Beyond following the money: next-generation local economic strategies for the post-COVID world

Major change moments, like those we are living through, shape our economic geography. How can local leaders design ambitious plans in times like these? PolicyDepartment MD Mike Spicer, and CEO of Third Life Economics, David Marlow set out their vision of future local economic strategies.

The 2020s started with two of the biggest changes to hit the UK in the last fifty years: COVID-19 and Brexit. For many working across economic development, crisis management is still ongoing from March 2020.

This has been a time of unprecedented ‘big government’ interventions. Policies once thought unthinkable are now routine across economic, social and environmental life. The role of large, centrally-prescribed, place-based programmes is growing. As is the influence on funding of UK-wide policy agendas like 'levelling up'.

So is it a distraction to spend leadership and management time planning for the longer-term future of your area? A luxury to develop new economic strategies rooted in the needs of place?

We don't believe so.

In this piece, we argue that such thinking is crucial as we move towards the pandemic’s turnaround phase. Now is the moment for local leadership teams to rethink the future of their cities, towns and communities. Both the roles they play and the sources of economic dynamism that will power them. We support this proposition with evidence and examples from recent exercises. We hope these make the case and illustrate how to set about delivering it.

Changes in the economy mean changes to economic geography

Economic convulsions tie back to geography in three main ways. First, through the rise and fall of sectors and the places tied to them. Second, when new industry practices, technologies or markets change the links between profit and place. And third, when people move with changes in jobs and housing markets. Over the span of modern UK history you can see these factors in each of Britain’s biggest ‘change moments’.

Consider these examples.

After 1918 the pre-war trend to consolidation in the UK’s banking industry sped up. In the years that followed institutions disappeared, rebuilt, merged and changed focus. A prominent case was the acquisition of the Nottingham and Nottinghamshire Bank (NNB) by London County, Westminster & Parrs. Once a force in East Midlands finance, it was subsumed into what later became the National Westminster Bank, NatWest. NNB disappeared from Nottingham in 1919.

The UK's banking industry wasn't always as geographically concentrated as it is today

The impact of a place-blind oligopoly on the market for small business finance was famously captured in the 1931 Macmillan Report. Arguably, it lives on today as the persistent gap in funding for UK scale-ups.

Green Belt surrounding post-war settlement in Hampshire

After 1945, the emerging pre-war trend of suburban living gathered pace. Towns were rebuilt around the needs of the car. Ring road systems went live from the late 1950s, channelling economic activity across cities like Coventry, Leeds and Birmingham. There were 'new towns' for the displaced and baby-booming populations like Harlow in Essex and Cumbernauld in Lanarkshire. The Town and Country Planning Act of 1947 regulated the pattern of development, introducing new concepts like Green Belt. As with the changes to banking a generation before, the impact of this rapid change was long term. You can see it today in the built environment of those places and the communities that settled them.

The de-industrialisation of the 1970s and 1980s created new areas of deprivation – especially in former mining communities, west coast port cities and single-industry towns. The rise of professional services created new communities of wealth in London and parts of wider South East England, widening regional disparities. Like our other examples, changes in the economy were catalysed by the major change moments in society. Oil price shocks; the arrival of the jet age; containerised shipping. All played their role in the economic stories of our communities.

There are reasons to believe that we are living through another big change moment. Coronavirus imposed changes on households, businesses and governments. The adaptations forced on us have altered the relationships we have to the places that matter most to us. These are the locations where we live, work, learn and play.

Remote collaboration in the modern age

Even if pre-pandemic norms reassert themselves, residual patterns of behaviour would still be transformative. If, as economies reopen in the second half of 2021, home-working rates settled at halfway between the pre and post-lockdown peaks, the UK’s ‘permanent’ work-at-home population would increase by 6 million. That’s more than the population of Denmark.

Brexit too, has the potential to shape our economic geography. New patterns of UK trade with the rest of the world are likely to show up in changes to distribution networks. Many local economies, not least port cities, depend on how goods enter, leave and move around the country.

The move to net zero greenhouse gas emissions is already reshaping industries from energy to automotive. The economic assets needed to make this happen, from battery plants to windfarms and green finance, all need places to call home. These too have the potential to re-shape our economic geography.

Places face greater uncertainties about their economic futures

Right now, economic policy is tied to decisions on public health. Uncertainty persists around the timing and nature of restrictions on economic behaviours. Even with roadmaps for re-opening now published, the pandemic could still surprise us. Medical science continues to develop new approaches to managing the evolving threat.

