How can UK cities better rival London when it comes to innovation?

As the UK looks ahead to a post-Brexit future, thoughts are turning to how its cities can better monetise innovation.

September 26, 2019

Building a productive, wealth-creating economy is all about harnessing innovation and attracting the brightest talent through a progressive work culture and collaborative workspaces.

London is, unsurprisingly, a prime example of doing just that yet other UK cities like Manchester, Leeds, Birmingham, Bristol, Glasgow and Edinburgh are slowly but steadily building their credentials in both areas.

According to JLL’s Innovation Geographies report, Edinburgh ranks 15th for talent with, Bristol in 25th and Manchester in 44th place – beating many of their mid-sized European peers but trailing well behind the global leader, London.  Yet having skilled workers doesn’t directly translate into being an innovation hotspot; in the innovation rankings London is 5th globally, but other UK cities are further behind the curve, with Edinburgh 60th, Bristol 69th and Manchester 74th.

What’s needed for cities outside London is more public sector investment, says Jon Neale, head of UK Research at JLL. “The strength of our universities is one of the UK’s great selling points, so we are producing the talent. A big challenge for government policy is how can we get more public investment into cities like Manchester and Bristol, where there’s already a lot of private investment and use that to spur economic growth,” says Neale.

One issue is convincing private investors to look outside the well-trodden ground of London’s thriving tech scene. Venture capital funding for London’s start-ups is among the highest in the world, at around US$25 billion between 2016-18, and almost 15 per cent of the capital’s workforce is employed in high-tech sectors.

Equally, public sector research and development (R&D) cash is skewed towards London, Oxford, and Cambridge, with clusters forming around some of the UK’s world-leading universities. Although areas like Edinburgh attract public sector investment, other regions are missing out. The most obvious locations are Manchester and Birmingham, where higher levels of business R&D are not matched by the public sector.

“Providing more public funding for R&D in cities outside London and improving business support and industrial strategy are key,” says Neale. “As a country we have always been averse to having an industrial strategy in place, although we are starting to see changes in thinking. The key challenge is translating innovation into a commercial product.”

Centres of Innovation

The UK Government has unveiled an industrial strategy, which pledged to work with industry to raise total R&D spending to 2.4 percent of GDP by 2027. But this is not the only area where investment is needed - improving connectivity between urban centres should also be a priority. Neale says: “Improving transport connections within cities – increasing their effective “commuter pull” – rather than between cities is the real issue, particularly as so many younger workers want to live without a car.”

Yet cities also have different strengths and weaknesses. Bristol has a relatively high level of R&D investment, but relatively low foreign direct investment, while Manchester attracts foreign investment, but R&D is low as a percentage of GDP. Such differences must be accounted for in policies, so cities are addressing their weaknesses while working to their strengths.

Furthermore, the innovation economy isn’t just about coming up with the next big idea; there’s an entire supply chain that enables it to operate and grow. Neale explains: “While many tech companies are growing fast and creating jobs, this is not just about that sector – in every single part of the economy innovation is important, whether you are creating new banking services or a new distribution centre.”

Demographics, Brexit and beyond 

Equally important are the skilled workers driving and delivering the innovation economy – especially in the post-Brexit climate. They will increasingly congregate in urban areas, so cities need to ensure they offer vibrant office space, quality housing, retail units and a range of leisure and amenities that can attract and retain skilled workers.

Some cities, like Glasgow and Manchester, have a high proportion of skilled graduates, but low population growth rates among 20 to 40-year-olds, while in Bristol and Birmingham, this age group is growing at a faster rate. In London around 2 in 5 of the capital’s workers were born outside the UK.

Neale does not believe Brexit will put skilled workers off the UK. “Whether Brexit dents the UK’s image as a place to live and work remains to be seen. But, I don’t think Brexit will be a concern for companies relying on the highly-skilled, it’s likely to be industries which depend more on unskilled labour which will be affected.”

In the meantime, stimulating and supporting the innovation economy remains critical in ensuring future growth. “The economy of these cities is improving rapidly, and we expect them to move up the table in the years ahead,” Neale says. “If you look at somewhere like Manchester, it is seeing phenomenal employment growth, faster proportionally than London and among the highest in Europe.”

“The university is really important in this – not just in bringing in students and retaining them as graduates but in driving innovations like Graphene. The key to improving innovation is to link the university more with the wider economy. US cities have a better track record of doing this.”

If all this can be achieved, Neale believes JLL’s next Innovation Geographies report will show many regional cities moving up the rankings because they will benefit from government policies and a greater tendency for younger, skilled workers to either remain or relocate.