240. Levelling Up 2.0: What Actually Works for Regional Growth?

0:00This podcast is brought to you by Carvana. Car shopping shouldn't feel like preparing for a marathon of paperwork. That's why Carvana makes buying and financing your car easy. From start to finish, search thousands of vehicles with great prices. All online, all on your time. And when you're ready, your new car shows up right at your door. It doesn't get better than that. Buy your car the easy way on Carvana. Delivery fees may apply. So good, so good, so good. Spring styles are at Nordstrom Rack stores now, and they're up to 60 % off. Stock up and save on Rag & Bone, Madewell, Vince, All Saints, and more of your favorites.

0:42How did I not know Rack has Adidas? Why do we rack? For the hottest deal. Just so many good brands. Join the Nordiclub to unlock exclusive discounts, shop new arrivals first, and more. Plus, buy online and pick up at your favorite Rack store for free. Great brands, great prices. That's why you rack. It's crunch time at work, and you need to bring wings to your workday. Visit redbull.com slash gettingitdone and answer a couple questions about your work style to get a Spotify customized playlist tuned to your productivity. Plus, score a can of Red Bull on us while you go from to-do to done. And remember, Red Bull gives you wings.

1:21Supplies are limited. Terms apply. Visit the website for more information.

1:36Hello and welcome to The Rest is Money with me, Robert Paston.

1:39Steph McGovern:And me, Steph McGovern. And today we are joined by Andrew Carter, who's the boss of the Centre for Cities. If you've not heard of them, they're basically a leading think tank looking at how we can economically improve the performance of our towns and cities. they advise on the government on things like urban regeneration leveling up regional equality productivity housing and everything in between and so it you know we wanted to get him on to get a bit of a snapshot of where we're at in terms of regional differences and where that we might see progress and what's kind of holding back productivity for our big cities and urban areas in the uk it's something we talk about a lot isn't it robert yes i mean the general point is this um britain's uk's productivity performance for the last 15 years has been incredibly disappointing it's uh you know risen uh a fraction of its trend before the global financial crisis before 2007 2008 and it also we've got we've had this low growth against a backdrop where output per hour that a typical person works and output per unit of capital owned by a business is low compared to other comparable countries so on some measures productivity in the UK is about a third lower than countries like Germany much lower than France way lower than the the US and these are all things we want to talk to Andrew about and just you know on that you know talking of productivity there's also big wage disparities too like you know the annual average workplace wage in London is 20 grand higher than then than in the lowest parts paid parts of the UK so so much to talk to him about in terms of productivity wages growth and everything in between so here's our interview with Andrew Carter.

3:45Steph McGovern:Angie, thanks for joining us. So we're at the end of 2025, the start of 2026. You guys, I know, put out your big reports looking at, you know, the future of cities, what's happening and, you know, where the productivity, the growth and everything else is, who's doing well, who isn't. What's the feeling at the moment? I know productivity has been something you've been looking quite closely at. It's something we're obsessed about talking about on the show. And you guys have talked in the past about the government, if they want to raise living standards, need to focus on boosting productivity in underperforming cities.

4:25Steph McGovern:So tell us a bit about that. Yeah, because I think that's an important sort of big framing point, which is if we do want to raise living standards in our urban areas, but also across the country, then we're going to need to get more growth and more productivity. As you know, you talk about this all the time, we haven't seen much growth and we haven't seen much productivity growth for the best part of a decade, maybe a bit longer. And if we don't get that kind of activity going, then we aren't going to see the living standards that we desperately need and indeed the government desperately needs.

4:58So I think that's quite an important framing sort of perspective because I think there is a bit of a conversation that maybe we can improve living standards by other means, by redistributing what we've kind of got between places or between people or between different sorts of households. And there's a role for that, but actually we just desperately need more. We desperately need more growth in the country. The second thing I would say, we see this a lot in our work, is that actually there is a particular geography to productivity and to growth performance in this country and one particular geography which we've seen for quite a long time is that essentially our the the city's urban areas that are more productive are almost exclusively in and around the greater southeast so they are places like reading obviously london but obviously places also places like milton keynes or brighton to an extent swindon even if you go down to Bristol, is a real pattern, a real geography to productivity performance in this country.

6:01And it's been there for quite some time. And that's partly where government policy, current government policy, levelling up as we had under previous administrations, recognised this point and then wanted to try and do something about it. The last part I'd make on productivity, which again makes Britain slightly unique, I think, compared to other OECD countries, comparable countries like France or Germany or Australia or Canada or the US, wherever, Netherlands, is that many of our bigger cities, so Greater Manchester, Greater Leeds, Greater Birmingham, Greater Sheffield, etc., don't do as well as their counterparts in those countries.