Changes to consumer habits are accelerating

The longer restrictions are in place the stickier temporary adaptations become. The scale of investment in new working practices increases with the length of the pandemic. Commercial decisions on space requirements become harder to put off the longer properties remain fallow. Consumer trends harden into permanent shifts over time.

Take one example: the regulatory limit on contactless payments in the UK. Lifted twice in twelve months – from £30 to £100 - it reflects the shift away from cash that was accelerated, then embedded, by two cycles of national lockdown. If the pandemic were shorter-lived, would the limit have increased in this way? The trend may be irresistible, but the sanitary needs of retail spaces demanded the adjustment be made faster.

Local areas face even greater uncertainties over the long term. As Overman and Nathan (2021) point out, there is nothing inevitable about how the economic cards might fall if employers rebuild, post-crisis, around remote working possibilities. Corporate fads; personal preferences; business strategies; the realities of commercial property rental - all are in the mix. Some may choose to put corporate functions in places with renowned expertise, rather than a central HQ. Others might operate on a hub and spoke basis – with smaller HQs and regional desks rented from co-working centres. Some may continue as they have in the pandemic with an emphasis on working from home as the default option. Some may revert to pre-pandemic patterns of operation. There are many possible outcomes. You can find support for each of them in the recent statements of senior business leaders.

Coworking is just one of several models for post-COVID business location

Local areas are not passive observers in this. Place marketing and economic development teams across the globe are grappling with a new reality. To attract new sources of economic dynamism in the future and retain existing ones, they will need strategies aimed at the full range of economic actors – employees and managers, not just CEOs and investors. They will need to consider the balance between inward-investment led strategies for growth and those focused on developing indigenous assets.

What does a next generation local economic strategy look like?

Ambitious places in the 2010s invested in understanding global trends. London and Manchester made plans. There were ‘future city’ exercises like Newcastle 2065, MK2050, and Reading 2050. In devolution initiatives, areas had opportunities to think big and local. At least in principle.

Outside London and arguably Manchester, place-based strategies, even in City Deals and devolution agreements, were funding-led. They targeted monies in government programmes designed for national policy problems. For those involved, the lived experience was mostly governing and accounting for expenditure.

Take LEP Strategic Economic Plans. They focused on Local Growth Fund and function-specific programmes across policy areas like transport, skills, and business support. And in specific places like Enterprise Zones or city centres.

The overlapping and time-sensitive demands of funding bids made a coherent approach challenging. Award criteria restricted the scope and content of strategies. Political timetables created cliff edges and insoluble catch-22s. Local consultation and accountability did feature in individual funding streams. But in reality, public engagement and consent in local economic strategy struggled to reach beyond the ‘usual suspects’ and light-touch approaches. In statutory processes like the local plan, consultation remains formal and highly-regulated.

As with the biggest shocks of the past, COVID-19 and Brexit will likely disrupt the currents of economic geography. They demand the kind of focus on place too often missing in the piecemeal orthodoxy of the 2010s.

So, what might a ‘good’ place-based economic strategy look like in the 2020s?

First, it must recognise that COVID-19 and Brexit are game-changers. These events are playing out in real time and their local impacts differ. Official datasets on the economy support policymaking over the business cycle. They are not designed to track local, event-induced impacts in real time.

Second, next generation strategy should eschew linear blueprints. Build in rapid change, uncertainty and risk through contingency and scenario planning.

Next generation local economic strategies must account for future uncertainties

Of course, some things from the 2010s continue. Many of the structural changes to the economy in that decade remain important. Attracting, retaining and developing young talent is a top challenge. Demographic ageing is still with us. But some trends are speeding up. The digitalisation and automation of our economy is more obvious. Climate change and environmental protection are bigger drivers of policy and public attitudes.

At the same time, we face new drivers of policy, like public health and wellbeing. Social distancing and remote working counter growth assumptions based on density and agglomeration. There is a new focus on the importance of foundation sectors, core workers, local supply chains, and making complex systems work.

Next generation strategy can build in these grand challenges. It can align with national priorities and consider local values and strategic choices. It can set levels of ambition and the relative priorities for these issues.

This type of thinking and approach can refresh existing plans and strategies. These include local industrial strategies at the sub-regional level. Even place-based programmes like Town Deals and Freeports. This should not be a repackaging exercise. Any refresh should consider new ideas. It should be open to challenge from disruptive local role-players and communities.

More than ever, local strategy must transcend traditional economic development roles and functions. It should work across specialisms like transport, enterprise or skills. It should bring behaviour change and local consent to the forefront. And it must be a flexible enough to account for new shocks.

