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Low skills and poor productivity ‘will hold back UK after Bexit’, report warns

Low skills and poor productivity ‘will hold back UK after Bexit’, report warns

🕔22.Sep 2016

Low levels of skills, productivity and innovation in most UK cities will make it difficult for industry to prosper after Britain leaves the European Union, a new report claims today.

Nine out of ten UK cities are performing below the European average in terms of productivity, and more than half are among the 25 per cent least productive cities in Europe.

More than three out of four UK cities have a lower proportion of high-skilled residents than the European average. UK cities are also home to the third highest concentration of low-skilled residents, behind only Spanish and Polish cities, according to Centre for Cities Competing with the Continent study.

The study argues that the Government must build on its devolution agenda by giving places the powers they need – and which European counterparts already enjoy – to grow their local economies.

Only six British cities – Brighton, London, York, Reading, Oxford and Cambridge – have a lower share of low-skilled adults than the European average. Birmingham falls in the range of 31 to 41 per cent of residents having low skills, sharply above the European average.

The study also examines productivity, comparing the largest UK cities with their nearest European counterpart based on population. Lyon, in France, is 25 per cent more productive than Birmingham.

READ: RSA Inclusive Growth Commission exposes myth of trickle down economics.

Out of 330 European cities, Birmingham is in 265th place for productivity with GVA per worker of £43.28 compared to £68.90 in London.

Most UK cities fall below the European urban average for skills, productivity and innovation – weaknesses which the report says must be addressed to help cities across the UK to compete globally, particularly for the knowledge-intensive firms and jobs which are increasingly important for boosting growth, employment and wages.

Only two UK cities, Cambridge and Oxford, are in the European top 20 for innovation, and around four out of fall below the continental average. Despite its vibrant economy, London only generated 8 patents per resident in 2011, compared to 26 patents per resident in Paris and 10 in Berlin.

The UK economy relies on a handful of high-performing cities for growth. London is the biggest economy in Europe, and accounts for a quarter of the UK’s economic output – more than Paris’ contribution to the French economy (20%), and significantly bigger than Berlin’s role in the German economy (4%).

Given these findings, the report argues that strengthening UK city economies – by tackling skills-gaps and empowering places to boost local growth – must be a top priority for the Government in its new industrial strategy, and in the forthcoming autumn statement. The report notes:

This matters because it affects the ability of UK cities to attract business investment, create jobs and grow both their own economies and in turn the UK economy as a whole.

UK cities cannot compete with Eastern Europe for lower-skilled investment because they are too expensive – labour costs in Bulgaria are six times cheaper than the UK. But because of the large number of people with few or no qualifications, many UK cities struggle to compete for higher-skilled investment too, particularly those further north. All but six UK cities have greater shares of their residents with few or no formal qualifications than the European city average.

The result is that UK cities are much less productive than cities on the continent. Just six cities had higher productivity than the European city average. And of the UK’s largest cities, London was the only city to outperform this average.

The underperformance of UK cities is even starker when looking at low skills. The UK stands out in Europe regarding the share of low-skilled residents in the population, both at the national and city level. UK cities have a significantly higher share of low-skilled residents compared to cities in most other European countries, with 34 per cent of the urban population having not achieved five good GCSEs.

Alexandra Jones, chief executive of Centre for Cities, said:

No other economy in Europe is so dependent on the performance of its cities, yet too many of the UK’s urban areas are failing to realise their potential. For the country to thrive in the years to come, it’s vital that the Government works with cities to address the skills and productivity gaps holding most places back.

In particular, the Government should ensure that any new funding commitments in the Autumn Statement focus on boosting the key drivers of growth in cities, such as skills, transport and housing. Over the long-term, it should also build on its devolution agenda by giving places the powers they need – and which European counterparts already enjoy – to grow their local economies.

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