Category: General

The leading candidate to replace Keir Starmer as the UK’s next Prime Minister, Andy Burnham, gave a speech on Monday in which he laid out his proposed governing plan. There was a lot in the speech – lots of politics, some immediate priorities, but also a lot more policy than many commentators were expecting. This piece is not a systematic review of the speech, and I won’t touch on the proposals for institutional change, as exemplified by the announcement of No 10 North. Instead, here are some of my reflections prompted by a few key passages, focusing on my interests of innovation, universities, industrial strategy, and regional economic growth.

Bottom up growth:

“It is time for Whitehall to accept that growth cannot be ordered from the top down. Instead, it can only be nurtured from the bottom up … It comes from running sound finances as we have done here in Greater Manchester, which in turn gives businesses the stability and the confidence to invest, increasing their productivity and adoption of new technology. It comes from placing our universities at the heart of local economies, as all the mayors do, and bringing the innovation-lead approach through start-ups and scale-ups.”

This is the central statement of Burnham’s economic thinking – we need economic growth, growth comes from improvements in productivity, & productivity growth is achieved by businesses investing and adopting new technology, and new businesses starting up and scaling. The argument is that this is most effectively encouraged at the level of a place, archetypically a city-region like Greater Manchester.

The singling out of the role of universities is interesting here. This is in part out of necessity – in England’s big cities in the Midlands and the North, in Belfast, Cardiff and Glasgow, universities remain as some of the few really sizeable public institutions with the scale and agency to make a difference. The question remains as to the degree to which universities, as autonomous bodies with a complex variety of missions, embrace this role “at the heart of local economies”. The University of Manchester, together with other GM universities like Salford and Manchester Metropolitan, have done this very consciously, but there are tensions here, both with the aspirations of universities to see themselves competing on an international stage, and with the very real financial pressures that most universities are struggling with. I think it’s an important moment for university leaders to seek to articulate and develop their contribution to their communities in the broadest terms, while stressing the positive benefits of the national and international dimensions of their mission to their cities.

Different kinds of places:
“Seeing the positives in all places and there are positives in all places, in all postcodes across this United Kingdom. Let’s always remember that.
Powers for our rural economies to address issues specific to them like inadequate transport.
Powers for areas undergoing industrial transition like Port Talbot, Scunthorpe and Aberdeen.
Powers for our proud coastal towns to reimagine themselves for the 21st century.
And yes, more powers for London too over education and housing so that London can do more for itself and remain the world’s greatest capital city.”

This passage tackles a really important point of tension in the argument for place-based economic development head-on. There is an economic argument for putting investment in the places where it brings the greatest return, which is a natural underpinning of the Treasury world-view. In practise, this has been used as an argument for focusing investment on London and the Southeast (and, now, perhaps with some reluctant acknowledgement that investment in Manchester could yield returns).

Even amongst policy thinkers more disposed to regional rebalancing, there’s a fear of “jam-spreading” – dividing up limiting resources so much that the investments in any single place are too small to make an impact. In many places, the result of many years of centralisation and the starving of local government is that institutional capacity to drive place-based economic development is lacking.

But the politics here is difficult – at a time when our political instability has been ascribed to the “revenge of places that don’t matter”, it’s not helpful to say to people in Blackpool or Burnley, “sorry, there’s nothing for you, because we need the resource to redevelop Ancoats”. Burnham has himself talked about the “Makerfield test”, and a big feature of his Mayoralty has been the need to spread the economic success of central Manchester to outlying boroughs like Rochdale, Oldham and Wigan. Burnham nails his colours to the mast with his slogan “Good growth in every postcode.”

A formula that I think is due to Diane Coyle is perhaps helpful here: “You can’t do everything everywhere, but you need to do something everywhere”. A good first step is to recognise that different kinds of places have different problems; to misquote Tolstoy, all prosperous places are the same, but every poor place is poor in a different way. A distinction that I’ve found helpful is between underperforming core cities, deindustrialised towns, and rural and coastal peripheries.

Burnham frames the issue in a positive way, arguing that there is potential everywhere; to put this in the language of economics, everywhere has some area of comparative advantage, even if it has no area of absolute advantage.

