What does the Northern Powerhouse mean to the digital economy?

By May 18, 2015Thoughts

Members of the Conservative-led coalition had been talking about the “Northern Powerhouse” for some time, the policy is a development of an earlier Labour policy initiated by John Prescott, and it proposes to create a second economic engine in the economy that will rival London by learning from some of the key lessons of London. Since the Conservative party was returned as a majority government around a week ago it would appear that the idea is more than just vote winning rhetoric with speeches being made and plans being pushed forward. This got me thinking: what are the implications of the Northern Powerhouse  to the digital economy?

Back in June George Osbourne spoke on this plans to create the Northern Powerhouse, saying: “The cities of the north are individually strong, but collectively not strong enough. The whole is less than the sum of its parts. So the powerhouse of London dominates more and more. And that’s not healthy for our economy. It’s not good for our country. We need a Northern Powerhouse too.

Not one city, but a collection of northern cities – sufficiently close to each other that combined they can take on the world,”

Osbourne outlined four key areas for development:

  1. Greater transport links between Northern cities to include a proposed high speed rail link between Leeds and Manchester (dubbed HS3)
  2. Create a focus on science and engineering through the North’s universities
  3. Building more cultural assets to make the cities more attractive places to live
  4. Give the cities greater autonomy to govern themselves

There’s nothing particularly SMART about the four key areas, and point two and three are fairly woolly. So as I see it, the core proposals are more connections between the North’s cities and devolution of powers to those cities.

I think it will be hard to measure any of these changes. We’re already seeing quite significant growth the Northern cities with hundreds of thousands of jobs being anticipated to be developed in Manchester alone in the coming few years and where indications suggest Manchester firms are already starting to feel a skills gap in which employees at the right levels can’t be found and where some companies are having to turn business down. This is especially true in the digital sphere.

According to Resourcing Partner for products and technology at Autotrader Sarah Brooks-Pearce, one of the difficulties in the North that has made the skills gap harder to plug is the amount of time it takes to get from one city to the other, Brooks-Pearce points out that in London commuters regularly travel around 30 or 40 miles to their places of work, which is doesn’t happen in most cases in the North (unless you live somewhere remote like we do!). Speaking about Manchester’s reach Brooks-Pearce said: “Where we could reach out on a 30-40 mile radius into London, to do that here that would cover Liverpool and Leeds but I think we would really struggle to convince someone to commute in from Leeds every day at the minute.” If this is part of the problem which is stalling the economic growth of the North, then the Northern Powerhouse concept of creating better infrastructure will surely help mitigate some of the issues surrounding the skills gap.

Many people have a romantic view of digital businesses being run from back bedrooms in pastoral landscapes and making millions with little effort, in the real world this is very rarely the case and web businesses always have bricks and mortar locations, which are often rooted in the collaborative environment a city can engender.

I wonder if the government have missed one of the central points about London when trying to replicate the model of infrastructure across the Northern cities. London is a megacity and it’s one sprawling mass. When I lived in Manchester I used to constantly see posters about things that were happening around the city and I used to think “I might go that event” whilst rarely going. My friends in London constantly bemoan the sense that they’re missing something because there is so much more happening everywhere they look, and many of these cultural events such as expos, exhibitions, arts events force the visitor to think differently. So the people of London, just by having so much going on around them, are challenged by and are saturated by the new and I believe this is bound to make them more creative and innovative, and more likely to take risks because they can see the benefits around them. No amount of train lines between cities in the North can replace this; the only thing that would replace this is a city in the North to rival London in terms of size and infrastructure.

Of course you can overcome some of this by focussing on the types of people being produced by education, we need an innovative, creative, tech-savvy workforce who are constantly engaging with and driving forwards changing technologies. However it’s only going to be through business being more involved with education and with a continued focus on the professional development of individuals that we’re going to get close to this, as President of the North & Western Lancashire Chamber of Commerce and OBAS CEO Norman Tenray said when discussing less experienced workers: “I often hear business complain that young people are not work ready, I believe that they simply need to experience that light bulb moment and it is our responsibility to help them to find the switch. The switch that motivates and captures their enthusiasm and energy for them to apply themselves and realize the importance of what they are doing and the opportunity.”

As well as creating cultural assets and links within Northern cities that will entice people to live and work in them, it’s essential that the government focusses on how to create real cultural links between those cities. People know they’re Northern, however what does that mean and how does that make a person from Manchester the same as a person from Liverpool or a person from Leeds? The old geographic rivalries and stereotypes still exist and need to be flattened out, much in the same way as they have been in Greater London over the last few decades.

Businesses need to think about how they can contribute to creating a bigger North, and how they can “export” outside the North competing less with our Northern neighbours whilst working more collaboratively with businesses in those cities closest to us, this is as much a digital endeavour as it applies to traditional bricks and mortar businesses.

In the digital economy one of the most important assets of a business is the types of people it can employ and the new £7bn infrastructure commitment should go someway to bringing the Northern Cities together, however there’s going to need to be more focus on the people working in the digital sphere as well as initiatives that bring the community together. TechNorth was launched to bring together digital expertise across Manchester, Leeds, Sheffield, Liverpool and Newcastle with a focus on creating opportunities for young people in the digital economy of the region.

It’s so important that the Northern Powerhouse doesn’t lose site on the role of digital. The Boston Consulting Group recently predicted that the digital economy would contribute £225b in the UK by 2016 and we need to make sure that the Northern cities have a healthy chunk of this otherwise we risk talent and businesses draining to London, much in the way they have in other industries, leaving the economy even more unbalanced.

If the UK, (let alone the Northern Powerhouse) is going to become dominant in the realm of digital and technology, the government is going to have to engage intelligently with the proposed Single Digital Market and I struggle to see how the arguments we’re going to be having with Europe over the next couple of years in the run up to a European referendum are going to help with that.

Unfortunately from what George Osborne said in this Manchester speech, it would appear that much of what he envisages for the Northern Powerhouse is routed in 19th and 20th Century technologies, including his outdated reference to the world’s largest supercomputer at Daresbury which demonstrate a lack of understanding about the changing role of digital, where large businesses can be run from tiny Raspberry Pi units and where supercomputing is done in the cloud. With the government’s leaning towards traditional business and large finance, it’s possible that much of the disruptive business models including the likes of AirBNB and Uber will start to become more heavily regulated; something that won’t be great to the North’s new startups.

Although there are some glaring issues with the Northern Powerhouse concept the general idea that we need to become more intertwined as a region has to be a good thing. If we can get more people commuting further distances for work, we’ll get the best talent in the businesses they belong to be in. Digital has to be a focus in this and the government need to get a better understanding of what the digital landscape looks like, not only in the North but throughout the whole of the country.

 

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