UK has a shot at redemption to level up in every region

Delivering economic growth in every place in the UK will be the determining factor in the success or failure of the government's levelling up agenda, said CBI Director General Tony Danker.

Kicking off this year's CBI Annual Conference at the Port of Tyne, he highlighted the opportunity ahead for the UK if the country turns itself around from decades of "living with the consequences" of "benign neglect" and "an economic policy that was ambivalent about levelling down".

This year's conference is taking place over eight locations across the country - and Danker used the opening speech to launch the CBI's Centre for Thriving Regions, designed to coordinate the private sector's commitment to levelling up.

Transcript - Checked against delivery

Good morning, everybody, and welcome to the CBI’s 2021 Annual Conference. It is such an honour to address you for the first time as Director General. And it's a real pleasure to serve alongside our amazing President – Lord Karan Bilimoria, who you'll be hearing from later in the day in Birmingham.

You can have your G7 in Cornwall. Your COP26 in Glasgow - where we were delighted to spend two weeks as the CBI. This is the big one. Over the next three days, we’re travelling from Tyneside to Belfast, Birmingham to Yeovil, and Swansea to Woking. With accents from all corners of the kingdom - especially mine.

So why change the usual venue - a top-class, London hotel? Well, London remains the world’s greatest capital city. But economic opportunity in the UK is everywhere.

And when I had my first meeting with the Prime Minister in March, we discussed what levelling up really meant. We agreed on many things, including that it was about time we levelled up the CBI Annual Conference.

So, I proposed a deal. We’d kick off in the North East if the Prime Minister was there too. It was the quickest yes I’ve ever got from government. In fact, some say it was the only yes. And we are delighted to have him with us as are all the political and business leaders joining us over these next few days.

And huge thanks must go to our strategic partners, Accenture and Hays - who've been long with us - and, also corporate partners, Advanced, Lloyds Banking Group, National Grid, Ricoh, Salesforce and Vodafone Business for their support. They are brilliant members – each leaders in their fields – and we could not do this without them.

And how great to be in the North East. Inward investment. Talented new leadership. A sense of possibility in the air. And that's just at St James’ Park. Even I admit that us taking over the Port of Tyne today is the second-biggest takeover in the region in the last month.

You know there's been a port serving the River Tyne for over 2,000 years. In lean times and good, it’s remained a committed local employer, and engine for growth.

And I know Matt Beeton and his team are even more ambitious for the decades ahead, creating the UK’s first 2050 Maritime Innovation Hub ─ alongside founding-partner Accenture and others.

Breaking down barriers, opening up opportunities

In May, we at the CBI published Seize the Moment, a ten-year economic strategy for the UK. It argues that after Brexit, after Covid, and after COP, the UK must – and can – build the most competitive, dynamic and future-focused economy in the world. With business at the heart of social progress and acting in the service of the nation.

We set out six big bets - real big bets - the UK can make to transform our productivity and success:

• To decarbonise our economy.
• To put innovation front and centre, alongside future technology.
• To reinvigorate our global trade.
• To build thriving regions and nations, competitive on the world stage.
• To adapt to a changing workforce – more skilled and inclusive than ever.
• And to build a healthier nation – after the pandemic, where business stood behind the mental and physical wellbeing of their employees, so brilliantly.

Many of you have heard me talk about this before. And we have organised our conference around these themes.

Some of you have said, “Tony, I love the bold strategy, but it just doesn’t reflect my current realities”.

Rising inflation. Higher energy prices. Labour shortages. Container costs. Broken supply chains. Brexit red tape. Covid surges possibly returning.

Securing recovery

And look, for many of you, the last few months have felt like a step backwards. The summer brought the prospect of a return to normal, and the chance to grow rapidly again. But instead from early September, let's be honest, the readjustment crunch has been varied and deep; with the possibility of a tough winter still to come.

So, I want to reassure all of you at home and here in the room that the CBI’s got good at supporting you through crises and we will do it again.

On Covid, we’re vigilant and asking Government and you, our members to use every tool at our disposal to keep the economy open, from deploying mass-testing to leveraging our world-leading vaccination programme.