The examples Burnham chooses are interesting. One obvious point is that Aberdeen & Port Talbot are in devolved nations, and the governments of Scotland and Wales have their own views and their own traditions about regional economic development. Burnham’s comments about seeking a more collaborative style of politics will need to have an early application in relations with the nationalist parties running our devolved nations.

A further point about Aberdeen is that the industrial transition Burnham refers to is, of course, the long-term decline of the North Sea oil and gas industry since its peak in output in the early 2000s. The transition to low carbon energy isn’t explicitly mentioned by Burnham, but it is going to be a major backdrop of politics for the next decade.

Finally, the politics of being positive about London are obvious – but there are some interesting economic lessons there too. London has a very high level of productivity, and its success is crucial for the economic health and public finances of the nation as a whole. But the rate of productivity growth has stalled in recent years – in fact, the narrowing of the economic gap between London and Manchester is as much a story of London’s progress slowing as Manchester’s accelerating. Part of this issue must be the falling productivity of the financial services industry since the Global Financial Crisis.

So there is an element of industrial transition in London’s story too – a move from financial services to wider knowledge intensive services, including in areas like artificial intelligence and life science. Here there are some stories of successful place-based industrial strategy. Tom Forth & I have shown that heavy investment in public sector R&D in London is now bearing fruit with big increase in private sector R&D. The Kings Cross area is now the outstanding example of an urban “Innovation District”. Here publicly funded institutions like the Crick Institute, the British Library, the Turing Institute, and the headquarters of ARIA, coexist with anchor private sector tenants like Google DeepMind, and supported by a flourishing network of support businesses such as Venture Capital. This all exists in an extensive modern real estate development, with attractive public realm and outstanding public transport links. Similar developments are in hand in White City and the Olympic Legacy Park – place-based industrial strategy does work.

On reindustrialization:
“We will support every region to set clear and credible industrial ambitions and provide the support to achieve them, encouraging more cross-UK partnership between places with complementary industrial clusters, as Cambridge and Manchester have done on life sciences. We will consolidate public and private investment at a place-based level and help all areas establish good growth funds as we have done here in Greater Manchester. We are such an inventive country and going forward we can be the world’s leading innovation nation. This is the key to higher growth and I want more world-beating British manufacturers and service providers at the frontier of new technology and exporting to the world. I will back our scientists, technologists, entrepreneurs and creatives as I have done here and show how Britain will be the innovation nation of the next decade.”

Burnham talks a lot about re-industrialization. Is this just a doomed nostalgic call for a return to coal mines, steel furnaces, and cotton mills? I don’t think so. It’s significant that Burnham talks about both manufacturers and service providers, and stresses exporting to the world. So in my understanding of “reindustrialisation”, one isn’t just talking about manufacturing, important though I think that is. The key point is to support and grow regional businesses that produce tradable goods and services. This is important in economic terms – these are the activities that bring money into communities. But I suspect that it’s also important in that it gives communities a sense of purpose, a sense that they too are contributing to the nation more widely,

The practical steps here are for places to produce a clear and credible local industrial strategy. Again, there is a tension here as the boundaries of industry clusters don’t always coincide with the political boundaries of city-regions, and supply chains are usually national or international. There does need to be a national dimension to industrial strategy. Part of this can be driven by region to region collaborations – of which the Cambridge-Manchester partnership is an important example that has clearly made an impression on Burnham in his time as Mayor.

On reshoring:
“We need to safeguard sovereign manufacturing and production capability across the country in critical sectors like steel, defense, energy, food and farming rather than just being prepared to let it go as we have sadly done in the past.”

This is a brief section, but an important one, as it recognises that industrial capacity isn’t just a question of economics, but is crucial to national security. Steel of course is highly politically salient at the moment, and with the Ministry of Defence having taken over Sheffield Forgemasters under the last government a precedent has been set, with more focus on defence manufacturing capacity inevitably to follow. The gas price spike that coincided with the invasion of Ukraine demonstrated the UK’s vulnerability as an energy importer, leading both to an inflation spike and to a big hit to the government’s debt position. I wonder whether we will be seeing the transition to low carbon energy being framed more in terms of security than net zero in coming years.

