Think globally, but act city-regionally
Author: Hannah BrownDate: 12/09/2008
Publication: New Start
Globalisation is changing the world around us. It is shaping the economic environment in which UK cities - and the businesses and people within them - exist. Globalisation, helps to explain key changes we have seen in the economy over recent decades such as the decline of heavy manufacturing in Birmingham and the growth of London as a global financial services centre. It also explains migration choices - internationally and within the UK - which have contributed to long-term population falls in many Northern cities that have suffered economic decline, such as Liverpool, and population growth in cities such as Cambridge that are hubs of international economic competitiveness for the UK.
Current economic debate is focused on the immediate impacts of the credit crunch and how to respond to rising fuel and food prices. But however long and however severe the current downturn becomes, global integration will continue, emerging markets will grow and trade flows will intensify, and those making policies that shape our cities mustn't be distracted by shorter-term concerns.
Globalisation makes the role of cities and city regions more important with some - like London and large regional cities - more important than others. Cities are hubs of economic activity and employment. They are the nexus of transport infrastructure which enables businesses and individuals to connect with the global economy and a wide range of trading partners. Their growing importance can be seen as competitive businesses are increasingly willing to pay a premium to locate in cities with infrastructure and leadership that support their success in the world economy. And cities will become yet more important as trade links grow, and globalisation continues to drive growth, with the UK specialising in knowledge-based industries that benefit from proximity to transport links, trading partners and knowledge centres.
But to enable UK cities to thrive, policymakers at national and city level need to understand better the impact of global economic integration on local economies.
Too often the debate on globalisation is biased to one side or the other. The Government extols the macro-level benefits of globalisation to the UK economy as a whole, as firms specialise and move up the value chain creating high-skilled jobs, and the UK gains from trade and attracts foreign direct investment. Conversely, other commentators focus on the downsides - of jobs lost to China and India, and burdens on public services from economic migrants.
In reality the truth lies somewhere in between. Nationally the UK is undoubtedly set to benefit from increased trade and investment flows, but many individuals and cities which grew up around more traditional industries such as textiles and shipbuilding stand to lose out and bear the costs of structural change and global competition. Policymakers cannot and should not try to turn the tide of global change, but we need more honesty about how cities should respond to globalisation based on a closer analysis of its costs and benefits.
Cities' experiences of globalisation will be determined largely by their economic history and geography, by their local industries, and by their own specific assets and strengths, including the individuals that make up their labour force. Cities that are well-connected and host businesses in high value, knowledge-based industries will attract investment, trade, mobile skilled workers, and jobs. Bristol and Cambridge are two cities that stand to do well out of global integration, having specialised successfully in high tech engineering, and biotechnology, and attracting investment from global firms such as Toshiba and Microsoft. London stands out as one of only very few truly global cities - a world centre for international business, for key world markets and transport and communication networks - Heathrow attracts more passengers than any other world airport, with Gatwick eighth in the list.
But focusing on these success stories overlooks the prospects for cities with concentrations of more traditional manufacturing industries, or which are isolated and poorly connected to key markets. These cities, many in the north, face significant economic restructuring, which can involve considerable costs for their residents as their skills become obsolete, and they may face periods of unemployment, or have to accept lower-paid jobs. Reminding the residents of Middlesbrough, who have suffered from the decline of their heavy industries, that the UK as a whole is reaping great benefits from trade will provide little comfort in a city where 20 percent of working-age people are claiming benefits.
So what can Government and city leaders do to make the best out of global economic change?
They need to recognise that UK cities - small on a global scale - need to collaborate on key issues to maximise their economic potential. In 2005, other than London only three UK cities were in the largest 150 cities by economic weight - Birmingham, Manchester and Leeds in 71st, 73rd and 85th place. And whilst projections to 2020 show London remaining in the global league at number 4, Birmingham, Manchester and Leeds are set to slip down the world pecking order to 79th, 82nd and 108th respectively. Size matters for businesses seeking to compete on the global stage, and cities elsewhere in the world can offer larger markets and deeper pools of labour.
But even though UK cities may be small, the UK is a densely populated country, and many major cities are close together. Within a 40 mile radius around Manchester -equivalent to the travel to work area of London - are located Sheffield, Liverpool, Bradford, Leeds and a cluster of other smaller towns and cities. By working together to build up strong and effective city-regions, and by collaborating on key issues such as transport, housing, and skills, cities can capitalise on their strengths.
City leaders also need to be much more realistic about their role in and contribution to the world economy. London is a truly global city, but the UK's regional centres cannot and should not aim to compete at the same level. Instead, they need to understand their key strengths and support their economies by focusing on what they are good at - backing ‘winning' sectors and avoiding more aspirational goals that are not based on a sound assessment of local economic potential. Transport, skills and other interventions need to be based on realistic ambitions, and building up links to the most appropriate markets. For instance, York does not compete with Tokyo, and should prioritise more effective links within the Leeds city-region and to other key cities in the UK to support its key growing sectors, such as financial services and biotechnology in order better to drive the regional economy.
Central to any economy's success and ability to respond to changing circumstances is the human capital it can develop, attract and deploy. To raise their economic performance cities need both higher-skilled people and higher-skilled jobs. Belfast can work hard to attract investment from financial services firms headquartered in Dublin and London - providing the right business space and infrastructure, but they also need the right people to attract the jobs. In addition to meeting employers' demand for skills and training, cities also need to ensure they are attractive places for higher-skilled, more mobile workers. They need to both retain the skills they develop and invest in, and they need to ensure a suitable housing offer and other amenities to make them want to stay.
Every UK city will be affected by globalisation, and city leaders do have a role in enabling their economies to benefit from new opportunities. Smaller businesses may need encouragement to take their first steps to export to new markets, and economic development teams need to work better with the Government agency UK Trade & Investment (UKTI) to ensure that this support adds the most potential value. Efforts to attract inward investment also need to make best use of the existing UKTI networks to target key sectors, rather than establishing separate investment promotion strategies -an investor in Chicago, or now in Mumbai, may want to invest in UK plc, but may initially understand less well the distinction between the West Midlands or Tyneside, so separate competing efforts are likely to be less effective in attracting investment, with the UK overall losing out as a result. More effective promotion through UKTI should then be complemented by city-level efforts to build up a strong and meaningful ‘brand'. ‘Greater Manchester' will mean much more as a brand to an outside investor than an unfocused strategy based around a broad coalition of smaller cities.
Finally, cities are key partners in helping those who stand to lose from globalisation. Globalisation benefits the UK economy overall, and national and local policymakers shouldn't attempt to turn back the tide of global change. But they need to acknowledge that in the medium term globalisation will produce losers as well as winners, particularly as jobs are offshored, and traditional industries decline. Many of these costs will be felt locally - like the decline of the shipbuilding in the North East, or the automotive industry in the West Midlands.
Without support for structural adjustment to more sustainable sources of employment, effects can be long-lasting - Hull is still suffering the effects of fishing industry decline brought on by global trade and exacerbated by the cod wars in the 1970's. Cities cannot and should not attempt to stop globalisation, but they do need to actively engage with the people and neighbourhoods that will bear the burden of change, working with local colleges and employers in growing sectors to help people develop the skills they need and adapt to the global labour market. The future prosperity of Britain's cities depends upon it.
A version of this article first appeared in New Start.
The report UK cities in the global economy is available at www.centreforcities.org/globalisation
