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City limits: How the UK’s industrial strategy can share living standards gains

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Stephen Clarke's presentation for the Resolution Foundation event with Greg Clark MP.

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City limits: How the UK’s industrial strategy can share living standards gains

  1. 1. City limits: How the UK’s industrial strategy can share living standards gains Greg Clark MP, Secretary of State for Business, Enterprise and Industrial Strategy Diane Coyle, Professor of Economics at the University of Manchester DavidWilletts, Executive Chair of the Resolution Foundation Stephen Clarke, Economic and PolicyAnalyst at the Resolution Foundation #livingstandards @resfoundation Wifi: 2QAG_guest p: W3lc0m3!! 1
  2. 2. Build it and they will come Do high-tech sectors raise living standards? Stephen Clarke July 2017 @resfoundation/@stephenlclarke 2
  3. 3. There has been consensus on the need for an industrial strategy that supports key sectors 3 • At a national level “Sectors such as aerospace, automotive, the life sciences, the creative industries, digital, financial services and professional and business services” Building our Industrial Strategy Green Paper • At the regional level “Key sectors where we have a comparative advantage to be exploited and accelerated include health and life sciences, financial and professional services, creative and digital, education, sport, culture and heritage and advanced manufacturing” Greater Manchester Strategy
  4. 4. The hope is that supporting these sectors will reduce regional disparities and also spread prosperity within communities 4 “Our modern industrial strategy is designed to deliver a stronger economy that works for everyone – where wealth and opportunity are spread across every community” Conservative Party Manifesto “a credible industrial strategy can reach this untapped potential and deliver prosperity to every corner of our country” Labour Party Manifesto
  5. 5. The focus has been on ‘advanced industries’ 5 “aerospace, automotive, the life sciences, the creative industries, digital, financial services and professional and business services” We focus on: Creative industries – e.g. advertising, television, architecture Digital technology – e.g. electronics, computer games, telecoms High-tech sectors – e.g. aerospace, pharmaceuticals Tradeable finance – e.g. Investment banking, fund management
  6. 6. Previously we had only limited evidence of the relationship between advanced industries and living standards 6 Advanced industries are clustered in the South East
  7. 7. Previously we had only limited evidence of the relationship between advanced industries and living standards 7 Where pay is higher
  8. 8. Previously we had only limited evidence of the relationship between advanced industries and living standards 8 And employment is higher
  9. 9. There is clearly a correlation between advanced industries and wider growth in ‘non-tradeable’ services (bars, restaurants, hairdressers etc) but this is not evidence of causation 9 London accounted for 75 per cent of the growth in advanced industries between 2009 – 2015 Cambridge, Leeds and Aberdeen accounted for 3-4 per cent each
  10. 10. Result 1: Advanced industries create jobs in the wider economy 10 • Between 2009 and 2015, 234,000 high-tech, digital, creative and tradeable finance jobs were created. • On average, each additional 10 jobs in these sectors created 6 new jobs in the wider service sector economy • Advanced industries created 20 per cent of all service sector jobs over the period
  11. 11. Result 2:The prosperity they create is shared, particularly by those with relatively lower levels of education 11 • For each 10 additional jobs created in advanced industries, a further 4 service sector jobs are created for those with relatively low education levels • Over the period, around 60,000 additional jobs were created for this group • Annual earnings for workers with average levels of education increased by £72
  12. 12. Result 3: But advanced industries do little to raise earnings for the lowest-paid 12 • Earnings fell by £85 for workers with below-average levels of education • This is a result of the fact that the new jobs created, and the people that fill them are – on average – lower paid
  13. 13. Place matters: the impact differs by area 13 Cambridge saw a further 28 jobs created in local service sectors for every 10 jobs created in advanced industries Manchester saw a further 48 jobs created for every 10 jobs created in advanced industries Oxford created almost no locally-based service sector jobs, despite creating 5,600 jobs in advanced industries
  14. 14. A modern industrial strategy 14 • Consensus view that spreading high-tech sectors can narrow regional inequalities and raise living standards • Evidence that this creates jobs elsewhere in the local economy but not guaranteed – role of policy makers like Metro Mayors key • Impact on low earners’ pay less positive so industrial strategy needs to also include low-pay but high-employment sectors e.g. retail & hospitality
  15. 15. City limits: How the UK’s industrial strategy can share living standards gains Greg Clark MP, Secretary of State for Business, Enterprise and Industrial Strategy Diane Coyle, Professor of Economics at the University of Manchester DavidWilletts, Executive Chair of the Resolution Foundation Stephen Clarke, Economic and PolicyAnalyst at the Resolution Foundation #livingstandards @resfoundation Wifi: 2QAG_guest p: W3lc0m3!! 15

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