The inclusion of food and farming as critical sectors is interesting; some may see this as a political gesture to rural communities. In fact it may be as much an acknowledgement of the new geopolitics, where global supplies are threatened by climate change and access to food exports are used as a weapon.

This isn’t an exhaustive list, and there will undoubtedly be suggestions of other critical sectors. One could point, for example, to the chemicals sector, underpinning production in many different sectors, still important for the UK economy, though struggling, and of particular regional importance in the North of England. Semiconductors, perhaps the most important industry of the 21st century, is one area that we did “let go”, with the exception of a few niche areas.

Discussions of sovereign manufacturing and production capability do need, however, to confront the difficult questions of ownership and control. We’ve had several decades where governments have been immensely relaxed about the sale of productive assets into overseas ownership, to the extent of celebrating such acquisitions as “a vote of confidence in the UK”, and there are certainly examples where such overseas ownership has been beneficial, through better management and closer incorporation into global supply chains. But overseas ownership leads UK governments with fewer levers for aligning the strategic decisions firms make with national priorities.

On further and higher education:
“We need a complete rethink of how we support the next generation to succeed and it has to start with the education system. The days of a school system configured entirely around the university route will be brought to an end. University is great for those who want it. But when are we going to focus on the life chances of those kids who want something different? When the country hasn’t done that for a long, long time. People have argued over many years for an education system based on par between academic and technical and that is what we will build. Giving every young person growing up here a clear path into a reindustrialized Britain.”

No-one who has followed Burnham’s most recent priorities as Mayor will be surprised at this. Some of my old friends and colleagues in the HE sector will be uneasy about this direction, and we certainly need to avoid false polarity of university vs vocational education (given that about half of university students are doing directly vocational degrees, e.g. in business studies, health related professions, engineering & computer science). Burnham has been a big champion of the FE sector, which has undoubtedly been starved of funding and respect over the last decade and a half.

One aspect of technical education that Burnham has emphasised is the important of working with the private sector to provide training placements for young people. He regards GM’s success in increasing the number of placements as a key positive outcome of its partnership approach to the private sector, and he hinted at a quid-pro-quo for British firms, being favoured in government procurement, in return for more involvement in training.

Final words

None of this represents new thinking, and the surprise of many national commentators at being confronted with this ambitious policy agenda seems a little baffling to me given what Burnham has been saying and writing since he became GM Mayor, as well as its wider history in policy debates.

There’s much wider support for this line of argument; from the academic world there’s been important work from the University of Manchester’s Phillip McCann, MIT’s Anna Stansbury, and, with a focus on skills and institutional aspects, Andy Westwood. This highly incomplete list is brought up to date with eg two papers from The Productivity Institute on Manchesterism, here and here, and there’s a nice summary of recent work from the University of Birmingham’s Rebecca Riley.

For more direct attempts to influence policy, there was the 2017 Sheffield/Manchester Industrial Strategy Commission, the 2020 UK2070 Commission, and some aspects of the Resolution Foundation’s Economy 2030 inquiry.

Perhaps even more influential has been the one-man think tank that is Tom Forth, who has been an indefatigable proponent of regional devolution. I wouldn’t be human without mentioning my own efforts on this blog and elsewhere, for example here.

A nice reflection of Burnham’s engagement with this body of work can be seen in an appearance he made a few months ago at Cambridge University’s Bennett Institute of Public Policy, where he was in conversation with the economist Diane Coyle. In reply to the question, “How do you account for Manchester’s economic success?”, he replied “We just did what you told us to do, Diane”. This was not just flattery; Diane Coyle was one of the key contributors to two important economic reports that have guided strategy in Greater Manchester, the 2009 Independent Economic Review, and the 2019 Independent Prosperity Review. This underlines the importance of evidence and external input in guiding GM’s economic strategy, which goes back well before Burnham’s time as Mayor. Greater Manchester has never “had enough of experts”.

