27 September 2018

The UK needs a regional response to the Fourth Industrial Revolution


Today, London contributes nearly a third of UK GDP. In the late 1990s it was less than 15 per cent. Despite being home to just 13 per cent of the population, it contributes a dramatically outsized share of national output. London saw a 49 per cent increase in jobs located in the city between 1996 and 2018 (twice the UK average), workers in London are 70 per cent more productive than the UK average and are therefore unsurprisingly paid on average almost £100 more per week than the typical UK worker. In 2016 more new businesses were set up in Hackney that year than in Blackburn, Blackpool, Bolton, Wigan and Burnley combined.

The boom in the London economy, partly driven by growth in the professional services sector and in particular financial services, has meant that what was originally understood as the “North-South divide” has now become “London vs The Rest”.

This two-track economy is not good for our economy or society. Alan Milburn in his last speech as head of the Social Mobility Commission said: “The country seems to be in the grip of a self-reinforcing spiral of ever-growing division. London and its hinterland are increasingly looking like a different country from the rest of Britain”.

The problem is that this divergence is likely to continue, and be made worse by the onset of automation, technology and the 4th Industrial Revolution. Centre for Cities research showed the towns and cities most at risk of automation were predominantly those ex-industrial communities in the North and Midlands. Mansfield, Sunderland and Wakefield are all at risk of losing nearly a third of their jobs by 2030 due to automation. Blackburn, Doncaster and Stoke could lose as many as one in four. London, Oxford and Cambridge are three of the safest places, with a much lower exposure to automation driven unemployment.

One of the gravest errors of the last 40 years was Government’s failure to adequately support those displaced by the last industrial revolution — the move away manufacturing and production industries. Now, the Centre for Social Justice’s report Regional Revolution demands action.

The loss of jobs in many of the communities that relied on those industries triggered a vicious cycle of social breakdown. Unemployment, welfare dependency, crime, drug abuse, and family breakdown all became prevalent and embedded in communities where economic opportunity had disappeared. What should terrify policymakers is that many of these towns that suffered so much from the de-industrialisation during the second half of the 20th century, where social problems are so rife, are most likely to suffer again from the 4IR.

Stoke-on-Trent is one of the towns most at risk of losing jobs due to automation; it also has one of the highest drug-related death rates in the country, and only three in ten young people leave school with a good pass in GCSE English and Maths. Dudley, outside of Birmingham, has the same number of people on unemployment related benefits as the entire county of Suffolk, while the wider Birmingham area is expected to lose nearly a quarter of jobs related to automation. Doncaster has one of the lowest per year productivity figures for a town and is simultaneously the fifth most at risk town to automation.

The CSJ’s report makes 21 policy recommendations that focuses on boosting transport connectivity between commercial hubs and poor commuter belt towns, creating the right conditions for businesses to grow in less economically active towns across the North and Midlands, creating more Mayors and devolving more power to them, and tackling social issues that have become embedded in ex-industrial communities.

Specific policies include the roll-out of Universal Support, devolution of further budgetary powers to Combined Authorities and Mayors, as well as the creation of a new Education and Adult Skills Commissioner in each of those Combined Authorities to lead local skills strategies.

The CSJ also calls for the Government to work with each Local Enterprise Partnership to set-up Automation Taskforces that would co-ordinate a local response to workers being made redundant.

The Fourth Industrial Revolution is coming, and while we forecast new technologies will create far more jobs than they destroy, it is becoming clear that the effect it does have on the labour market will worsen our already deeply regionally imbalanced economy.

We need a regional revolution that puts power in the hands of local policymakers, supports businesses to create jobs and fundamentally tackles the social problems that afflict these communities. Only then will Britain be ahead of the curve on the automation revolution.

Patrick Spencer is Head of Work and Welfare at the Centre for Social Justice.