Receive our newsletter – data, insights and analysis delivered to you
  1. Analysis
10 June, 2021updated 12 Oct 2021 05:41

Covid, Brexit, resilience, diversification: What will shape the future of the UK’s cities?

Investment Monitor's Future of British Cities series has taken in more than 20 locations, each with its own industrial story and offering to investors. Richard Gardham rounds up our coverage.

By Richard Gardham

coventry-uk-cities

Covid-19 has caused a delay to Coventry’s UK City of Culture celebrations, but the mood within its borders remains one of optimism. (Photo by Darren Staples/Getty Images)

When thinking about how Investment Monitor could cover the UK in depth, there was one priority: do not view any large area as one homogenous mass. The London-based media will all too often simply see ‘the north’, for example, as one entity, meaning that what is going on in Newcastle is in some way directly connected to events in Liverpool.

This approach misses out on a lot. Each major British city has a fascinating backstory, often with a history of growing around an industry that still shapes its economy today. No two cities in the UK are the same, but that is not to say that they don’t face similar challenges. Everywhere is trying to ‘build back better’ from the Covid-19 pandemic and lockdowns. Everywhere is trying to make sense of Brexit. Many locations are still coming to terms with a post-industrialisation decline, wanting to branch out into more fashionable emerging fields such as green energy, digital media or advanced manufacturing.

It is with these challenges in mind that we embarked upon Investment Monitor’s Future of British Cities series, to listen to the unique voices of these locations and look at how they are hoping to meet these challenges over the coming years.

Making things work in the Midlands

In early June, Coventry finally started its celebrations as the UK City of Culture for 2021. The events should have started in January, but the Covid-19 lockdowns prevented this from happening. Even still, the mood within the city is one of optimism. This is summed up by Andy Williams, director of business, investment and culture at Coventry City Council, who says: “It is going to be a different year than the one we had envisaged. We are going to be targeting domestic tourism more instead of international tourism, but that is no bad thing in terms of putting Coventry on the map. Coventry becoming a more popular domestic destination will do us no harm.”

We are going to be targeting domestic tourism more instead of international tourism, but that is no bad thing in terms of putting Coventry on the map. Andy Williams, Coventry City Council

The optimism in Coventry seems well-founded. The city, once nicknamed ‘the Detroit of England’, is still playing to its strengths in automotive manufacturing. Indeed, plans for a gigafactory to build batteries for electric cars in Coventry were approved in February 2021. The factory will create up to 20,000 jobs and bring in £2bn of investment after starting operations in 2025.

This optimism seems to have spread through the Midlands region. In Wolverhampton, the city has seen exponential growth in its financial services sector, though its strengths in construction are helping it to meet the challenges of the present and shape its future. In Birmingham, the UK’s second city, investment in physical and digital connectivity is a priority, which is linked with the wider West Midlands’ role as a hub for the aerospace and automotive sectors. Speaking of hubs, a new one has emerged around the East Midlands (essentially Nottingham, Derby and Leicester) in recent years, with the UK’s e-commerce industry increasingly being drawn to this most central and well-connected of locations. East Midlands Airport was named as one of the eight English free ports in March, which should further strengthen the region’s reputation as an e-commerce and logistics hub.

In the corner of the Midlands knows as ‘the Potteries’, Stoke-on-Trent is a city that has been quietly but effectively diversifying its economy and attracting investment. While ceramics remains an integral part of the local economy, manufacturing in this area has declined as an employer in recent decades due to increased automation. Stoke’s response to this has been to focus on myriad sectors, such as healthcare, retail and other areas of manufacturing. “We have world-leading industries here and have a very diverse economy,” says Alun Rogers, chair of the Stoke-on-Trent and Staffordshire Local Enterprise Partnership. “That is a real strength but can also be a challenge when promoting the region because it is difficult to pull out one or two things from the hundreds of good things going on.”

