At its heart, growth is about people and the value they create.
That’s why London has been so successful – why can’t policy makers see that?
At the Mansion House, the Chancellor said a strong City needs a successful economy, and a strong economy needs a successful City. Of course, he is right.
Yet both of those factors depend on one thing – an agglomeration of people with the skills and motivation to create value in our economy and prosperity for our nation. That London is the engine of the UK’s economy isn’t what makes it one of the best cities in the world to work in. It’s that being one of the best cities to work in supports London’s economic performance.
Yet our recent Report on Jobs shows the sharpest drop in recruitment in UK in three years, led by London. London is weaker on permanent recruitment and pay than the rest of the country, with uncertainty over the economy and business investment plans seeing employers lean more on temporary work to meet present demand. Firms are coping with today – not necessarily building for tomorrow.
To some extent, these figures are a sign of London’s strength - robust despite the relative lack of economic growth, high cost of capital and general uncertainty. But even in periods of loosening (when there are fewer jobs and plenty of workers), this labour market is tighter than we are used to. And when growth returns, whether we can get the economic benefits that people drive in the way we have before is a challenge.
This is where industrial strategy comes in.
When people hear these words, they often think “factory”. That’s no bad thing – 144,000 people work in London manufacturing – but an industrial strategy is about every sector. It’s about services too, including the ones London thrives in supplying: hospitality, finance, law, recruitment.
An effective industrial strategy should unite thinking about competitiveness, investment and employment. The people strand of any strategy must encompass skills, but also vital issues of labour supply such as transport, childcare, immigration, and welfare-to-work support.
It’s telling that this is where - across the whole UK – our economy is underperforming.
To its credit, the Government realises childcare is a problem, but their plans don’t deal with the problem now. The skills system has been under-funded for years and is reeling from botched reform to apprenticeships after the 2015 election. Outside London, the halving of local bus services since 2011 means people often can’t get to work even if they are available.
Yet we know what works. Look at what London’s transport structure does to support the economy – we need that to spread. And to link centres together – the tragedy of cuts to HS2 is the removal of far greater local passenger and freight capacity on the classic network, better local services in Birmingham, Leeds and Manchester, and radical cuts in journey times between Yorkshire and Birmingham. All of these would be engines of growth, driven by business links and commuting.
On skills, London might look to the rest of the country. Mayors in the West Midlands and Greater Manchester have started to address the state of the skills system – and efforts in London to do the same are rightly being focussed on by Sadiq Khan.
But what is lacking here is an overall, long-term approach. What is our pitch to the world?
The Chancellor was right about the linkages of our economy – but there’s more to supporting growth than an AI Summit, however valuable that is. We are overdue a proper, long-term strategy for our economy that helps us set out to the world why they should invest in Britain, because we are investing in ourselves.
This isn’t just about Government – it is also about us as businesses. Stepping up on skills, planning for our workforces, redesigning jobs, and adapting how we hire and develop staff will be critical to survival and long-term growth. So many recruiters across the country tell me of clients who are hiring based on decades-old job descriptions and see it as going through a process. That’s not how they would approach a legal case, or product strategy – yet their people plan is just as important.