Practical examples

Newcastle Policy and Evidence Hub

A strong evidence base is always important to economic development strategy. But it is even more critical in times of disruptive change. Translating evidence into insightful intelligence and policy interventions demands a specific skillset. It needs strong, committed relationships between the major role players. This includes local government; economic development bodies; NHS trusts; universities; other anchor institutions and major business and community intermediaries.

Many areas have regional or urban observatories. Some operate more expansive arrangements including think tank, policy advice and development functions. In Newcastle, the city council, North of Tyne Mayoral Combined Authority, NHS, Northumbria and Newcastle universities, and the wider North East LEP are establishing a policy and evidence hub. This will take and develop research from across the city region for addressing the most complex questions facing policymakers. The hub goes live in April 2021.

Local and regional leadership teams should ensure they review and resource their evidence, analysis and policy development capabilities so they are fit for the purpose(s) of post-pandemic and post-BREXIT place-based leadership and management; and can be commissioned and tasked to deliver those purposes.

Surrey County Council – Socio-Economic Trends Research

Translating evidence into actionable insight means asking the ‘so what?’ questions of data. In late 2020, Surrey County Council did a meta-study of post-pandemic economic reports undertaken for the area and beyond. It drew on materials from academics, think tanks, policymakers and economic development bodies across the globe. It analysed over fifty traditional and non-traditional data sources.

The study found eleven priority trends for Surrey to address in future strategies. In headline, these were:

• Increasing dependence of employers on the quality of local digital infrastructure to support business models

• Increasing importance of large anchor institutions like the NHS, local government and major corporates for a resilient, sustainable and inclusive recovery

• Accelerating shift of retail spending to online vendors

• Reduced entry-level career opportunities for young people

• New structural unemployment from forced changes to business models, increasing take up of automation and labour-saving technologies

• Increasing numbers of financially-fragile households

• More London-based employers offering full-time remote working / hybrid work models

• Decline in international travel, airport and aviation sectors/related industries

• Slow growth, ageing, and net-outmigration will put major pressures on future sustainable and inclusive growth and development in Surrey

• Increasing preference for accommodation types that Surrey will struggle to supply at affordable prices

• More Surrey-based employees and learners working from home / at nearby work hubs with local areas retaining more of their spending

Place leaders should step back to identify the big picture issues facing their areas. Not all fit neatly into funding programmes or service areas. But understanding the co-dependencies – such as between demographic and workplace trends, infrastructure and consumer habits – will ensure that plans better address future opportunities and threats.

Cambridgeshire and Peterborough Local Economic Recovery Strategy

The Local Economic Recovery Strategy (LERS) of the Cambridge and Peterborough Combined Authority and its partners is a rolling programme of live priorities. First published in the Summer of 2020, it is subject to regular reviews informed by a live dashboard of post-COVID crisis statistics. The dashboard combines public health data for the area with metrics for business performance and the labour market. It incorporates a range of data types, from official numbers on economic output to newer sources, like mobility data and job search.

The LERS embraces the reality of a fast-moving and uncertain context. It maps priority interventions onto scenarios for growth and phases of the crisis which are themselves updated as new data become available. It is also pragmatic – as all good crisis responses must be – by identifying which actions are the closest to being realised, and which ones require time and effort to secure funding and delivery mechanisms. In this way the highest priority actions are allowed to evolve with both the crisis and the funding context.

In times of fast-moving, disruptive change, strategy cannot be about door-stop data dumps and static visions. They need to be sophisticated frameworks for decision making, with regular reviews and trigger points for action.

Recommendations

The demands on place leaders and their wider executive teams are great. As they move from crisis management to turnaround and recovery planning, there is much more to do than respond to the UK Government’s latest propositions. They face new funding competitions, like Levelling Up, Community Renewal and Community Ownership. Then there's the habitual 10-year churn in the institutions for supporting local economic growth in England.

There are many prescriptions for future local and regional priorities – including by this piece’s authors. What this paper seeks to do, distinctively, is make the connection between the long-run, big picture changes in economic geography and a small cohort of current practical examples of place-based transformation in practice – Newcastle, Surrey and Cambridgeshire and Peterborough.

We suggest there are 3-4 key issues and approaches to work on which each of place-leaders, their teams, and the wider economic development community of practice might focus.

For place leaders

1. New plans and strategies. Frame your tactical responses to government requirements and programme opportunities as part of a wider process. Take time to build local and regional support for a post-pandemic, post-Brexit vision. It should aim to be game-changing. And it should express the long-term values, aspirations and practical priorities of your cities, towns and communities.