The pride of Yorkshire

Coventry’s predecessor as UK City of Culture was Hull, which had used the event to revamp its image after decades of being derided by many as the poster child for the country’s post-industrial decline. Just after Hull was announced as the City of Culture, an announcement that was arguably more important was made: German energy giant Siemens stated that it had chosen Hull as the site to manufacture its wind turbine blades. Hull had seen its fishing industry collapse in the 1960s and 1970s, with little to replace it. Now, thanks to a piece of foreign investment, the city had an exciting future mapped out as a green energy hub. Siemens has become part of the city’s DNA, to the extent that Mark Jones, the director of regeneration at Hull City Council, says: “The acid test is that people in Hull now think that Siemens Gamesa is a Hull company, such has been its impact.” There can be few greater accolades that a foreign investor could hope to achieve.

People in Hull now think that Siemens Gamesa is a Hull company, such has been its impact. Mark Jones, Hull City Council

As a region, Yorkshire has a population of 5.3 million people (about the size of Norway) and some three million of those are located within the Leeds City Region. While Leeds itself – a core UK city – is the dominant partner in this area, it also takes in Bradford, a city with a rich history in textiles, manufacturing and engineering and a population of more than 500,000. The two sit about 13km from each other, so rivalry is to be expected, but more important is a spirit of collaboration that is growing stronger between the pair. Indeed, when Leeds was chosen as the UK headquarters for broadcaster Channel 4 (and subsequently saw many BBC journalism jobs relocated there) it might have been seen as a kick in the teeth for Bradford – a Unesco City of Film. Instead, the mood seems to be one of ‘a win for Leeds is a win for Bradford’, given the opportunities these investments offer people in both cities.

Rounding off the Yorkshire ‘big four’ is Sheffield, which was known the world over for its steel-making prowess a century or so ago. This expertise in metallurgy remains in the city, and has been used to put it at the forefront of the UK’s charge into the Fourth Industrial Revolution. It is widely recognised as a hotbed of advanced manufacturing and its innovative spirit has seen Sheffield attract big investments from the likes of McLaren and Boeing.

Scotland’s future in or out of the UK

Debate in Scotland at the moment is centred around Scottish independence – both whether the country should go it alone, and can it afford to? However, irrespective of their future within the UK, Scotland’s big cities have their futures clearly mapped out. Dundee made its past fortune on ‘the three Js’ – jute, jam and journalism. However, ‘the city of discovery’ is now looking to become ‘the city of diversity’. With a £1.1bn investment in its waterfront development, an ambitious renewable energy plan, universities pumping out impressive talent pools and research and development projects, and even a thriving video game design sector emerging, Dundee is embracing the 21st century head-on.

Further up Scotland’s east coast, Aberdeen has formed a reputation of being the oil capital of Europe in recent decades, bringing a wealth to the city that has been the envy of many other locations in the country. However, how will Aberdeen cope with the energy transition away from fossil fuels? The city is not going to abandon oil and gas completely, but it is looking more towards wind power and hydrogen in an effort to future-proof its economy.

Edinburgh has no such worries, and its status as a major global tourism hub seems unassailable, thanks to its rich history, castles, cultural events and Harry Potter. The Scottish capital is much more than a tourism destination, however, housing some of the world’s best universities, boasting a major financial services sector, and making advancements in areas such as fintech, life sciences and data centres. Not one to let its old rival get one over on it, Glasgow has enjoyed a fruitful start to the 21st century too, establishing a reputation as a good place to live, work and invest in. For foreign direct investment specifically, Glasgow was the fourth most popular city in the UK for project numbers in 2019. The city is targeting advanced manufacturing and technology in particular to keep this momentum going.

Wales ticks along while Brexit impacts Belfast

Speaking of local rivalries, few are more keenly contested than that of Cardiff and Swansea on Wales’s south coast. Cardiff became the official capital of Wales in 1955, thus ending any claims Swansea may have had to the title. Its young, educated workforce and high quality of life have proved popular with investors in recent years, and it has become a hub for back office operations, with many companies using Cardiff to complement their activities in London.