6:42And that's quite a problem for us if we're trying to get regional prosperity. We need Liverpool to be more prosperous. we need greater manchester to be more prosperous we need newcastle to be more prosperous so they drive the economy and economic growth in and around their regions as well and you've seen this again through various administrations last and current recognizing our big cities have a big role to play but they're not maximizing their potential as of yet so if you were going to look at the city or the urban area with the worst productivity performance and compare it with the place which I mean my understanding has always been that it is London which is the most productive part of the country what is the gap so the gap depending on who what you're comparing to I'll take two versions of that Robert first I think is to think if you think about our big cities so their their comparison to london they're roughly about 70 to 75 percent of what london is and that's kind of fairly historical so they're three quarters as productive as london leeds is a bit more it's about 80 percent places like birmingham are closer to 70 and just just below so that's one way of thinking about the differential between our big cities and the differential there is bigger than if you compare French cities you compare the gap between Lyon say and Paris the gap is smaller it's under 20 % rather than over 20 % so that's one way of thinking about it if you think more broadly about urban areas because we look at 63 urban areas across the country so you're taking a much broader and bigger perspective then really what you're looking at if you can play somewhere like Slough on the outskirts of London and you compare that to places like Mansfield or Doncaster, the productivity differential is basically twice.

8:40So Slough is twice as productive. Twice as productive. Historically, London's productivity advantage was hugely to do with finance, with the City of London, Canary Wharf. Is that still why London does relatively better? But that can't be the explanation of Slough versus Mansfield. Or is it the explanation of Slough versus Mansfield? Is Slough basically another place where basically finance jobs tend to be more prevalent? It's less finance in Slough. It's more IT and data. But your broad point is correct in a sense that the places that have historically done well and are beginning to do better, and you can see that in places like Greater Manchester or Leeds or Reading, what they're essentially getting is more of what we would call the new economy type activities, which are crudely the industries and the firms that were identified in the government's industrial strategy.

9:38So the more digital firms you've got, the more creative firms you've got, the more finance firms you've got, the more life sciences firms you've got, whichever ones you want to look at, the more of that that you've got, that drives up productivity. And then that also results in those places having higher wages as well. So that's crudely, obviously, slough is different from london different from manchester but just think about the extent to which they are getting i have been able to get more of this new economy type activity and if they get more of it then they typically do better on a productivity front and they typically do

10:12Steph McGovern:better that uh from a wages front as well so when you say um new um new businesses the the cutting edge technology and things like that are we also talking high value like are these businesses worth a lot as well are these and is that part of it yeah so they're worth they're worth a lot they sense they are high value added firms and high value added activities high value added jobs in a sense that what we also know about them is they're in those kinds of industries where to varying degrees the country at large has a comparative advantage so we are you know we have competitiveness in life sciences which is global in orientation what does that mean well we're able to attract the very high-end innovation activities, the high-end new economy activities, the high-end productivity activity, but we also sell what we then produce to other parts of the globe.

11:05You can see that in finances, you can certainly see that in creative, you can see that in digital. Because we're able to sell some of this activity to other parts of the world, that makes it very, very productive. That actually creates an awful lot of value, which then benefits the people in those industries but the places that have more of them as well so what struggling areas need then more

11:26Steph McGovern:than anything are more high value industries to locate there yes i mean that's a very that's exactly the right thing to think about in a sense that it's the absence of these things that that really explains why they do less well and then it's trying to think about how do we create conditions that gives these places or some of these areas are more to be more attractive but i think it's often in in our world in sort of urban policy we focus on what these places have already got and ask can we get more of it actually we need to think about the fact that they haven't got something that other places have and they need to get some of that rather than doubling down on what they've already got because that doesn't seem to be working for them it's not producing the productivity it's not producing the uh the wages that we desperately need in these places so on your model if you uh go to a place where output per person output per unit of capital is low living standards are low wages are low and you're thinking is that you know as a point of government policy.

12:36Let's try and get one of the big pharmaceutical companies to invest, create a research and maybe manufacturing capacity there, or let's maybe try and persuade one of the big banks to set up a processing center there. What is the chicken and what What is the egg in terms of getting that investment? Do you have to start with trying to ship people in with the requisite skills? If you just announce it, will people acquire the skills locally? I mean, one of the reasons why these places are often, you know, find it hard to attract this kind of investment is precisely because, you know, you've had a neglected local population who hadn't been helped to get the kind of skills.