2. New approaches to devolution. Work with other places to develop 'home-grown' proposals for reshaping the UK state. Devolution propositions in the 2020s must be deeper and more authentic than the top-down, deal-based ‘haggles’ of the 2010s.

3. ‘It’s more than the economy, stupid’. This may seem perverse as advice for place-based leaders. But you must aim to eschew territorialism and boundaries in your thinking and practice. New economic geographies will not align with existing administrative structures. Economic place-making should look outwards to locate local change in its wider spatial context. It must break down institutional barriers. And it must look beyond productivity and competitiveness. Give equal profile and prominence to social and environmental goals and drivers.

For local leadership teams

1. New types of evidence and intelligence systems. Strategic processes should recognise and manage information gaps, uncertainties, contingencies and place-based variation. The foundation for this is a quality local intelligence system. The data and analysis collected by it must be as comprehensive and 'real-time' as possible. And its outputs must be meaningful for decision-makers. It's about facilitating good decisions - not creating more door-stop data dumps.

2. Embracing complexity, uncertainty and change. A fit-for-purpose, local leadership team must be cross-agency and multi-disciplinary. It will have direct intervention capabilities. But it will also a strong influencing role with its stakeholders and partner bodies. Structures and processes need to be flexible, adaptive, open to challenge and change.

3. Building accountability and ‘followership’. Place-based leadership teams must address head-on issues of legitimacy, consent and trust. Digitalisation has been a driver for new approaches to involvement and engagement. But post-pandemic arrangements could become institutionalised before their effectiveness is understood. Place leaders should experiment with different consultative approaches before this happens.

For economic development policy and practitioners

1. Imagining new economic geographies. ‘Levelling up’ may be an ambiguous, politically-loaded construct. But it does serve as a useful catalyst for creative thinking about the future of places and how they relate. Economic realities do shape the administrative loci of place-making. At least to some extent. These realities change over time. Practitioners must be prepared to offer robust advice on how frameworks for cooperation should evolve with them.

2. Refreshing skills, competences and renewing perspectives. The COVID pandemic has demanded much from the economic development practitioner. They underwent an accelerated form of 'on-the-job' learning for new working practices. They managed crises, processed government grants and bid into competitive place-based programmes. To perform well in the post-crisis phase will draw on other skills. They should seek out and form networks for creative thinking about new trends and contexts. Using these to explore concepts like ‘build back better’ and ‘green recovery’ is a sensible investment of time. But they need to keep a practical perspective and focus on real-word solutions.

3. Changing the language and terms of the debate. Brexit and the pandemic challenge core concepts of economic development. Growth models assume relationships between productivity, globalisation, agglomeration and densification. Even where these relationships were changing, often it was assumed to be in a direction that now looks less plausible. The case for new models, tools and techniques is compelling. Tensions in the UK context are as acute as anywhere in advanced national economies. Formulating credible and compelling narratives for this era is essential. As is developing the tools and techniques for realising them must.

For convenience, we grouped these recommendations by role-player. But they are not exclusive to each. Together, they form a sort of manifesto for post-crisis economic development practice. But this is with a heavy caveat of uncertainty. History tells us that in moments of great social change, the currents of economic geography can change too. Sometimes the impact is more or less immediate and obvious. Such was the case with factory closures during deindustrialisation. But sometimes, the full significance remains unclear long after the policy decisions.

We believe this is likely the case with Brexit and COVID today. We can speculate about the impact of changing trade patterns and remote working. We can accept the likelihood that the UK's heat-map of economic assets will look different five years from now. But as of early 2021: it is hard to assign probabilities to the many competing scenarios. The best we can do is track the situation as best we can and ensure our decision frameworks and area plans adjust to new information.

The Newcastle Policy and Evidence Hub is partly about intelligence and analysis. But it is also about local leadership and collaboration between anchor institutions. The Surrey research stresses the importance of asking the ‘so what?’ and ‘what if?’ questions. It's also about going beyond traditional data sources, assessing the impact of external drivers (like London and major airports) alongside indigenous issues and opportunities. The Cambridgeshire and Peterborough Local Economic Recovery Strategy illustrates the importance of contingent decision-making and scenario planning in 2020s economic strategy.

We hope this paper stimulates feedback and deliberative exchange. Most of all, we believe further pieces that populate big-picture thinking with current, specific local practice are crucial to better local economic development in the turnaround and recovery phases of the coming years.