I am disappointed Swansea didn’t do this [regeneration] ten years ago… [but] I am proud that we have now got more cranes across the city than we have seen in 30 years. Rob Stewart, the City and County of Swansea Council

Swansea maybe lacks Cardiff’s cache, but it is embarking upon a city centre regeneration that it hopes will revive its economy and bring in investment. The city is making a big play in cutting-edge technologies, but there is an acceptance within the city that this regeneration is overdue. “I am disappointed my city didn’t do this ten years ago… [but] I am proud that we have now got more cranes across the city than we have seen in 30 years,” says Rob Stewart, leader of the City and County of Swansea Council.

While Brexit has made its impact felt on all UK cities, its effect upon Belfast is unique. The city, and the whole of Northern Ireland, has been largely at peace since the Good Friday Agreement was signed in 1998, but this has come under threat from the UK leaving the EU. Worries abound, however, that the reintroduction of a border caused by the UK’s departure from the EU could cause an increase in civil unrest. There are some advantages for Belfast, though, as it can sell itself to investors as a location with a foot in both camps. “If you are trading goods, Northern Ireland is the place to come and set up access to both [the UK and the EU],” says Steve Harper, executive director of international business at Invest Northern Ireland.

What of the northern powerhouses?

Brexit has been a key topic in North East England too, and the Nissan plant in Sunderland has been seen as something of a bellwether as to how the UK will fare outside of the EU. However, there is much more to the region than its automotive expertise. The reputation for friendliness and the favourable accent of Geordies (people from Newcastle) and Mackems (those from Sunderland) have made the region a hotbed for customer-facing business services operations. The area’s appeal goes wider still, though. According to data from the ONS and Department of International Trade, the region ranks second only to London for job creation through foreign direct investment (FDI). It is considerably ahead of other English regions when compared by FDI jobs per 100,000 people.

Of the other northern giants, Manchester’s fall and rise has perhaps been one of the most dramatic in UK history. By the dawn of the 20th century, the city then widely known as ‘Cottonopolis’ was spinning 32% of the world’s cotton, with the textile industry responsible for three in every ten of its jobs. However, when the bottom fell out of the market, Manchester was left with nowhere to go. After decades of stagnation, the Manchester of 2021 is a vibrant, educated, innovative and ambitious city, arguably the UK’s premier advanced manufacturing hub.

There has been much talk of rivalry in this article, and few are more rabid than that of Manchester and near neighbour Liverpool, particularly when it comes to football. However, Liverpool has its own success stories to tell of late. The country’s image took a battering in the 1980s and 1990s, but its port, which faces the US and the now crucial EU market of Ireland, and its ability to attract major investments from the likes of Jaguar Land Rover, AstraZeneca and Unilever, give the city an edge it is using to its advantage. Its strength in life sciences is fuelled by its educational offerings, through the likes of the School of Tropical Medicine, the University of Liverpool, John Moores University, and the Royal Liverpool and Broadgreen teaching hospital.

Latching on to London

There has been much talk during the lockdowns caused by the Covid-19 pandemic that London’s allure may dim somewhat. With working from home becoming the norm for many, moving out to somewhere more affordable becomes an option. One area hoping to cash in on that is Kent, which is a traditional location for younger workers who can’t afford a house in London and want to raise their families away from the hustle, bustle and pollution.

We are witnessing a repurposing of the high street. Not only are co-working spaces being set up but a number of large companies based in London are also wondering whether they need such a heavy footprint in the capital. Gavin Cleary, Locate in Kent

The county, known as ‘the Garden of England’, is seeing co-working facilities popping up in its towns and cities, taking advantage of impact of Covid-19 on commuting levels. “We are witnessing a repurposing of the high street,” says Gavin Cleary, chief executive officer of Locate in Kent. “Not only are co-working spaces being set up but a number of large companies based in London are also wondering whether they need such a heavy footprint in the capital and are considering moving some of their office space to the county.”

