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Adonis Review ‘paints distorted picture of economic growth’

The UK’s national growth picture is much more complicated argues The Enterprise Research Centre’s Mark Hart

Last week’s much anticipated Growth Review from Lord Adonis paints a robust but distorted picture of the state of economic growth across the UK’s regions.

One of the report’s central recommendations makes the case for greater devolution of power from Westminster, with Adonis arguing: “It is time to give our city and county regions the powers they require to promote growth. Local Enterprise Partnerships (LEPs) – as the regional voice of business – need to be significantly improved.”

Despite this, much of the Adonis review fails to accurately capture the true state of regional growth across the UK and oversimplifies the nature of the regional contrasts. And it makes the mistake of overplaying the extent to which the UK’s regions lag behind London.

While London, as a world-beating global financial hub, will always be a jewel in the UK’s crown, for too long the UK’s other potential powerhouse cities and regions have been largely overlooked.

The Enterprise Research Centre recently undertook research across all 39 of England’s Local Enterprise Partnership areas (LEPs). Our data shows that no single Local Economic Partnership area is strong across all metrics of growth in the private sector – including net job creation, start-up survival rates, proportion of fast-growing firms and the growth in turnover of start-ups and established businesses.

Crucially, it demonstrates that, the UK’s national growth picture is much more complicated than that painted by the Adonis report.

Take job creation, an area highlighted by Lord Adonis as extremely imbalanced in the UK, claiming that four-fifths of net private sector jobs between 2010 and 2012 were created in London.

Not as reliant on London for growth as people think

Yet our research supports statistics from the Office for National Statistics that show that the UK is far less reliant on London for job creation than the report claims.

The vast majority of private sector jobs have over the 12 months to March 2012 been created outside the capital, with ONS data showing that over 75% of all new private sector jobs have been created outside London.

While London created 551,000 gross new jobs the Local Economic Areas in the Midlands and the North created almost double that number of jobs (just over 1 million).

It was not just the cities in these areas that were creating jobs with the more rural areas in England such as Cumbria, Lincolnshire and Worcestershire making an important contribution as well.

Furthermore, our research also shows that proportionally more jobs were created in Derbyshire and Nottinghamshire Local Economic Area between 2011 and 2012 than in London, casting further doubt on the myth that London is the runaway job creation hub.

Contrary to popular opinion, ERC research found that four of the UK’s biggest cities are the four most difficult areas in the country for start-ups to survive.

Between 2009 and 2012 start-ups were far more likely to survive in Oxfordshire, Yorkshire or Buckinghamshire than the urban metropolises of London, Birmingham, Manchester and Liverpool – cities often championed as start-up incubators and drivers of economic growth.

I do not doubt that the Adonis report can serve as a useful tool in highlighting how the UK’s regional economic power should be structurally realigned away from the capital towards the UK’s regions.

But this is not a new argument, and for the Report to serve as the bedrock for new policy formation it makes little attempt to address the influence of non-urban areas, whilst the ‘hidden’ sources of job and value creation that already exist across some of the UK’s regions continue to be  ignored.

To suggest at this time London is the UK’s solitary economic powerhouse ignores the complexities and nuances of the UK’s economic landscape. There is no doubt that greater economic devolution is required.

But this does not mean the rest of the UK is currently cowering in London’s shadow and we need to build on the sources of growth which are clearly in evidence across many local economies and sectors in England.

Mark Hart is deputy director at The Enterprise Research Centre (ERC), the UK’s leading centre for independent research on SME and growth.

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