On labour shortages, I do believe the government can help smooth the transition too, by targeting its skills interventions to match shortages; by shrinking training times, to be able to meet demand; and by ensuring a responsive immigration system to fill the gaps we're not going to meet anytime soon.

On supply chain shortages, we are actively participating in Sir David Lewis and his taskforce to find solutions. And we will continue to argue for a joint Business-Government COBR for Recovery. As you know, at the CBI we love a COBRA.

But we cannot afford to act just in the short run.

We cannot put the future on pause. That’s what we did in 2008. We spent several years only managing the immediate matters and rowing politically about everything. And we look headed that way yet again. But we mustn’t do it. We can’t have another low-growth, flatlining-productivity decade.

So, in the twelve months ahead, the challenge for business leaders is twofold: yes, we need to break down the barriers in front of us, but simultaneously we also need to open up opportunities.

Today, I want to talk about the opportunities. The next decade. It’s time to make big bets as a country, big bets as business. And that’s why we call it: Seize the Moment.

Levelling up

Let’s take levelling up. An agenda we share wholeheartedly with the government.

Billed so far, it’s a lot about politics and public services. City mayors or County mayors. Pride in places and better spaces. It all matters. Business cares about these things but there, the politicians lead. 

Business also cares about critical infrastructure and many of our members here in the North are feeling bruised by last week’s decision on HS2. Especially with reduced funding to transport across the North. And I very much hope Government will now engage with local leaders and businesses to find a better way forward.

But ultimately, what the UK needs to really level up, is economic growth in every place. Growth that in turn provides better paid jobs, skilled work, firm-level success and that creates the kind of virtuous circle that really  helps a place to prosper. 

So, let’s talk about money. Let’s talk about industry.

You know every place has an industry that they’re famous for. Textiles in Lancashire. Shipbuilding on the Clyde. Steel in Sheffield. Sources of competitive advantage that made the place prosperous. Where people learnt a trade and forged a career.

But let's be honest, the truth is that the UK has suffered from de-industrialisation. Since the 1980s, we let old industries die – offering little more than benign neglect for what got left behind – it was an economic policy that was - at best - ambivalent about levelling down. Too relaxed about:

• A brain drain, as young people leave home to chase better wages and jobs.
• Wages higher on average in the South than the North.
• Multi-national corporations located overwhelmingly in the South-East where new industries thrived.
• Shuttered high streets in towns and cities left behind.

We have spent the past decades living with these consequences.

But now, we’ve got a shot at redemption, with a chance to regenerate with nascent industries – such as biotech, space, and cybersecurity – emerging in all parts of the country. Even more so with net zero, which creates a once in a generation opportunity for the UK’s industrial heartlands to lead in this new industrial revolution, as they did in the last. Hydrogen. Off-shore wind. Carbon Capture. Electric Vehicles and batteries. And other net-zero solutions.

But it won’t happen on its own – we know that now. This might be a new line from the head of the CBI, but simply saying the market will fix this is simply not good enough. There are free marketeers in the debate who say government should never play an active role like this. But I don’t know a country in the world – including, and especially, the United States – where governments aren’t active in economic geography. Look, governments don’t create jobs and wealth. Businesses do. But businesses alone don’t make better places. That’s on all of us.

So, let’s get real. How do we do it?

The four levers of levelling up

Well, we believe that higher value drives the prosperity of a place. In four ways:

• High-value sectors.
• High-value firms.
• High-value skills.
• And higher business investment.

Sectors

Let me say a bit about each. First, high-value sectors. There is a clear correlation between high-productivity sectors in a place and the economic outcomes for local people.

And lots of places have them.

Just down the road in Sunderland, for example, where productivity is 3% higher than the UK average, fuelled by its world-class automotive sector, a major source of high-quality jobs for the region.

Or Cheshire East, where the combined power of its pharmaceutical and advanced manufacturing sectors has pushed productivity 16% higher than the UK average.

