmatism

Strategic authorities’ ability to catalyse growth depends on the stability of the devolution agenda. There is no time to wait for the perfect deal. Nor is there any benefit in reopening arguments over how devolution ought to be done. A robust framework for mayoral strategic authorities can provide the basis in which agreements everywhere can be established and then evolved.

But arrangements made for the GMCA or West Midlands Combined Authorities (WMCA) should not simply be copied elsewhere. Our regions are different; one size does not fit all. Greater Manchester has an unusually coherent functional economic area and history of institutional and inter-authority cooperation. The boundaries of the GMCA’s jurisdiction line up well with the regional boundaries of the NHS and to a lesser extent the rail network. There’s also a clear administrative centre unlike regions including the North East or South Yorkshire, where some combined authorities have resisted perceived domination by their region’s largest cities. Misalignment can arrest progress towards an initial deal, which has halted progress in certain cases.

On the journey towards greater devolution, some principles are non-negotiable: clarity of purpose and vision; sufficient executive power to deliver results; and accountability to voters, stakeholders, and central government. Each region will need to define how those principles apply in their context. And there is debate about whether it’s better for devolution to go deeper on economic development issues before broadening out into other areas of public policy.

Pragmatism can mean starting small, a lesson demonstrated by the Metropolitan Region Rotterdam The Hague (MRDH) in the Netherlands. A total of 21 municipalities voluntarily convened in 2014 to create a regional authority that contains around one eighth of the country’s population, with the goal of developing its combined economy in a way that individual municipalities could not. It began with transport, then scaled with success into economic policy, innovation, housing, and environmental policy.

2. Joint initiative

Mayoral combined authorities depend on partnership and collaboration with their constituent local authorities, communities, businesses, and education providers. They know which infrastructure, skills frameworks, transport links, housing market interventions, and redevelopments are required to drive prosperity – bringing local jobs to local people.

Yet these partnerships will only bear full fruit with financial empowerment. The challenge is that central government naturally wants to see results before further committing to devolved funding, but without funding it is hard to deliver those results.

The best way out of this situation is to take the initiative and start working with local partners on developing and executing the growth strategy before the next devolution deal is signed. Not only will this demonstrate to Whitehall an ability to hold the necessary consensus; it also allows the strategy to show early results.

Political leaders rarely need to start from scratch in developing close partnerships with employers and universities. Usually there are already voluntary networks of relevant employers. There are also often existing statutory bodies that work to grow the local economy. But political leaders need to think about the long-term value of certainty and stability for business over more immediate political cycles.

The Cambridge phenomenon shows this in action. Over the past 50 years, some of the UK’s most innovative companies and technologies have emerged from the city and its environs, in large part thanks to partnerships between the University of Cambridge, local businesses, investors, and end-to-end innovation partners.

On the voluntary side, Cambridge Ahead brings together organisations with over 40,000 employees collectively, with the explicit intention of catalysing growth in the area. On the statutory side, the Greater Cambridge Partnership emerged from the Greater Cambridge City Deal in 2014 with a similar goal.

3. Capability-building

It is no small task to ignite growth in areas that have long fallen behind their international peers. While mayoral strategic authorities may be suited to this task in principle, in practice they require considerable support.

Staffing the strategic authority is a matter of utmost importance. Diverse teams should be recruited from civil servants, national delivery bodies, the private sector, and local government – bringing a range of skills, aptitudes, and understanding of how to get things done through collaboration.

Data and analytics capabilities will be vital to help develop the growth strategy and learn from experiments, while maintaining the support of local stakeholders and central government. Mayors will make far better cases for a given policy, decision, or investment when they have robust evidence to support it.

That requires constant engagement with departments and delivery bodies, and ongoing negotiation around further devolution. There is an important role for networks, summits, and organisations that can act as interconnectors between the different bodies, and who can speak the language of both Whitehall, city hall, and business.

Central government can support relationship-building capability through secondment programmes, and by embedding team members from relevant departments to support mayoral combined authorities as they mature. We’re supporting the Whitehall and Industry Group to develop their regional programme – an important step in building support for sub-national networks.

Regional leaders need to make the case for investing in the new authorities’ capabilities to support the common goal of growth, in a way that is acceptable to all affected. In doing so, those capabilities will mature over time and their impact will expand. Early indicators, not just in Manchester, but also in Liverpool and Tees Valley, have been positive.

Driving growth

Today, centralisation endures to an internationally unprecedented degree in England. Regions continue to trail behind the capital. But the decisive decade ahead can change this.

By reversing the centralisation mindset, strategic authorities are already changing who drives economic growth, slowly building the belief that growth needs to be place-based. The opportunity now is to accelerate devolution, power up institutional bodies, and embrace their role in catalysing growth.