Ahead of the Chancellor’s Autumn Budget, KPMG has launched its inaugural UK regional productivity performance report.
Echoing the findings of a new report from the National Infrastructure Commission, published yesterday, the KPMG study points out that improving regional infrastructure, particularly transport links and improving skills, are vital if the UK is to boost productivity. It examines how different regions fare in each of these areas.
Productivity overall plays a key part in the long term economic prosperity of the UK.
The report found that the East of England is a leader in innovation, as measured by R&D spending and registered patent counts. In comparison, Welsh R&D expenditure is only half of the UK average.
According to the research, Cambridge has historically been a very successful centre for embryonic innovative companies to achieve their potential. However, the increase in home grown business and the influx of ‘new joiners’ has put an increasing pressure on the region’s roads, the demand for housing (and the consequential price inflation) and on human resources.
A number of other cities in the region are growing fast, such as Norwich, where the University is becoming a hub for innovative businesses working in nutrition, green tech and Fintech. Yet the city and Norfolk overall remain relatively isolated and improved communication bandwidth should be a top priority the report recommends.
The food production sector, with its reliance on foreign labour, stands to be heavily affected by Brexit and its impact on the free flow of labour and goods, as well as growers’ subsidies.
Overall the report concluded that East of England has an above-average productivity in all but three sectors, which make up only around 15% of its GVA. The region has a slightly higher share of manufacturing than London and the South East, dominated by high value-added pharmaceuticals, metals and transport equipment. The best performing area in the region is East Anglia, where there are advanced clusters around the University of Cambridge, operating in research and development, software consultancy, high value engineering, creative industries and pharmaceuticals. The sectoral mix is conducive for high labour productivity.
Charles le Strange Meakin, Senior Partner for KPMG in Cambridge commented on the findings: “The Chancellor is facing tough choices in his budget next week. With little money to spare, priority should be given more than ever to initiatives that can raise productivity across our regions. The East of England ranks top three in the list of most productive UK regions and our local economy continues to grow, however the lack of really good infrastructure seriously hinders our ability to reach our full potential.
“We must acknowledge that the UK faces a number of challenges in the coming years, with economic growth likely to come under pressure. The Government has an opportunity to play an important role in securing better growth prospects for the UK through policy programmes which focus on lifting regional productivity levels. We hope to see measures addressing the different barriers, as well as a more regionally targeted approach, to improving productivity levels in the Chancellor’s Budget next week."