The past few weeks have been full of speculation as to the future of the Northern Powerhouse, the plan to create strong links between urban areas in northern England. The Northern Powerhouse was a mainstay of the Cameron government, and closely linked to George Osborne. The Northern Powerhouse concept is underpinned by agglomeration - the idea that the concentration of people, businesses and education establishments in close proximity leads to new knowledge, transfer of new ideas and greater productivity. It’s a really good idea. I talked about it (under the guise of proximity) here. There’s plenty of academic work on agglomeration economies and clustering effects, and it is the driving force behind many of the City Growth Commission’s final recommendations. But is the Northern Powerhouse still alive? On 27 July Northern Powerhouse minister Andrew Percy and Treasury commercial secretary Lord O’Neill reaffirmed the government’s commitment to building a Northern Powerhouse. (Lord O’Neill had previously threatened to quit if the Northern Powerhouse dies. A few weeks later he threatened to quit again, this time over the UK’s approach to China. He’s not having a good month.) However, Theresa May hasn’t mentioned the words Northern Powerhouse since assuming office. Her Economy and Industrial Strategy Cabinet Committee met for the first time on 2 August 2016 - the press release doesn’t mention the Northern Powerhouse either, but quotes May: we ’need a plan to drive growth up and down the country, from rural areas to our great cities’. Many commentators have picked up on this - perhaps previous plans were too Manchester-centric, or the government needs to appease voters in large swathes of the country that voted to leave the EU, or the plans were too closely associated with the former chancellor. A broader focus seems inevitable. At the same time, Andy Burnham used his nomination as Labour candidate for Manchester mayor to campaign for the resurrection of the Northern Powerhouse - a curious case of a Labour politician pushing a Conservative policy. However, as Alexandra Jones notes on the Centre for Cities blog, a likely outcome is that work on the Northern Powerhouse continues, but the name might be quietly dropped. We may well see a more diverse range of future devolution deals, including for the first time some in the south of England, and a softening of the requirement for elected mayors. It will be difficult to do, but encouraging effective agglomeration more widely is a good move.
This blog is in three parts. Tomorrow we’ll look at how universities can help realise the benefits of agglomeration. And next week we’ll look at an international example of agglomeration economics in action.