There’s also been serious thinking about regional economic growth in both main political parties. For the Conservatives, Michael Heseltine’s 2012 paper – No Stone Unturned called for “reversing a century of centralisation”, while, in Theresa May’s government, Greg Clark’s Industrial Strategy White Paper had kicked off a process of co-creating Regional Industrial Strategies, working with the Mayoral Combined Authorities set up by George Osborne’s “devo deals”. This process lost momentum after May resigned, and was finally killed off by Kwasi Kwarteng. Under the Johnson government, Michael Gove’s 2022 Levelling Up White Paper set a mission that: “By 2030, every part of England that wants one will have a devolution deal with powers at or approaching the highest level of devolution and a simplified, long-term funding settlement”. Once again, another change in Prime Minister, in the form of Liz Truss’s brief tenure, led to a loss of momentum.

Meanwhile, in the Labour Party, Gordon Brown’s 2022 “Commission on the UK’s future”, remarked on “an unreformed, over-centralised way of governing that leaves millions of people complaining they are neglected, ignored, and invisible, all too often left to feel as if they are treated as second class citizens in their own country” and complained that “when we should be unleashing the potential for growth and opportunity in every part of our country, the continuing over-concentration of power in Westminster and Whitehall is undermining our ability to deliver growth and prosperity for the whole country.”

The Labour Party campaigned in the 2024 election on a manifesto that promised “good jobs and productivity growth in every part of the country making everyone, not just a few, better off.” The 2024 English Devolution White Paper, and the 2025 Industrial Strategy White Paper – offered a serious programme for government to decentralise power in England, and to implement an industrial strategy with a significant local and regional dimension.

What’s different now? I think it’s clear that Burnham intends to put this agenda at the centre of his government and to implement it consistently, and he has shown that he can effectively communicate it. There are many practical difficulties, and some serious global headwinds, so success is not guaranteed. But, what is certain, though, is that whatever else we’ve been doing for the last fifteen years, it hasn’t worked.

For the first time for several decades, there are grounds for optimism about the future of Sheffield’s steel industry (very much reduced in scale though it now is). Sheffield Forgemasters (now UK state owned) is building a major new facility, and Special Melted Products (with an infusion of Taiwanese capital) is also expanding. This isn’t about the standard grades of steel for use in construction – the expansion is to meet demand for specialised forgings from speciality steels and other alloys, driven by applications in defense, aerospace, civil nuclear and energy, and influenced by a new focus on UK national resilience and industrial capacity. This gives me a pretext to republish this piece I wrote nearly ten years ago about the history of the steel industry in Sheffield – and the valuable lessons this history can teach us about innovation.

As someone interested in the history of innovation, I take great pleasure in seeing the many tangible reminders of the industrial revolution that are to be found where I live and work, in North Derbyshire and Sheffield. I get the impression that academics are sometimes a little snooty about local history, seeing it as the domain of amateurs and enthusiasts. If so, this would be a pity, because a deeper understanding of the histories of particular places could be helpful in providing some tests of, and illustrations for, the grand theories that are the currency of academics. I’ve recently read the late David Hey’s excellent “History of Sheffield”, and this prompted these reflections on what we can learn about the history of innovation from the example of this city, which became so famous for its steel industries. What can we learn from the rise (and fall) of steel in Sheffield?

The rock-climber Alex Honnold is in the news again, thanks to his live, televised ascent of a skyscraper in Taiwan.  This gives me an excuse to recycle this post from October 2019.  Here I explain that just because Honnold climbs without a rope, that doesn’t mean that his achievement doesn’t rely on technological progress over many decades, contrary to the claim of a well-known economist.

The rock climber Alex Honnold’s free, solo ascent of El Capitan is inspirational in many ways. For economist John Cochrane, watching the film of the ascent has prompted a blogpost: “What the success of rock climbing tells us about economic growth”. He concludes that “Free Solo is a great example of the expansion of ability, driven purely by advances in knowledge, untethered from machines.” As an amateur in both rock climbing and innovation theory, I can’t resist some comments of my own. I think it’s all a bit more complicated than Cochrane thinks. In particular his argument that Honnold’s success tells us that knowledge – and the widespread communication of knowledge – is more important than new technology in driving economic growth doesn’t really stand up.