But even when it appears that a place has a high-value sector presence, you know you do have to look more closely. What you’ll see is that – within some UK regions – even the most productive areas remain stubbornly below the national average.

According to ONS data looking at regional productivity in 17 broad economic sectors. London ranks number one in 13 of those sectors, and the South-East also has a top-three ranking in 13 sectors. While Scotland also achieves a top-three ranking in 9 of the 17 sectors.

The truth is that, in too many sectors, the UK now feels like a branch line economy. With the most productive parts of a sector, such as HQs, too often based in London and the South East, and the branch managers and the back-offices are the ones that are based everywhere else.

Instead of a branch-line economy – what we want is an economy of many hubs. In a multi-hub economy, clean energy headquarters in the North East call up Edinburgh and London to arrange finance. And London companies like TfL call up Yorkshire for trains; and Falkirk and Ballymena for buses.[1] [2]

Firms

Second, let's talk about high-value firms. We know the transformational impact a successful company can have on its local economy.

A local start up made good. Like Sage: now the UK’s largest listed tech company and a driving force of investment, innovation and employment in the North East.

A “relocator” that plants new seeds. Like the BBC did in Salford, or Channel 4 are doing now in Leeds.

An overseas investor which commits to the UK. Just like Nissan, who came in the 80s and are now creating a world-first £1bn electric vehicle manufacturing ecosystem here.

Or a UK firm that has been a regional leader for decades. Like BAE Systems, in Barrow where they design and build some of the most complex, nuclear-powered submarines in the world for the Royal Navy. And Leonardo, which has kept Yeovil at the cutting-edge of aerospace since the First World War.

High-value firms of these kinds are the job-creators, the skills-builders, the innovators – they are catalysts for growth in our local economies.

Skills

Which leads me to our third lever, skills. When skills rise, so does economic growth. And that golden thread between skills and productivity only becomes more important over time.

For example, in parts of central London, such as Wandsworth, Camden and the City, around three quarters of workers are educated to at least degree level. That’s a big part of the explanation why London has the highest productivity of anywhere in the UK.[3]

It’s a similar story elsewhere - it's not just London - with other places, such as Edinburgh, Bristol, Brighton and Hove having relatively high graduate shares too.

But many of our other major city-regions have traditionally lagged behind – like Leeds, Birmingham, Manchester and Glasgow, despite being home to some of the UK’s leading universities.

And we can guess why that might be – better prospects elsewhere. All of which, in turn, exacerbates the local skills shortages.

Investment

Finally, of course, we come to business investment. When it rises in a place, the economic impacts are clear.

I have spoken about business investment before. It is, as a nation, our Achilles heel. Seriously underpowered since the 1990s. And on track to coming back lower still after the pandemic.

But investment and productivity are interlinked. For example, some more numbers, recent research found that over time, a persistent 1% increase in the level of capital per worker – that’s machinery, IT, buildings, etc – leads to labour productivity growth of 0.6% across the whole economy.[4]

And our analysis found that, over the past five years, while some regions have seen double-digit growth in capital per worker, it’s stagnated in many of our industrialised areas -Derbyshire and Nottinghamshire, West Yorkshire, Greater Manchester and Merseyside.

Business investment is something that needs tackling locally but nationally too. It's why we've called on the Chancellor to look again at tax and markets. And also regulation, which we need to think about more holistically. We need UK regulators to pioneer pro-investment and pro-innovation regulation, alongside competition and consumer price. That’s the way we use post Brexit freedoms to unlock growth.

A clusters approach

So. There we are – I hope you've stayed with me - the four levers, the four economic ingredients of levelling up. Sectors. Firms. Skills and Investment.

But what’s the recipe? Because its only when you bring them in tandem that these levers work.

For us, the answer is a clusters approach.

Where you get a concentration of firms co-located. They compete, but also collaborate. They have the same skills needs. And supply needs. Their ideas and innovations spur each other on.

It becomes an ecosystem, made up of start-ups and anchor institutions, the colleges and the universities. Thus, flows skills and expertise, in turn generating innovation and ideas. Surprise, surprise – then finance, and legal and professional services show up. And soon, adjacent sectors come to town.

