90% of UK cities are below the European average for productivity

21 Sep 16

Cities in the UK are lagging behind their European counterparts in terms of productivity, skills and innovation, which will harm the country’s competitiveness in a post-Brexit world, a report has found.

The Competing with the Continent report, published today by the Centre for Cities think-tank, offers an in-depth picture of how UK city economies compare to those in Europe and covers 330 countries across 17 countries.

It reveals that UK cities contribute over one fifth of Europe’s total urban economic output, which is the largest share of any nation in the continent. Also, the UK’s cities play a larger role within the national economy than those of other European nations. They contribute 60% of UK economic output, compared with just 36% in Germany and 32% in Italy.

However, most UK cities fall below the European urban average for skills, productivity and innovation. The report authors insist this must be addressed to help cities across the UK to compete globally, particularly for knowledge-intensive firms and jobs that are increasingly important for boosting growth, employment and wages.

It found that 90% of UK cities – 57 out of 63 examined – perform below the European average in terms of productivity. Moreover, over half (39) are among the 25% least productive cities on the continent. The research is based largely on a dataset from 2011 due to constraints on available data.

Also, more than three-quarters of UK cities have a lower proportion of high-skilled residents than the European average. The UK is also home to the third-highest concentration of low-skilled residents in Europe, behind only Spanish and Polish cities.

Cambridge and Oxford are the only UK cities in the European top 20 for innovation, and around four out of five cities in Britain fall below the continental average.

The UK economy relies on a handful of high-performing cities for growth. London is the largest city economy in Europe, and accounts for around one quarter of the UK’s economic output. This is greater than Paris’ contribution to the French economy, 22%, and much more than Berlin’s role in the German economy, 4%.

The report recommends that tackling skills gaps and empowering cities to boost their local economies should be the top priority for government, as it looks to reveal more details of its new industrial strategy in the coming months.

Devolution deals have already been agreed for several key regions – in Greater Manchester, Sheffield, Birmingham and Liverpool and the Tees Valley, although a deal for the North East Combined Authority has been  rejected by four of the seven councils involved.

Sajid Javid, the local government secretary, confirmed the offer has been withdrawn.  

Alexandra Jones, chief executive of Centre for Cities, said that too many of the UK’s urban areas are failing to realise their potential.

She said: “For the country to thrive in the years to come, it’s vital that the government works with cities to address the skills and productivity gaps holding most places back.”

In particular, she said, “the government should ensure that any new funding commitments in the Autumn Statement focus on boosting the key drivers of growth in cities, such as skills, transport and housing.

“Over the long term, it should also build on its devolution agenda by giving places the powers they need – and which European counterparts already enjoy – to grow their local economies,” she added.

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