Northern Powerhouse must focus on productivity not rail links, says think tank

The Northern Powerhouse will only succeed if instead of focusing on inter-city rail links, it boosts the productivity of cities that currently lag some 40 per cent behind their European counterparts, a new report has argued.

Think tank the Centre for Cities said regions such as the Rhine-Ruhr in Germany and Randstad in the Netherlands, which have been cited by the Government as models for its Northern Powerhouse, are not successful because of the extensive connections between their cities, as it often assumed. In fact, the report says, their inter-city commuting links are little better than the North of England.

Their economic success is based on strong performance of individual cities. In 2011, for example, greater Amsterdam had a gross value added per worker of £75,188, while Bonn had a GVA of £73,857. This compares to £46,575 per worker in Leeds, £44,159 in Liverpool and £43,572 in Manchester.

The average productivity of the Northern Powerhouse cities was £42,816, compared with £60,169 for the Rhine-Ruhr and Randstad cities.

To boost productivity, the report calls for a focus on addressing skills gaps in Northern cities. Its research shows that only three - York, Warrington and Leeds - are currently in the top 20 UK cities in terms of residents education to degree level. Nearly half of people living in Reading (47 per cent) have a degree, compared with just a quarter in Liverpool.

It adds that strengthening transport links within cities should be a bigger priority than creating more inter-city links. The think tank said that improving connections between cities such as Manchester and Leeds will boost economic development, but links that help people to access jobs within their wider city-region will have a bigger impact on productivity.

The report also argues that city-region governance will be vital. The North is comprised of several economies that operate at city-region scale and face distinctive challenges in terms of skills, planning and local transport. Policy decisions should therefore be taken at city-region level and the paper urges national and local leaders to continue the push for devolution deals for Northern cities. Where decisions need to be taken on pan-Northern issues, such as creating Transport for the North, they should be taken in a way that "best supports these city-regions to prosper".

Alexandra Jones, chief executive of the Centre for Cities, said: "We can't build a successful Northern Powerhouse without stronger, more productive cities. The Government's initiative has the potential to have a huge impact in addressing the North/South divide, but only if it maintains its original focus of boosting productivity in major Northern cities such as Manchester, Leeds and Newcastle. These big urban areas have the most potential for growth in the region, but are currently underperforming, especially in comparison to cities in more successful areas such as the Rhine-Ruhr and Randstad areas.

"Instead of spreading limited monies and political focus equally across the whole region, national and local policymakers should concentrate most resources on addressing the economic challenges that big Northern cities and their city regions face, as these have greatest potential to deliver benefits for the North as a whole."