Alexandra Jones is the Chief Executive of the independent think tank Centre for Cities
As Theresa May returns from holiday this week, one of the top items in her in-tray will be a plan to boost British businesses and jobs, as the Government prepares for Brexit and negotiations regarding continued access to the single market.
The new Prime Minister has promised to build an economy that works for everyone, and a new industrial strategy that will drive growth “up and down the country, in rural areas and our great cities”.
To deliver on this promise, the Government’s strategy must reflect the nature of the national economy and how it is changing – by recognising why businesses choose to locate and invest where they do, and the global trends that influence which industries the UK is best-placed to compete in.
In other words, for any economic plan to be successful in raising prosperity and extending opportunity to all, it has to identify and respond to the economic strengths that different places offer.
New research from the Centre for Cities has mapped out the landscape of the UK economy, and shows that the fastest-growing sectors of the economy are increasingly clustered in dense, vibrant urban areas – with British cities now home to 59 per cent of all jobs, despite accounting for just 9 per cent of the land.
Crucially, businesses exporting within Britain or internationally are also increasingly attracted to city centres, where they play a key role in boosting jobs in the wider suburbs and rural areas, and in other sectors such as retail and leisure.
Employment in these firms has risen by 13 per cent in city centres since 1998, but has fallen by 15 per cent in rural areas, resulting in a loss of 109,000 jobs in these places.
This isn’t just about the number of jobs available, but the kinds of jobs too. In her first Prime Minister’s Question, Theresa May stressed that she does not want to simply boost employment – she also wants to create more high-skilled, high-waged jobs. The sectors which are best at generating these jobs (such as the creative, digital and professional industries) are predominantly based in city centres.
These businesses are choosing to crowd into urban centres because they offer the strong transport links, access to skilled workers and customers, and proximity to ideas that other types of places lack. To enjoy those advantages, firms are willing to pay on average 3.5 times more rent than they would be charged in rural areas.
This demonstrates that even if it were deemed desirable to move economic activity to other parts of the country, businesses may be unwilling to follow. If the Government were to channel investment away from cities to other parts of the country, firms have indicated that they are likely to move to other better-equipped cities in other countries, rather than to rural areas in the UK.
But cities only work if they have strong links with their suburbs, hinterlands and rural areas, where so many of their workers, customers and suppliers are based. Indeed, a fifth of all people who work in cities British live in nearby rural areas.
The best way, then, to raise prosperity for the majority of people is to make the most of cities like Manchester, Birmingham and Leeds – and their neighbouring areas – by investing in improving skills and transport links across urban and rural areas.
The previous Government came a long way in recognising the diverse roles that different places play in the national economy, especially in its drive to devolve more powers over the key drivers of economic growth to major city-regions in England. Now May needs to build on this progress, by putting Britain’s great cities at the heart of the new industrial strategy, in order to drive up growth and extend prosperity across the country.