In this piece I set out why economic growth is essential to both harnessing and increasing these ‘six capitals’ in left behind areas.
Levelling Up is about restoring opportunity and rebuilding community. The Government’s White Paper set out the ‘six capitals’ that underpin this kind of transformation - physical, human, intangible, financial, social and institutional. The mix between these capitals is key, and often forgotten by national governments when they launch a new rail line, housing pot, or investment fund.
In this piece I set out why economic growth is essential to both harnessing and increasing these ‘six capitals’ in left behind areas. Economic growth is not everything. Academics like Diane Coyle have shown convincingly why as a country we need to measure more than just our output and productivity. But it is hugely important. And arguments against the pursuit of growth, or that call growth an illusion, are dangerous.
Onward’s work on Levelling Up In Practice has taken us to some of the least productive parts of the UK. Recently we spent time in South Tyneside, where GVA per capita is roughly £12,500, over £10,000 below the national average. This places the borough at the 1st percentile nationally, with higher productivity than only three other local authorities in the country (East Renfrewshire, Castle Point, and Gosport). Low productivity drives low material welfare. Household income per capita is just under £16,000, placing the authority around £5,500 below the UK average and at the 6th percentile nationally.
These economic indicators have social roots. As in many coastal communities, public health is poor: 41 per cent of neighbourhoods are in the bottom decile in terms of health deprivation. This feeds into high levels of unemployment. Almost one in four households are workless compared to fewer than one in seven nationally, and a third of adults who are economically inactive suffer from long term sickness compared to a quarter nationally. Rates of death from drug misuse have doubled between 2010 and 2020, over four times the national increase. As one council officer told us: “some communities are a few metres back from the starting line, others within the borough aren’t even on the track.”
Hope in South Tyneside comes from the green shoots of a new economy. Dogger Bank, the world’s largest offshore wind project, is 150km off the coast. Through admirable determination the Council has secured investment for the International Advanced Manufacturing Park and designation as a ‘Nationally Significant Infrastructure Project’. The Port of Tyne is expanding rapidly and hosts major international companies like Drax and Ubisoft. All of these companies will sell products and services outside the borough, bringing investment into the area and creating new jobs.
The challenge for the Council is to make sure local people can contribute to and benefit from growth. That means interventions across all six capitals - improving public health, boosting skill levels, and supplying affordable housing. It also means working more closely with community groups to reach those individuals that are least likely to trust state services. But all of these efforts are galvanised by, and focused on, building a bridge to the bright future afforded by this new economy. Just as the pits and the shipyard gave this area direction and identity in the 19th century, the wind farm and the smart factory can guide it into the 21st.
Boosting productivity and providing good jobs in the foundational and non-exporting part of the economy is also important. As more people take up jobs offered by in-person services such as leisure, hospitality, and care, these sectors need attention to tackle in-work poverty. Leveraging anchor institutions, supporting co-operatives, and innovating with new models of delivery are all evidence-based and effective strategies. But these interventions have a natural ceiling in terms of bringing jobs and investment into an area, because they cater only to consumers within the borough. There is also a risk that recycling public funds within an area stymies innovation, which is driven primarily (but not exclusively) by competition and exposure to international supply chains.
The perils of relying on non-exporting sectors were laid bare to us when we spent time in Oldham. In 1909 the area was spinning more cotton than France and Germany combined, and during the 20th Century hosted advanced manufacturing firms like Ferranti and British Aerospace. Today, the largest employers in Oldham are in the public sector - primarily the Local Authority, the NHS, and schools and colleges. We estimated that 53 per cent of workers are in the foundational economy and 21 per cent are in the public sector - both significantly above national averages. This drives the areas low labour productivity (17th percentile nationally) and even lower household income (5th percentile nationally).
Part of this is as a result of intentional economic strategy within Greater Manchester going back decades. As Lord O’Neill has highlighted, the economic model for the area focused on channelling investment into the city centre of Manchester, with little thought for the economic contribution that an area like Oldham could make. The assumption was that new transport links would connect workers to jobs. Onward’s research has questioned that theory - local residents don’t get the tram due to high levels of antisocial behaviour, and persistent skills gaps mean city centre jobs are too often out of reach. So Oldham’s focus retreated to high-employment, low-wage sectors - and it got them stuck.
Local leaders in Oldham are now taking action to address this challenge. The Oldham Economic Review argues that “the economic transformation of Oldham must start by breaking the dependence which it has on the foundational economy” and calls for a stronger focus on private sector, export-led growth. Steps to support this include working with Innovation GM on increasing R&D and greater collaboration with the nearby Advanced Machinery & Productivity Institute. It’s early days, but this approach has promise and cross-sectoral backing.
What does all this mean for Levelling Up? It shows that private sector growth is crucial in driving regeneration. The six capitals are an important organising framework to understand what might be holding growth back, but what they mean in a local context only becomes clear when you have a clearly articulated direction of travel for the economy.
To adopt a slightly crude rail analogy - local leaders need to set the train on clear tracks and shovel coal into the front to get it moving. They also need to make sure the carriages are connected and the passengers are on board. But without a powerful drive from the front it doesn’t matter how well maintained your train is, it’s going nowhere.
This isn’t about trickle down economics. Tackling health inequalities and improving access for communities means real investment and attention. But a successful approach to levelling up will need to give weighting to both the foundations and the frontiers.
Dolly Parton offers the best piece of advice on industrial strategy: “find out who you are and do it on purpose”. That’s the role for local leaders from both the public and private sector - to understand the comparative advantage of their population and place and turn it into a strategy for broad-based and sustainable growth. Areas that are left-behind today were leaders in the past, and their identity came from the products and services they sold to the rest of the country and the world. Their wares allowed humanity to cross oceans, cure diseases, and construct cities. Levelling Up means rediscovering that spirit of progress.
Adam Hawksbee is Deputy Director and Head of Levelling Up at Onward, and was previously Head of Policy to Mayor Andy Street