That's the way economies grow. It’s not a new idea.

We know London did it in finance; Aberdeen in oil and gas; and Cambridge did it in science. It’s also enabling South Wales to emerge as a player in the world’s compound semiconductor industry, which is projected to grow to over $300bn as a market by 2030.[5]

It's true internationally. In the US, it’s cemented Massachusetts’ reputation as a global leader in biotech innovation.[6]

And, in Germany, it’s helped Hamburg to become a world-leading civil aviation hub.[7]

And where it works, and this is key, it’s rarely public-sector push, it’s private-sector pull.

So, at the CBI, we want to help. Yes, levelling up should absolutely be led by a local mayor or government. But a business plan for a place has to be a plan with businesses in it. Committed, invested – in every sense – and showing up to play.

So today I can announce that the CBI will establish a new Centre for Thriving Regions to coordinate the private sector’s commitment to levelling up.

Our Centre will have a new Director and be staffed from across all four nations, and regions. It will have a Steerco of leading national, local and multinational businesses and universities or colleges. It will draw on the input and ideas of our 800 strong regional council network.

It will launch a roadshow round the country - we may be back - to codify success and failure in business-led growth across the regions. It will create two demonstrator projects in high-potential clusters – a multi-year intervention to support local efforts to transform and improve the case. It will draw on all this and tonnes of international evidence to write the “levelling up playbook” – how any UK place can build globally successful clusters – clusters that are private-sector engaged and led.

And it will crack one of government’s biggest questions for me – how to bring private-sector leadership to a place. You know businesspeople - I'm sure you agree - want to play that role. But to date most of the asks are for committees that oversee public funds. I’d change the ask. Ask businesses to do fundamental economic strategy for regions – as the best Mayors often do. Or be a genuine decision-maker on specific deliverables that make a difference – a university hub, a new logistics centre, a thriving regional airport.

I have spoken to companies far and wide who want us - at the CBI - to do this work. They want us to ensure that we throw the full weight of private-sector involvement, ingenuity, and investment to build a shared mission to level-up the country.

Changing role of the CBI

It also speaks to how the role of the CBI is also changing in this coming decade, and our continued commitment in new times to you – our members.

I’ve been in post for one year now. And when I was appointed Richard Lambert told me that I’d put on a stone in the first year. I think he meant because I'd be going to endless black-tie dinners. But I still managed to put on a stone sitting in a chair at home.

But I don’t want us at the CBI to be armchair critics. I don’t want the CBI just to be advocates of change. I want us to be its agents too.

And to be so, with you.

For the years to come, we’re here to help you shape change – by influencing new policy for these new times. But we’re also here to help you embrace change – by enabling you to learn from others around you and the best experts we can find. And we’re here to help you lead change, by pioneering and showcasing new answers for new challenges.

And change is upon us all.

This Conference sets out how our economy will now move rapidly in different ways. Decarbonisation. Innovation. Trade. Regions. Workplace and Health.

So, please soak it all in. Whether you're in the room or at home, please comment and tweet. Please engage with us afterwards to make it better.

It’s kind of tiring to have to think about the future after everything we’ve come through.

I know it’s kind of hard to solve for a new world when the current one presents real problems.

But as we emerge from trying times, our very best businesses are already surging ahead. They are going fast. They are growing fast.

So, my message is simple to everyone – it's time to seize the moment

[1] https://www.bbc.co.uk/news/uk-england-humber-44496526

[2]  https://www.london.gov.uk/press-releases/mayoral/mayor-champions-national-levelling-up-agenda

[3] CBI analysis of ONS data

[4] Gardiner et al, UK Regional capital shocks and productivity, an updated analysis, Productivity Insights Network, 2021

[5] https://catapult.org.uk/our-work/case-studies/developing-a-compound-semiconductor-power-house-in-south-wales/

[6] https://www.bostonglobe.com/2021/06/15/business/has-boston-become-silicon-valley-biotech/

[7] https://www.hamburg-aviation.de/en.html