The film “Free Solo” shows Honnold’s 2017 ascent of the 3000 ft cliff El Capitan, in the Yosemite Valley, California. The climb was done free (i.e. without the use of artificial aids like pegs to make progress), and solo – without ropes or any other aids to safety. How come, Cochrane asks, rock climbers have got so much better at climbing since El Cap’s first ascent in 1958, which took 47 days, done with “siege tactics” and every artificial aid available at the time? “There is essentially no technology involved. OK, Honnold wears modern climbing boots, which have very sticky rubber. But that’s about it. And reasonably sticky rubber has been around for a hundred years or so too.”

Hold on a moment here – no technology? I don’t think the history of climbing really bears this out. Even the exception that Cochrane allows, sticky rubber boots, is more complicated than he thinks. Continue reading “Rock climbing and the economics of innovation (revisited)”

As the UK endures the second decade of its crisis of economic stagnation, a loose group of commentators, activists and think-tanks have emerged to argue that this stagnation isn’t inevitable, and to call for more houses and infrastructure to be built, for energy to be cheaper and more abundant, and for a restoration of the technological optimism of earlier times.  It’s not an entirely homogenous movement – some call themselves “Anglofuturists”, others organise under the banners of “progress” and “abundance”.  As I wrote a year ago in my piece “Taking Anglofuturism seriously”, I am sympathetic to some of the goals of this movement. I agree that our economic stagnation isn’t inevitable and that the UK’s physical infrastructure needs upgrading, I regret the failure of recent new nuclear build plans, and I think that technological innovation is a key driver of productivity growth.  Yet to me there seems to be a gap in the movement between willing the ends and identifying the means, with the suggested remedy all too often coming down simply to calls to deregulate more and reform the planning laws.

There is perhaps a lesson from history here, emphasised by some comments the historian David Edgerton made in a podcast last week.  The kind of nation that Anglofuturists call for looks rather like what was delivered by post-war British governments between 1950 and 1980.  Then, the UK was one of the most R&D intensive economies in the world, with a cross-party consensus that technological innovation would deliver economic growth.  Despite persistent national soul-searching about a ruling-class trained in the humanities, a number of scientists and engineers rose to powerful and influential positions.  The world’s first nuclear power station was designed and built in just four years, following which there was a large-scale roll out of nuclear power stations. A national capability for launching satellites was developed (and subsequently abandoned).  This period saw the construction of most of our current motorway network, and, as my plot shows, new houses were built at a rate that has never since been matched.  In this sense there is a certain retro quality to Anglofuturism, a harking back to a time when the UK seemed to look to the future with technological self-confidence.

How will artificial intelligence change the world of manufacturing?  Sam Altman, CEO of OpenAI, has no doubt that the effect will be transformational [1]:

“If we have to make the first million humanoid robots the old-fashioned way, but then they can operate the entire supply chain—digging and refining minerals, driving trucks, running factories, etc.—to build more robots, which can build more chip fabrication facilities, data centers, etc, then the rate of progress will obviously be quite different.”

It’s difficult to know what to make of this vision.  Taking it at face value, it seems to represent a profoundly unimaginative view of the future, in which there is a straight replacement of workers in factories by humanoid robots.  Factory automation has developed hugely since my brief period as a production line worker in 1980, but this hasn’t occurred by a one-for-one replacement of people by robots.  

Most people have seen pictures of modern car factories, with robot arms carrying out repeated operations like welding with great precision.  But, as Tim Minshall explains in his excellent book on manufacturing [2], robots are just one example of the many devices that can carry out physical operations in an automated factory.  If you are automating a chemical factory, you don’t do it by getting a humanoid robot to open the valves and stir the tanks.  The most sophisticated factories that currently exist – the chip fabrication facilities that produce the GPUs that underpin AI, as well as the CPUs in our phones and computers – are almost entirely automated.  In the fab, a silicon wafer goes through hundreds of complex process steps without being handled by a human – but the robots that move the wafers from tool to tool run on wheels, not legs.

So is Altman just saying that automation makes capital goods cheaper, and that leads to a self-reinforcing process of increasing productivity? That’s certainly true, but it’s a process that is neither new, nor having much to do with large language models or generative AI.