13:32And then you've got a problem of, well, all right, if I'm going to invest there, am I going to be able to recruit the people I need? Are they going to, you know, if I'm going to have to persuade them to move from some other part of the country, you know, is there the, you know, is there the kind of, are there the kind of homes they want to live in? This is quite big and complicated stuff, really. Yes, it is. it's a little bit well it is quite complicated as you say Robert I think the way to there are different ways of thinking about it but I think it's not always helpful to think about it as a sort of a big bang approach that's sometimes what happens you see this with government you know government very deliberately said we're going to move quite a bit of the BBC up to Salford to Manchester and really build on on that I think and you can see that there's been enormous benefits to the greater Manchester economy as a result of that.

14:25Similarly, Channel 4 has gone to Leeds and that is beginning to have an effect on there. Now you have a bits of Bank of England and such. So you can see different models.

14:35Steph McGovern:Until they ditched the programme that was coming from Leeds every day that was providing loads of employment called Steph's Pack Lunch. But hey-ho, I'll hold my personal beef back. I'm happy to write a piece on how the government has not helped themselves by making those kinds of decisions. But yeah, so there's a sort of government-led approach. If you go back to the 1980s, maybe, the poster child for a long time was Sunderland and Nissan. And that was about encouraging foreign direct investment from somewhere else in the globe to come and be based in places like Sunderland. And what did they have?

15:14Well, they had quite a lot of land that was relatively cheap and they had quite a lot of labor that was relatively cheap and they had a sort of an industrial past, which meant there was a culture of these kinds of activities. There are different models. Whereas I'll give you a different one. You know, if you look now at Stoke, Stoke is still a struggling place, but Bet365 is quite a significant employer and a spinoff merchant in and around Stoke. And that's very much because in part the entrepreneur, the owner came from that part of town and has really kind of built up or is beginning to build up a sort of digital model.

15:46So there are different ways of thinking about it, but it's not just the big bang. I think all places, most places, will have something that can be encouraged, something that can be supported, something that can be helped to grow a little bit more. And I think that's partly the role of government, but it's also partly the role of local leaders is to find those kernels and try to make them a bit bigger and a bit better than they currently are and see that as a beginning to be a slow process of accumulation that's really the story about but many places they start someplace they move on they move on they move on and then suddenly you get skill if you're going to start somewhere do you start with trying to improve skills locally or do you start with you know basically advertising to big international businesses this is a place to come and then they turn up and they say well hang on a second it's a bit of a desert you know who am I going to recruit?

16:42You do have to start with the skills base and the skills profile in that place. You have to think very carefully and be considered about, do we have an education system in the school environment that is producing youngsters with the requisite qualification stroke skills to be competitive in the labour market, wherever that might be? And sadly, in many of our urban areas their school system is not is not as competitive as it probably could be so you're disadvantaged from the so that is the you do have to begin with trying to produce homegrown talent homegrown capability and then look to supplement that by bringing others in that want to take up opportunities for whatever reason and you complement and supplement that with what's going on that's part and parcel of what you see and you see this if you go to if you go to Newcastle or if you go to Birmingham or if you go to Leeds or go to Manchester or even places like Mansfield, the ones I was talking about, they are trying to do this.

17:41They're trying to underpin the ability of their schools and skill systems to produce homegrown talent and look to complement that to the extent that they can by bringing in outsiders. Because we're not in a position in this country anymore to really be looking for the modern-day Nissan equivalent. Those opportunities have gone. So we have to think about the extent to which we can provide talent and then supplementary activities that make us attractive to existing firms to grow and would-be firms to come and locate here, whatever industries they're in.

18:16Steph McGovern:But it's important, I guess, though, in this point you're making as well about Nissan, not to have an over-reliance on any single industry in any one place, because that's the danger. So Steph, can I ask you, as somebody who spent quite a lot of your adult life worrying about Middlesbrough, the place you came from, and the absence of ambition and hope among young people, where would you start in Middlesbrough if you were in charge of the regeneration? yeah well you know as um and you can confirm middlesbrough tends to pop up quite a lot in most economic think tank reports normally on the negative about what it hasn't got and what it's not doing um and so i mean you know i talk about people in middlesbrough about this all the time what can we do what can we do that has legacy that actually provides something meaningful for young people and it is it is about providing I think it comes back to skills needed in the region and and a sense of like you can you can learn stuff here and then stay here and do it you know so for example Teesside University has done a I think has done a great job with social mobility in the area there's a lot of kids from the area who go there it obviously attracts people from other places too which is great for the area but it feels like Middlesbrough now is Teessage University that's what it feels like that's where all the investment's coming from that's where that's you know the the bars that are around it where people drink has changed on the basis of where the university is the accommodation set up even the retail centre is like moved towards the university so and Angie I mean you you probably know just you know a lot on this as well For me, it's about how we skill people in the area.

20:14Steph McGovern:And I always go on about this and it's about that for a lot, 55 % of the kids from the region are from deprived homes. Sorry, 50 % of the kids in the region are in deprivation. And so there is this sense as well of like, what can we do to give them skills that in case they can't get the academic stuff that they need, How do we still mobilise them to know that, yes, OK, you might not have got the GCSEs you need because at the same time you were dealing with not eating and not having, you know, you're sharing a room with other kids and looking after you being a carer or whatever else you were dealing with, all this stuff, you might not have slept because your house was freezing.

20:55Steph McGovern:or how do we make sure they know they are skilled? And that's the key for me and kind of how we make areas prosperous is just when things are terrible and people are in deprivation, what can places like the university do to socially mobilise people? Andrew, I mean, what do you think? No, no, I completely agree. You know, in many respects, in some of these places, Middlesbrough is a good example. I've already mentioned places like Stalk, but Hull and Plymouth. The university or their further and higher education institutions are enormously important. I mean, they are the modern day equivalent of the old school massive factories that many of these places had.

21:39My hometown is Swansea. It's a similar perspective to yours in the Middlesbrough, Steph. You can see when you go to Swansea that the enormous contribution now, and big contribution that the university is playing, both in terms of literally as an institution providing people with skills and qualifications, et cetera, but actually employs an awful lot of people. Many of them, you know, they are paid relatively well. It's regenerated large parts of the town and the city as it goes through its sort of expansion and development. You can see that in places like Coventry, if you haven't been, you know, you go to Coventry, get off the train, you can't fail to be struck by the significance physically of the university, never mind everything else.

22:23I suppose my slight worry on that is that we seem to have a government and a previous government that was indifferent to the university sector more broadly. And ironically, in some of these places, it's the universities that are incredibly important and are probably the ones that are feeling the strain most on the financial front. So you have an irony there where we want these places to expand. We want these places to do better. They have some assets, but not very many. And if we're not careful, we'll undermine some of the very assets that they've got because we haven't thought about the place aspects of these sorts of industries because it really does matter.

23:00Steph McGovern:Yes, I just want to add to that because Robert might be sitting there thinking, hang on a minute, Steph often slags off universities in the sense of I am very much about we should have support for vocational education just as much as we push people into higher education. The one thing that I've seen places like Teesside Uni do is be in the community, not just as the place for higher education. But for example, I was there a couple of weeks ago doing a book event with Adele Parks, a famous author from the area. And that was for locals. Yes, OK, students could go, but it was for local people. So that was that access to the arts.

23:39Steph McGovern:It was also where hosting the Turner Prize in Middlesbrough next year via the university. It was the university that got that bid. That's going to be really big for the area. So whenever I'm, you know, sometimes people think, oh, maybe she's a bit anti higher education. I'm not. I very much am like, it should be higher education. These amazing institutions being used for the greater good of the whole area, not just for the students who are going to go there. I mean, I completely echo and agree with that, Steph. and you can see this, I mean, if you look, if you go and talk to some of our Metro mayors, for example, Tracy Braben in West Yorkshire or Oliver in South and Steve in Liverpool, et cetera, one of their big central elements, A is skills, as we've already talked about, but it's the vocational, it's the FE element that they are very, very focused on.

24:32You know, the universities, yes, obviously, but they recognize they have a particular role to play in actually in improving the the vocational offer and the vocational connection and then dragging and drawing people into those those activities so that they can take up some of the jobs that are that are being generated in the place that you know don't necessarily require you to go to university wherever that might be so that you'll see that as a very particular policy emphasis in in many of our urban areas particularly on that sort of vocational FE front as well as in complementing the the HE point that you were making so it's obviously brilliant that you've got these universities that both provide education and indeed jobs right but one of the problems many of these areas have is somebody gets a qualification and then they just move from the area net migration from these areas is a big problem right they go to where the jobs are or the better paid jobs are.

25:32And, you know, we need to distinguish between the challenges that people on low incomes have, but also that that is not quite the same thing as the challenges that a place has, because you could have a very credible industrial policy, which is simply all about making sure that, you know, everybody has the same access to education and skills and not worry about the fact that almost all of those people are going to gravitate south um and and and leave behind and you know an older rather lost population living on welfare um and and you know we haven't we haven't cracked that problem have we no no that's a that's a very good point and it is it's difficult and it it very much uh makes us really think about how we actually support and complement and help firms and entrepreneurs in these places to actually grow and to expand and to understand what they might need from public policy broadly defined in order to do that right and whether that is making sure that they've got access to the premises that you know and making sure that our planning system permits the expansion of premises so if they do look to expand that they you know they can or if they need business support in order to identify new market opportunities that they are unaware of, that we are able to provide support to them on that front?

