Inward Investment and Economic Development: It's all About Cities Now...Isn't It?

Wednesday, 20 January 2016

Within the last three decades, our cities have gone from being decrepit centres of industrial decline to recognised engines of economic growth. Through their works on clustering, agglomeration and the 'New Economic Geography', academics like Michael Porter and Paul Krugman explained why. According to Bruce Katz,* 'Cities are the locus of the forces and assets that power trade: innovative firms, talented workers, supportive public and private institutions, and modern infrastructure.'


And now cities are at the heart of government strategy...

In the UK, this re-focusing on cities has been reflected in government strategy. Since 2010, Regions have been 'out' (along with their Regional Development Agencies) and City Regions have been 'in'. In the north of England, the Northern Powerhouse project emphasises improved connectivity between cities to create the agglomeration effects of a much larger city economy. Today, it's cities, cities, cities.

The loneliness of the (non-city) Inward Investment professional...

It's hardly surprising, therefore, that some inward investment professionals outside the cities are feeling a bit left out. In the north of England, representatives of towns and counties that we speak to worry about their locations being overlooked. And what about those high-value, high-technology corridors strung along the motorways of southern England? On the basis of column inches, you could be forgiven for thinking that the UK's high-tech story is all about cities too.

End of Story.

So there you have it. The cities have won the economic development argument. They're destined to drive growth, attract investment and win government support and funding in the process. End of story.

Except it isn't, is it?

No. Because the challenges facing city economic development and inward investment teams are just as frustrating as those facing their 'non-city' counterparts. Yes, their famous city names, leading universities, education infrastructure and large labour forces can be huge assets in attracting the interest of expanding companies. But city locations can then be faced with a host of barriers to actually landing inward investments: limited land supply, high land costs, congested roads and planning departments that prioritise housing over industrial development.

There are, of course, lots of companies that want, or even need, to be in the city (many, for example, in the creative, financial or professional services sectors). But there are just as many that want to combine access to all that the city has to offer (people, knowledge, services...) with the lower costs and improved connectivity of out-of-city locations. Large-scale industrial operations want big, easily developable, motorway-linked greenfield sites. Logistics businesses want access to freight terminals. High-technology companies may be attracted to (out-of-city) Science and Technology Parks.

In summary, what these businesses want is to Locate in Hinterland - where the benefits of city and out-of-city come together.

End of Story (Version 2).

The conclusions to draw from all this should be clear. The agglomeration advantages of cities are proven, and there's a powerful case for featuring high-profile city brands in inward investment marketing campaigns. But metropolitan ('city') economies comprise both the dynamic urban core and lower cost, well-connected 'hinterlands' - city fringes, satellite towns and transport corridors. Both are essential, inter-connected parts of the thriving 'city' economy, providing diverse location solutions for businesses with different needs. And it's only a problem for inward investment and economic development teams - city or 'hinterland' - when this essential inter-connectedness isn't acknowledged and accepted.


Nick Smillie
MD, Clarity Business Strategies Ltd.


Is Your Location's Inward Investment Value Proposition Up To Date for 2016? Speak to Clarity for Expert Assistance. 

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