The recent Autumn Budget clearly demonstrates the importance that the UK Government has placed in the Northern Powerhouse as the country’s emerging economic juggernaut. Allocations have been made into the transport and digital tech sectors, giving the northern economy a huge boost in jobs creation and population. Read on to find out why investments into the Northern Powerhouse makes sense.
The UK Government continues its momentum of rebalancing the country’s development focus, reducing its concentration in London and pushing it up towards the North. The importance of investing in the Northern Powerhouse to drive economic growth, has been recognised in the Chancellor’s recent Autumn Budget, with increased funding announced for infrastructure across the North.
The Northern Powerhouse, an initiative by David Cameron’s government, was established to boost economic growth in the North of England, particularly in what is termed as the “Core Cities”, namely Manchester, Liverpool, Leeds, Sheffield, Hull and Newcastle. Its aim is to reposition the British economy, shifting the traditional focus from London and the South East, to the North.
In the Budget, Chancellor Philip Hammond promised a £1.7bn Transforming Cities Fund to improve transport links between suburbs and cities outside of London. Half this amount will go to the six combined authorities with elected metro mayors, including £243m for Greater Manchester and £134m for the Liverpool City Region. The other half will go to the other cities by way of bidding.
The fund is designed to address weaknesses in city transport systems in order to spread prosperity by improving connectivity, reducing congestion and introducing new mobility services and technology. In practice, it will mean spending on improving buses, trams, cycle lanes and other initiatives in the regions.
Transport links are important to drive the regional economy, allowing growing businesses to tap into the local workforce. As the economy develops and cities expand, demand for housing will grow with the population increase it brings. This makes property a favourable investment to make, especially in the light of the severe shortage of housing in the UK.
Additionally, the fund will allow links between the new High Speed 2 (HS2) stations and local transport networks, complementing its development in improving movement throughout the regions. The HS2 is a planned high-speed railway in the United Kingdom which is poised to be the new backbone of the national rail network, linking London, Birmingham, the East Midlands, Leeds and Manchester.
A sum of £300m will go towards ensuring that the HS2’s infrastructure can accommodate future Northern Powerhouse Rail and Midlands Connect services. This would enable faster services between the Northern cities of Liverpool and Manchester, Sheffield, Leeds and York, as well as towards the East Midlands and London.
Chris Grayling, the Secretary of State for Transport said: “Investment in transport is crucial to a strong and resilient economy. The Transforming Cities Fund will drive productivity and growth in cities where this is most needed, connecting communities and making it quicker and easier for people to get around.
“We have already seen the impact of better integrated transport links for both passengers and the local economy in cities like Nottingham and Manchester. This new fund will enable more English cities to reap these benefits, helping to deliver the opportunities and ambition of the Industrial Strategy across the country, as well as driving forward the Northern Powerhouse and Midlands Engine.”
The Industrial Strategy is Prime Minister Theresa May’s road-map for boosting productivity growth and encouraging investment in the UK, to help deliver a “stronger economy and a fairer society”. On the other hand, the Midlands Engine is the initiative to drive economic growth in the Midlands regions, in cities like Birmingham, Stoke-on-Trent and Nottingham — the Midlands’ equivalent to the Northern Powerhouse.
The Chancellor also announced additional funding for development projects in the North, targeted towards the business, technology, research and development sectors, building upon work done previously.
The Tech City scheme will be expanded nationwide, and is set to receive £21m in funding over the next four years. Tech City was started in London in 2011 to accelerate the growth of the UK digital tech sector, through a series of programmes, research and events.
Since its launch, the scheme has helped the digital tech start-up and scale-up sectors become the UK’s fastest growing industry. The UK tech sector had a turnover of £170 billion in 2015, an increase of 22% in five years. More than 1.7 million people now work in the digital tech sector and jobs are being created at twice the rate of other sectors in the economy, 85,000 of which were created from the past year alone!
In line with its new focus, this scheme is renamed to Tech Nation, and aims to bring jobs, skills and higher productivity to the regions. Leeds and Sheffield will become home to a Tech Hub, which will support businesses and enable skills in the area to thrive and prosper.
Hammond said, “A new tech business is founded in Britain every hour. And I want that to be every half hour.”
The Chancellor also extended the National Productivity Investment Fund for a further year, expanding it to more than £31bn. The fund was a £23bn fiscal stimulus introduced by Hammond in 2016, to tackle the UK’s poor productivity and lower growth forecasts resulting from Brexit.
A further £2.3bn is being allocated for investment in research and development, while £500m of investment will go into a range of technological initiatives ranging from artificial intelligence (AI) to 5G and full fibre broadband.
Lee Dentith, CEO and founder of the Now HealthCare Group, added: “This is a good start and will work towards ensuring the UK stays at the forefront of technological innovation. AI is vital in transforming the health of our nation and R&D investment from PhD student level onwards will help us and other digital health businesses develop pioneering solutions to tackle health problems.”
In furthering devolution for the regions, the Chancellor also announced a new deal for the North of Tyne region, a new combined authority comprising the Newcastle, Northumberland and North Tyneside councils. Devolution is about giving more governmental powers to the local authorities for regional self-government. A mayor will be elected for the combined authority of North of Tyne and he or she will be able to exercise these devolved powers. The North of Tyne will elect their mayor in May 2019.
The focus of this devolution deal is to create “more and better” jobs in the Northeast. Initial analysis finding 10,000 jobs could be created, 25% of which would be south of the Tyne. £337m will go towards the Tyne & Wear Metro, which is vital funding for it to replace its ageing trains.
In the aftermath of Brexit, the UK is mobilizing its economy in a massive push towards economic development, with emphasis on building the regions. For investors this will mean a strong outlook for the property market in the UK outside of London, and new regional property developments are particularly attractive investments.
By Ian Choong
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