Forget Manchester, Rotherham offers a lesson in ‘good growth’

The government's devolution agenda emphasizes enhancing firm-level productivity and altering industrial structures for genuine regional growth, rather than merely focusing on surface-level infrastructure developments. Andy Burnham's administration is facing criticism from the media for concentrating on minor issues while neglecting crucial matters.

However, one clear and essential policy objective is the establishment of devolution. Plans are being formulated to create similar structures throughout England. While infrastructure projects like new roads and improved public transport are beneficial, they do not address the core issue. The shining example of successful transformation lies in Rotherham, where the Advanced Manufacturing Research Centre has shifted the area away from heavy coal and steel industries to high-tech manufacturing.

Manchester's growth, centered around services such as legal and AI sectors, is commendable, but to achieve a comparable second city status, productivity needs to be at least twice as high as it currently is. The main challenge in achieving "good growth in every postcode" is not a lack of competence but rather a history of superficial regional policies that merely patch up problems without resolving the underlying issues.

Decades of regional policy have been inadequate due to insufficient concrete analysis to develop effective strategies. Regional income disparities persist, both between regions and within local authorities. The primary reason for the UK's underdeveloped regions is the lower productivity of typical firms compared to those in London and the South East.

This wage disparity stems from two factors: the regional industrial structure heavily favors less productive sectors, and a significant gap in productivity levels even within specific industries. To uplift the regions, policy should concentrate on shifting industrial structures and boosting the productivity of existing firms.