An old hand at using its proximity to London to its advantage is Reading, which lies about 70km west of the capital. This town, with a tech-led economy, has achieved a great deal of success in drawing investors from London given its cheaper labour and office space, its transport links with the capital, and its impressive quality of life. This approach appears to be paying off; in the third quarter of 2020 it had a smaller economic contraction than any other UK city.

Sat in Norfolk’s splendid isolation (about 160km from London) lies Norwich, famous for mustard and Alan Partridge, but in reality now boasting an economy based much more around insurance services and its growing digital and tech offering.

The beautiful south

England’s south coast is dotted with beauty spots and industrial hubs. Brighton qualifies as the former but has aspirations towards the latter. The city is a tourism hub within the UK, particularly for sun-seekers travelling from London, and is therefore well placed to take advantage of the Covid-induced move towards domestic holidays, but the city has an underwhelming track record when it comes to attracting FDI, and is heavily reliant on small and medium-sized enterprises (SMEs) based around the tourism industry.

Further along the south coast, the picture looks a little more rosy. Portsmouth is another once-thriving city that has had to cope with post-industrial decline and the socio-economic problems that come with that. Its historic expertise in all things naval, however, is giving the city an advantage when it comes to its ICT offering, as well as helping to shore up its manufacturing base. It is still a busy port for imports and exports too; if you have ever eaten a banana in the UK, the chances are that it has journeyed through Portsmouth. In nearby Southampton, the city’s cruise terminals and docks look set to give the city a logistical advantage in a post-Brexit and Covid environment, but quite how this will translate into attracting much-needed investment remains to be seen.

Echoing the issues that have hit Coventry, Covid has put a dampener on some major celebrations in Plymouth. The year 2020 marked 400 years since the Mayflower set sail from the city to the New World. The city’s role in the global Mayflower 400 celebrations was set to highlight it as an international cultural attraction until the pandemic hit. Tourism is a major contributor to Plymouth’s economy, and the city had 5.1 million visitors in 2019, who spent approximately £322m. It is hoping that its wealth of marine expertise will continue to be a fruitful area when attracting FDI as the city looks to offset these losses.

Bristol is one of the UK’s core cities, and has largely avoided the industrial decline seen in other urban areas in the country. It did make headlines in 2020, however, when a statue of Edward Colston, 18th-century philanthropist and slave trader, was torn from its plinth and dumped in a nearby harbour. It is maybe unsurprising, then, that one of the key messages emanating from the city is that any future economic growth should be both inclusive and sustainable.

What now for British cities?

The recovery from the economic and social hit of Covid-19 will undoubtedly shape the UK’s cities for years, maybe decades, to come. They all intend to build back better, but catchphrases and jargon are easy to produce in the heat of the moment. The acid test will come soon.

Brexit brings a more immediate threat. Almost all cities report that their major investors, mostly multinationals, are coping well with the demands of Brexit, but the SMEs, the economic backbone of the country, are really struggling. It is still too early to tell what impact Brexit will have on the UK, and while the government is busying itself with feel-good announcements such as the eight free ports and the National Infrastructure Bank in Leeds, the more immediate needs of the country’s businesses seem to be going under the radar. If Boris Johnson’s government is serious about its levelling up agenda, it will need not just more FDI pouring into cities that aren’t London, it will have to recognise that the real economic heartbeat of the country comes from its smaller businesses, whose needs do not seem to be top of mind at present.

The real story of the UK’s cities, however, is one of resilience. When Britannia ruled the waves, each city was a global leader in the industry that it was formed around, be it textiles in Bradford, jam in Dundee or fishing in Hull. The UK’s post-war industrial decline has laid down multiple challenges for these cities, compounded by events such as Brexit and Covid. Yet the feeling throughout each is one of optimism, with a real enthusiasm to embrace future technologies and provide high-quality jobs for its citizens. At Investment Monitor we will continue to assess the UK’s cities – and others throughout the world – on an individual basis as each emerges from these unprecedented times.

For more of Investment Monitor’s coverage of the UK’s cities, read through our Future of British Cities series:

Topics in this article: , , ,
NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. Data, analysis and deep insights on foreign direct investment delivered to you
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU