Experts Debate the UK’s Two Economies

Presided over by Steph McGovern, familiar to British television viewers as the BBC’s business commentator, the panel for a Q&A session at the ACT conference consisted of Peter Hahn, senior lecturer at Cass Business School; Tim Hartford, a columnist for the Financial Times; Trevor Williams, chief economist for Lloyd’s Bank Commercial Banking; and Sir Richard Leese, leader of Manchester City Council.

The panel considered the newly-elected UK government’s plans for a ‘Northern powerhouse’. Chancellor George Osborne, who has been actively promoting the concept for the past year, claims that a more prosperous Northern England could add £37bn to the UK economy – although Hartford dismisses the claim as an example of “statistical bull”.

However, Leese supports the plan to regenerate northern cities such as Manchester, Leeds, Liverpool and Sheffield by spending on improved transport connections to help create “a single labour market” for the major urban centres of the north.

Panelists also agreed that the UK is unique – but not in a good way – by having one single city, London, as such a dominant force. Leese contrasted another European country, Germany, which has prospered through investment in its ‘second tier’ cities. “Southern England is hugely successful and hugely internationalised, so there is enormous opportunity in northern England following a similar path,” according to Hahn, who points out that in both the UK and Europe, extremist political parties typically flourish in areas which have missed out on growth and prosperity.

EU Membership

Also debated was the government’s pledge to hold a referendum by 2017 on the UK’s continued membership of the EU. An impromptu audience poll found only three individuals who believe that the UK should vote to withdraw. “It’s hard to see any advantages in the UK withdrawing from Europe, despite the bureaucratic ‘red tape’ that emanates from Brussels,” suggests Hartford. “We stand to lose an enormous amount, but UK companies that support continued membership need to start speaking out more strongly and making a positive case.”

Hahn draws attention to London’s ability to attract many banks formerly headquartered in Brussels, along with investment and highly-paid jobs, which would be at risk from a withdrawal. Deutsche Bank has already warned that a UK outside of the EU would persuade it to relocate away from the UK capital.

However, the issue of UK membership extends beyond the option of leaving or staying in the EU as the government has pledged to secure improved terms for the UK’s continued membership. Some UK companies wish to see reforms to the EU’s employment laws.

“The government has to show that something has changed,” says Leese. “There seems to be a general consensus across Europe that some parts of the EU are not ‘fit for purpose’ – such as the ability of migrant labour to come to the UK not to work, but to claim benefits.”

The panel also agrees that another of the most pressing tasks for the new UK government is to address the country’s notoriously poor levels of productivity. These had shown a steady improvement up until the global financial crisis of 2007-08, but have fallen back sharply in recent years.

“Our ability to maintain living standards and economic growth rests on improving both productivity and the UK’s infrastructure,” says Williams. “It means tackling the big problem of limited capacity at our ports, airports and rail networks and also ensuring that we don’t leave behind those workers who are unskilled or poorly educated.”


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