Issues

There’s more to life than GDP

IMG_3559 The measure of a city is not just about GDP, Stephen Smyth and Esmond Birnie write. Other social factors attract both people and investors and by these measures Belfast is in the Top 10 of UK cities, with Derry/Londonderry showing considerable potential amongst the UK’s smaller cities.

When London and New York tied for first place in PwC’s global Cities of Opportunity report, not an eyebrow was raised. But, just a month ago, when another PwC report put Belfast in the top 10 UK cities with growth potential and London amongst the bottom three, there was considerable political disbelief.

And if that wasn’t surprise enough, Derry/Londonderry performed creditably relative to other smaller cities, easing into the top-10 ‘smaller’ devolved cities which have populations below 250,000.

But disbelief or not, both reports are right.

In addition to looking at the current performance of 27 cities that are already global capitals of finance, commerce and culture, Cities of Opportunity analysed city employment in the most significant and telling job sectors and projected the likely future trajectory of the cities in terms of jobs, economic output and population.

Given those parameters, it’s not surprising that London, New York, Paris, Beijing and Shanghai were crowned the world’s top cities when measured by economic clout. But as Belfast and Derry/Londonderry now discovered, there’s more to life than GDP.

The 2013 Good Growth for Cities index from PwC and think tank Demos shows how combining economic performance with quality of life ranks Belfast as ninth amongst the UK’s top 10 cities in which to live and work.

Derry also makes it into the rankings of smaller UK cities with populations of less than 250,000 people.

Balance

For the average UK citizen, it’s about jobs, health and work-life balance.

As the UK begins to experience real growth and recovery, policy-makers and commentators fixate on quarterly GDP figures as the key indicator of economic health, employment as a short-term indicator of recovery and investment as an equally short-term measure of confidence. However, the good growth analysis in the Good Growth for Cities report shows the public takes a wider – and possibly a longer-term view of the components of economic success.

For its second Good Growth for Cities report, PwC and Demos polled over 2,000 city-dwellers across the UK to find out what, for them, constituted a ‘good’ city in which to live and where they might hope for a reasonably prosperous future. Unsurprisingly jobs came top, followed by good health (so as to be able to work and earn a living), adequate income levels, available skills, time with family (work-life balance), affordable housing, a balance of manufacturing, services, technology and other sectoral activities, a fair distribution of income and wealth, future employment prospects, affordable and quality transport (particularly public transport) and the environment (carbon emissions and reducing pollution).

Taking the citizens’ definition of a ‘good’ city, PwC and Demos measured the performance of 39 UK’s cities and their travel to work (TTW) areas against this basket of 11 categories defined by the public as key to economic success and personal and family wellbeing. Belfast took the number nine slot just behind Oxford, Cambridge, Preston and Bristol and well ahead of Manchester, Liverpool and London – an improvement on the Belfast’s position in 2012.

When it comes to the devolved nations alone, Belfast ranks as fourth best devolved city to live in, with Derry entering the smaller cities index in tenth place; the top four places amongst the devolved cities went to Scotland, Aberdeen, Edinburgh, Inverness and Dingwall, and Perth and Blairgowrie.

Good Growth

Investors look for many of the same ‘good growth’ characteristics.

An analysis of Belfast’s apparent strong performance suggests that that the city scored well in the economic measures of jobs and income, as well as the social factors like travel-to-work times, environment and work-life balance. In contrast, many large English cities are paying a high price for economic success, from increased congestion and pollution, to income inequality, high house prices and marathon travel-to-work journeys.

The citizens’ survey and subsequent findings suggests that people prefer to live where they can acquire jobs, skills and advancement as well as enjoy affordable housing and a good quality of life. The seemingly contradictory Cities of Opportunity report shows that investors are looking for many of the same things – available skills, transport infrastructure, sectoral balance, technology and environmental awareness. That and other independent research suggests that investment follows the same priorities: seeking skills, talent and infrastructure.

So, if you accept that the measure of a city is not just about GDP and that other factors attract both people and investors, Belfast and Derry have advantages that are not immediately obvious, but still make the cities attractive investment locations. So, as global recovery is driven by emerging economies, attracting and retaining investment is vital and there is some evidence that the region is punching well above its weight. In 2012-2013, Northern Ireland showed a 41 per cent increase in the number of investment projects, substantially ahead of the overall increase into the UK of 11 per cent.

It’s worth remembering that the Good Growth for Cities measures relate to the TTW areas rather than the actual city boundaries. As cities expand, so to must high-speed road and/or rail/rapid transit infrastructure linking the city’s wider metropolitan area with a growing TTW catchment – a key component in a ‘good growth’ city. This provides incentives to investors and relative ease of access for workers who, faced with unaffordable housing costs in the city are subjected to protracted (and expensive) commutes from the suburbs.

The linkages between infrastructure spending (primarily road, but including rail) and private sector investment are well documented (A US-wide study in 1990 concluded that $1 of public capital investment in highway construction stimulated $0.45 of new private investment) but closer to home the ESRI Mid-Term Assessment of the 2000-2006 Irish National Development Plan, noted that the return on investment in physical infrastructure, especially roads, was “very substantial,” with expenditure 2000-2002 contributing to raising the level of GNP by around 7 per cent.

Key Messages

Investment follows skilled workers, world-class infrastructure and competitive operating costs and both Belfast and Derry score on these key criteria on our good growth scale. Having paid employment is at the cornerstone of individual and regional economic success and well-being, so it is therefore important that the messages in this report are clearly understood. Sustained investment in skills development and infrastructure – including roads, air routes and broadband – are vital to creating the environment that will attract and retain investment sand sustainable employment.

A number of messages come out of the report for a variety of stakeholders.

For politicians:

• The importance of holistic policies to integrate economic, social and infrastructure policies

• Cities drive entire regions, so infrastructure is the key to linking them

• Good growth cities appeal to workers and investors alike and their reputation will attract FDI and skills.

For business:

• Skills, innovation, exports and international competitiveness are national priorities

• Partnership with government is essential to deliver good growth outcomes

• Clustering reinforces good growth concepts.

For local government

• TTW areas contribute to good growth cities, so think ‘metro’;

• Appropriate administrative boundaries are important, as is cooperation between them;

• Economic and social outcomes trickle down, so regional objectives deliver local outcomes.

In summary, good growth is the Holy Grail of holistic social and economic strategy. But to support good growth, we need good jobs that give satisfaction, pride in doing good work, career progression and a real contribution to the community. Add affordable housing, good transport infrastructure, work-life balance and income sufficient to live on − ideally with a little left over – and you have the recipe for the ideal good growth city.

That means the Assembly, the business community and local government and Northern Ireland’s city planners have an important role to play in collaborating to deliver a platform for even greater growth through a focus on the key levers of skills, infrastructure and innovation.

City Rank
(travel to work areas)
1. Reading and Bracknell
2. Aberdeen
3. Edinburgh
4. Southampton
5. Cambridge
6. Oxford
7. Preston
8. Bristol
9. Belfast
10. Norwich

pwc_master_logo_shortform Stephen Smyth is Associate Partner, stephen.p.smyth@uk.pwc.com Tel: 028 9041 5817
Dr Esmond Birnie is Chief Economist, PwC Northern Ireland, esmond.birnie@uk.pwc.com Tel: 028 9041 5808

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