Building the Northern Powerhouse - DAC Beachcroft

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Building the Northern Powerhouse

Published On: 13 June 2016

The idea at the heart of the Northern Powerhouse is to increase the scale of the North of England, better linking cities together through transport improvements to create one single economy. This approach has been inspired by the Randstad and the Rhine-Ruhr, two areas on the continent that, like the North of England, have a number of cities located close together.

Both the Randstad and Rhine-Ruhr perform better than their respective national averages. But this success does not appear to be based on the strength of their transport links. Our research shows that commuting between city regions in the Randstad and Rhine-Ruhr is not significantly greater than across city regions in the North, nor are train links much quicker. There is no clear policy lesson for the Northern Powerhouse from the proximity of or the linkages between the cities in the two areas - they just happen to be close together.

Instead, the main lesson from these areas is that strong regional economies require strongly performing cities at their heart. This is because the benefits of a large economy are only achieved when combined with the concentration of economic activity in specific places, specifically cities. And this concentration particularly benefits more knowledge-based businesses, which not only tend to employ more highly skilled and better paid workers, but also create jobs in other sectors, such as retail and leisure. The Randstad and Rhine-Ruhr get more out of the economic activity they have by concentrating it in cities, and this pattern of economic activity makes both areas more productive than their respective national economies.

Like the Randstad and Rhine-Ruhr, the economy of the North of England is concentrated in its cities – northern cities account for 20 per cent of land in the North, but 70 per cent of jobs. But in contrast to the Randstad and Rhine-Ruhr, northern cities punch well below their weight in terms of their contribution to the national economy. It is this underperformance that primarily explains the underperformance of the North as a whole, rather than the weakness of intercity transport links.

This suggests that to improve the performance of the North, policy makers should use limited resources to prioritise supporting the growth of cities in the North. This will mean making decisions and choices that focus public investment in specific places rather than spreading it equally across the North of England.