26:56Or can we get them to partner with and become linked into other organizations like themselves so there is a sort of sharing of experiences? So thinking very much about how you grow the economy on that side, on the firm side, is definitely an important thing. As you say, otherwise, the extent that you are training and skilling people, they understandably will then go and look for opportunity elsewhere if they can't find it in their locality. I would say this though, and this is kind of, it's a fairly static statistic, about 50 % of the population adults, I mean, live and work within the area that they were born in.

27:37So, you know, people do move and maybe, you know, some of us on the call and those listening are people who have moved. An awful lot of people don't move at all. And actually, even if they do move, they don't move very far and they stay within their vicinity for a bunch of different reasons as well. So, you know, it is an issue, particularly as you get more skills. But I think, you know, it just emphasizes this point about helping places to strengthen their economy, create more opportunities. It's really, really important. So we better go for a break because there's lots to pick up.

28:14Are you stuck staring at your W-2? Are tax refund worries holding you back? You probably have FOMO, the fear of messing up. The fix? Using TurboTax on Intuit Credit Karma. They find every credit and deduction to help you get every refund dollar you deserve. Or your money back. It's time to overcome your fear of messing up and get your taxes done right. Start filing today in the Credit Karma app. Zootopia 2 has come home to Disney+. Let's go! Get ready for a new case. We're the greatest partners of all time! New friends. Gary the Snake. And your last name? The Snake. Dream Team. New habitats. Zootopia has a secret reptile population.

28:57You can watch the record-breaking phenomenon at home. Zootopia 2, now available on Disney Plus Rated PG. And right now you can get Disney Plus and Hulu for just$4.99 a month for three months with a special limited time offer ends March 24th. After three months, plan auto-renews at$12.99 a month. Terms apply. This episode is brought to you by State Farm. Listening to this podcast, smart move. Being financially savvy, smart move. Another smart move, having State Farm help you create a competitive price when you choose to bundle home and auto. Bundling, just another way to save with a personal price plan.

29:32Like a good neighbor, State Farm is there. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings, and eligibility vary by state.

29:45Steph McGovern:Welcome back to The Rest Is Money. We're talking to Andrew Carter, who's the CEO for the Centre for Cities. You're a dedicated think tank, aren't you? Looking at how we can improve the economic performance of our urban areas. And we were talking a lot about skills before the break. We were talking a lot about productivity. I just want to ask you about infrastructure in all of this and transport because for me that's after skills transport's the big thing that drives me nuts and that you know as someone who's regularly traveling around the UK that feels like one of the biggest barriers to growing urban locations because it's just so hard to get between them you know like even just pop into leads for the day which technically is not that far from Newcastle it can feel like a really strenuous effort because this train system and everything else is just so out of date for what commuters and businesses need and can I just ask you on that point if you look at if you look at what the data shows you so you pointed to the fact that the productivity gaps between conurbations in a place like France are way lower than they are in the UK.

31:04Is that, I mean, because one of the things that I'm afraid is conspicuous about France and Switzerland and actually less, Germany's under-invested in infrastructure recently, but let's just look at places like Switzerland and France. They just have way better transport networks than we have. Is that a big driver of levelling up, as it were, in terms of productivity and incomes? Yes, absolutely. And to connect the previous conversation, we also know that there's a direct relationship between the ability to attract skilled labour and skilled workers and the provision of public transport. right skilled workers want to be in places that they can get around relatively easily and they don't necessarily have to rely on a car they want to live in nice places and when they mean nice one of the things they mean is places that are connected internally as well as externally connected to somewhere else but to connect it within their place so you know it's all part and parcel of the same thing but you're right in a sense the significance when you look at our urban areas outside of London is the absence of any form really of integrated transport system you know it's just almost it's incredibly difficult to get around you know greater Birmingham or greater Leeds or slightly less or now greater Manchester because they've made some big strides but you know greater Liverpool etc it's very very hard to get around these places unless you own you own a car and that is noticeable.

32:27Steph McGovern:So do you think things are going to change on that front because obviously the push towards more devolution, the metro mares, they're all the things that they want, aren't they? So are we going to see things change? I think so. And I think we've seen, I think we definitely will see. And I think we have seen, I think there are many strands to the devolution agenda that we've seen over the last decade, but a prominent and big strand has been around transport. And that's two things. One is actually now beginning to put capital investment into these places so that they can actually improve the physical infrastructure of their place, build more metro lines, add more buses, put in more cycle lanes, etc, etc.