We need a regional revolution if we want to be ready for a 4th Industrial Revolution

This story first appeared in CapX.co on the 27th September 2018

Today, London contributes nearly a third of UK GDP. In the late 90s it was less than 15 per cent, and it had been approximately that proportion since the 70s.

The boom in the London economy, partly driven by growth in the professional services sector and in particular financial services, has meant that what was once understood as the ‘North South divide’ has now become ‘London vs The Rest’.

Despite being home to just 13 per cent of the population, it contributes 30 per cent of national output. The capital saw a 49 per cent increase in jobs between 1996 and 2018 (twice the UK average) and workers in London are 70 per cent more productive than the UK average and are therefore unsurprisingly paid on average almost £100 more per week than the typical UK worker.
Why is this the case? London has been hugely successful at attracting people with good qualifications and new high growth businesses. One in four graduate jobs are in London, meaning over a third of Russell Group and over a half of Oxbridge university students move to London upon graduation. 102,140 new enterprises were set up in London in 2016 — ten times the number in the North East and nearly double the number set up across the entire Midlands region.

More new businesses were set up in Hackney that year than in Blackburn, Blackpool, Bolton, Wigan and Burnley combined.
This is part of the reason that London dominates jobs in the exciting new industries; a third of jobs in the Information, Communication and Technology industry are based in the capital.

This two-track economy is not good for our economy or society. Alan Milburn in his last speech as head of the Social Mobility Commission said: “The country seems to be in the grip of a self-reinforcing spiral of ever-growing division. London and its hinterland are increasingly looking like a different country from the rest of Britain.”

Today the Centre for Social Justice has released a report that sounds the alarm bell for Government as they prepare for the next wave of technological disruption.

One of the most serious errors of the last 40 years was government’s failure to adequately support those displaced by the second industrial revolution, the move away from mining, steel production and shipbuilding.
The loss of jobs in many of the communities that relied on those industries triggered a cycle of social breakdown. Unemployment, welfare dependency, crime, drug abuse, and family breakdown all became prevalent and embedded in communities where economic opportunity had disappeared. What should concern policy makers is that many of these towns that suffered so much from the deindustrialisation during the second half of the twentieth century are most likely to suffer again from the 4th Industrial Revolution.
Stoke-on-Trent is one of the towns most at risk of losing jobs due to automation, it also has one of the highest drug related death rates in the country, and only 3 in 10 young people leave school with a good pass in GCSE English and Maths.

Dudley outside of Birmingham has the same number of people on unemployment related benefits as the entire county of Suffolk, while the wider Birmingham area is expected to lose 23.2 per cent of jobs related to automation. Doncaster has one of the lowest per year productivity figures for a town and is simultaneously the fifth most at risk town to automation.
The CSJ’s report ends with a call for action from Government. It makes 21 policy recommendations that have emerged from discussions with local government, business leaders and practitioners on the ground. The summary is simple, unless policy is designed to tackle the social problems that afflict these communities, it will be hard or even impossible to mitigate the effects of 4IR and attract jobs, investment and growth to the area.

Of the recommendations made the report calls for an acceleration of the devolution agenda. Local problems need local solutions, and these are almost always driven by local champions. During our research, we found countless examples of how towns and cities that have struggled in the post-industrial era had been turned around by passionate mayors and local government officials. The most recent examples of this has been in the Tees Valley region with Ben Houchen, but evidence of this can also be found across the world, most recently in Detroit with its Mayor Mike Duggan.

The report also calls for action to roll-out the Universal Support programme, helping people to get back in to work and up-skill (among other things), an extension the family hub programme which offers parents relationship support, as well as the ‘second-chance programme’ which aims to reduce drug addiction and drug-related crime.

The report makes a raft of proposals designed to encourage investment and business creation across Britain’s towns and cities. It advocates for further investment in transport across the Northern Powerhouse cities, the Free Port agenda and the creation of 10 new enterprise zones in Doncaster, Wigan, Blackpool, Mansfield, Barnsley, Bradford, Plymouth, Stoke-on-Trent, Wakefield, and Dudley — all towns that have faced particular difficulties in the post-industrial era.

Finally, the CSJ call for the Government to work with each Local Enterprise Partnership to set-up Automation Taskforces that would co-ordinate a local response to workers being made redundant. While the role of each taskforce will vary, the researchers believe that better communication between employers, workers, education providers and government can reduce much of the harm that mass redundancies can often bring.

The Fourth Industrial revolution is coming, and while we forecast new technologies will create far more jobs than they destroy, it is becoming clear that the effect it does have on the labour market will worsen our already deeply regionally imbalanced economy.

We need a regional revolution that puts power in the hands of local policy makers, supports businesses to create jobs and fundamentally tackles the social problems that afflict these communities. Only then will Britain be ahead of the curve and fit for the future.