Northern England requires about £50bn in government infrastructure spending if it is to close the economic gap with the south, an analysis of the region’s challenges has concluded.
The government’s “northern powerhouse” strategy to close the north-south divide can only succeed with substantial extra funding over the next 20 years, the report by think-tank IPPR North says. Backed by professional services firm KPMG, the think-tank says halving the gap between the north’s output and the national average would add £34bn annually to the region’s £289bn economy.
But it would take £33bn of transport investment to match the level of spending per head in London, and a reallocation of government research funding. Just 7 per cent of the latter is spent in the region, which accounts for 19 per cent of the UK’s economy.
The northern powerhouse aims to group big cities in the north of England in a single area to replicate the “London effect” of a massive and efficient labour market. But travel times between them are double those in the south-east and plans to electrify the Leeds to Manchester and Sheffield to London routes were put on hold after May’s general election.
Network Rail has set out options for upgrades and new lines in the north, costing up to £60bn but no money has been committed.
Richard Threlfall, KPMG’s UK head of infrastructure, said: “The north has huge potential, it should be in the premier league of world economies but is currently condemned to mediocrity because of lack of investment. The poor connectivity within and between our northern cities is throttling our productivity and weak national and global links are restricting our trade.”
The north received £2.5bn less in transport spending than the national average in the last parliament, the report showed. It said while planned spending per head for 2015-16 was £2,604 in London, in the north it was £380.
Stripping out projects defined as “national” such as Crossrail, London received £332 per capita in 2013-14, compared with £166 in the north, and £189 in other regions.
This lack of investment, along with a historic reliance on manufacturing that has been hit by foreign competition, has left the north with a less skilled and less productive workforce. Manufacturing accounts for 14 per cent of its gross value added, against 10 per cent nationally.
Only 52.4 per cent of the population holds at least a level 3 qualification, considered necessary for “skilled” job, compared with 56.5 per cent nationally. Labour productivity is £26.88 per hour compared with £30.05 for the UK as a whole.
The north loses tens of thousands of graduates and other skilled workers to the rest of the UK annually. However, it is creating jobs as quickly as the rest of the country and the gross domestic product of its five biggest cities together grew 38.8 per cent in the 10 years to 2013 — matching the UK outside London, which saw 38.3 per cent growth.
Ed Cox, director of IPPR North, said business leaders also needed to play a bigger role in transport and investment decisions.
“The historic economic underperformance of the north of England is not natural, nor is it inevitable,” Mr Cox said. “Investment, leadership and urgency are the key ingredients for turning northern powerhouse rhetoric into national economic prosperity.”