Cities are crucial hubs in the Midlands, providing employment, higher wages and increased prosperity for their residents and those living nearby, according to a new report by a leading economic think tank.
They have a vital role to play in tackling the region's persistent productivity gap - the result of historic underinvestment and undervaluing of the Midlands - which costs the region £18 billion annually, a new Centre for Cities report highlights.
The think tank says urban areas should be a key focus of efforts by the Government to help the Midlands reach its economic potential as part of the wider objective to level up struggling regions.
The body has published its latest research in a report called 'All Cylinders: The role of the Midlands Engine in the British economy', in collaboration with the Midlands Engine partnership.
The report claims that if Birmingham, Nottingham and Leicester were enabled to play the same role that similar sized economies on the continent played within their local areas, the Midlands economy would be larger and more productive.
Centre for Cities estimates the Birmingham urban area accounts for £11 billion of the £18 billion shortfall in economic output in the region.
Centre for Cities says that focusing on Birmingham and Nottingham's ability to attract service-exporting companies into their city centres will be a key opportunity.
At £70,000 per worker, the economic output of service exports in the Midlands is below the national average of £92,000 and tackling this shortfall will be of huge economic benefit to the region and the country, according to the analysis.
Centre for Cities' research suggests that Nottingham and the Birmingham area are missing out on some of the so-called "agglomeration effects" that make city centres advantageous places to do business, particularly for service exporting firms.
The research highlights three key areas of economic policy which should be addressed to achieve the region's productivity potential, namely boosting the skills of residents in large urban areas, making city centres more appealing places to do business with high-quality offices and improving public transport and housing density.
Andrew Carter, chief executive of Centre for Cities, said: "If we are going to see a greater amount of access to prosperity available to people who live across the Midlands, then addressing the performance of its cities is essential.
"Government should consider the role cities play in the wider economy if it wants to realise the Midlands' economic potential, grow the national economy and achieve its goal of Levelling Up struggling regions.
"These regions should take advantage of the offer of greater devolved powers as the Government outlined in the Levelling Up White Paper last year.
"Urban economies in the Midlands were shaped by globally competitive manufacturing industries and these are still a major part of the Midlands. Birmingham and Nottingham city centres now have a key role to play in offering the services sector access to knowledge and innovation.
"This includes 'new economy' businesses, like fintech and advanced manufacturing - cutting-edge parts of the economy increasingly important to the UK's export base. When we picture the Midlands firing on all cylinders, it's a region with highly skilled, knowledge-intensive jobs in the city centre."
