South East: CBI urges government to 'turbocharge' regional productivity

Government must publish a framework to devolve powers and reignite the regions says the CBI today in a major report. The business lobby group says this will help address the productivity puzzle and will help close the gap on regional inequalities. The CBI believes this will ‘ignite a new era of economic prosperity’.

• Create a South East ministerial champion
• Cover 60% of the population with a devolution deal within five years
• Create an independent board to decide devolution deals against a published framework – ‘kicking the politics out’ from decision-making on devolution

Devolution across England has stalled over recent years. Building upon recent momentum including speeches by the Prime Minister concerning the need to ‘level up’ places across the UK, the CBI has outlined three steps needed to kickstart devolution and maximise the potential of all English regions.

Despite some attempts, the UK’s productivity puzzle remains and tackling it requires bold and sustained action. The UK lags international competitors when it comes to productivity, with output per hour in Q2 2019 just 1.3% higher than it was in Q4 2007.

With productivity a key driver of wage growth and living standards, addressing it must be a priority, from Whitehall to town halls. Stagnating productivity in the South East and throughout England is estimated to cost private sector workers on average £5,000 in lost income every year.

The most productive part of the country is almost three times more productive than the least in 2017, and intra-regional variations in productivity are equally stark. There’s now an urgent need to get local decision-making, funding and delivery working effectively in all parts of the country.

CBI research published in 2017 showed that closing the productivity gap between the highest and lowest performing parts of a region and replicating this across each region of the UK could add more than £200 billion to the economy in the next decade. Devolution allows key decisions relating to productivity to be made closer to the places they affect, and if done right could support in unlocking regional growth.

Three key steps are needed to kickstart English devolution:

• Step One: Develop and publish a clear framework for devolution so that local leaders understand what powers government are willing to consider devolving
• Step Two: Optimise Westminster and Whitehall for devolution including buy-in and support from Treasury who hold the purse strings
• Step Three: Deliver new deals to cover 60% of England's population and streamline local government by championing unitary authorities

Recommendations include removing politics from decision making by establishing an independent board to assess proposed devolution deals, and simplifying boundaries between combined authorities and local enterprise partnerships.

Businesses in areas with devolution deals have cited a range of positives. They include the raised international profile that having a Metro Mayor brings, clarity over the strategic direction, increased collaboration with neighbours across the region and the country, as well as a greater focus on inclusive growth.

The CBI report is released after the chancellor announced at the Conservative Party conference that the Government will bring forward a new White Paper on English devolution in the months ahead. The CBI hopes its report will kick-start a national conversation, with business at its heart, on the future of devolution.

Commenting on the reports launch, CBI regional director for the South East & Thames Valley Malcolm Hyde said: “Now is time to work with business to set out plans to devolve powers and unlock regional growth. Within five years, 60% of the population should be covered by a devolution deal. This change will turbocharge our economy and will ignite a new era of economic prosperity in the South East & Thames Valley.

“Business is keen to unlock growth but wants to avoid future deals being influenced by politics. A clear framework where deals are assessed by an impartial independent board is sorely needed.

“I believe it is time the prime minister harnesses devolution and runs with it. If he does the CBI will support him every step of the way. Everyone knows that productivity is a key driver of wage growth and living standards, so addressing it must be a priority, from Whitehall to town halls.

“We encourage government to work with the business community to reduce local government complexity and kicking the politics out of decisions on devolution.”