Outlooks & Setbacks Saturdays

“We are all in the gutter, but some of us are looking at the stars.” ― Oscar Wilde

With stagnant economic growth, rising costs for business, constrained public finances, heightened global tensions, and grim weather it is understandable why many people are gloomy about the prospects for the UK as we enter into the new year. However, partly prompted by an article in the FT on the optimistic case for the British Economy, I have been thinking about reasons to be cheerful, positive and upbeat when it comes to topics such as economic development, infrastructure, housing, good government, and towns and cities.

1. Stability. The UK's still relatively new Government has been criticised for being cautious, technocratic, and frankly boring. Many economists believe that some stability is very welcome, particularly given the our experience of recent years, and the increasing tumultuous politics elsewhere in Europe and US. We have with a large majority and a reasonably coherent, evidence-based, long-term agenda, and a belief in robust public institutions. There are moves towards closer alignment with EU rules, hopefully reducing friction with our largest trading partner. These are all reasons why a recent FT survey of economists the majority believed the UK will outgrow France and Germany.
2. Global sector strengths. The UK has genuine world class strengths in sectors such as life-sciences, digital and data, AI, financial and professional services, creative industries, and advanced manufacturing. We have hugely innovative and dynamic businesses and ecosystems in these industries, which tend to be concentrated together in places where there are positive knowledge spillovers between them.
3. Innovators and entrepreneurs . We have globally leading universities, that increasingly are recognising and investing in their civic and economic development roles. Along with other knowledge producing organisations, city leaders and investors they are developing exciting innovation districts. We have growing and more diverse networks of start-ups, and strengthening ecosystems of accelerators, peer networks, angel investors and corporate firms to support them. Building on the Innovation Accelerators the Government are committed to more place-based R&D investment.
4. Scaleups. Scaleups are firms that experience staff and / or turnover growth over three consecutive years. They are a huge UK success story. According to the excellent Scaleup Institute The number of scale-ups has grown by 27% over the last decade, and more scaleups are achieving significant size. Scaleups now represent 55% of UK SME output at £1.45 trillion despite only accounting for 0.6% of the business population. Optimism among scaleup business leaders is high (9 out of 10 expect to grow further in the next year), and the future scaleup pipeline is strong.
5. The potential for incremental gains. Notwithstanding the UK's economic strengths, let's face it large parts of our economy are a long way from the technological frontier. Sam Bowman has argued that creates an opportunity for us to think like a developing country: to achieve growth through "improved use of existing technology and inputs, and accumulation of capital", facilitated by relatively easy wins such as building more homes, commercial space and infrastructure, and reducing energy costs.
6. The new fiscal rules. The new fiscal rules provide a more pragmatic framework for distinguishing between borrowing for investment and borrowing for day-to-day spending, creating more headroom for investment. There is also a new definition of public debt (the Public Sector Net Financial Liabilities - the "Persnuffle") , which places greater value on the assets created by public investment, which will also incentivise smart long term investment.
7. Industrial Strategy. The Government's Industrial Strategy, scheduled for the Spring, could and should provide a coherent long-term framework for cross-government investment and action to boost key sectors. I hope it sets out some clear short-term investment projects, and is place-based, recognising that there is a positive related diversity of sectors, and networks of businesses, investors and institutions in places, particularly cities.
8. Planning reform. The new Government is clearly serious about reforming planning. The new NPPF will have mandatory housing targets, more pragmatic and pro-growth policies on the Green Belt and renewable energy. Cross-boundary strategic planning is being re-introduced. There is even a more sensible position emerging on the nutrient neutrality rules. And ministers appear to understand the positive role planning and planners can play in enabling growth.
9. Infrastructure. The creation of the National Infrastructure Strategic Transformation Authority, reform of infrastructure consenting regimes, a clearer and more stable infrastructure investment pipeline, and a willingness to develop new public-private financing mechanisms are all reasons for optimism.
10. Devolution. With complete coverage of England by Combined Authorities, more Mayors and CAs receiving integrated settlements, and new powers and resources across a wide range of policy areas, the Devolution White Paper sets out a positive direction of travel. It will now be about delivery. The White Paper is significant in the tone it sets for how national government and its agencies should work more closely with local areas. Mayors continue to deliver for their areas, and to increasingly set the agenda on issues such as national connectivity.
11. Rail. The creation of Great British Railways, bringing back together planning and operations of rail infrastructure and services will make a real difference. An enhanced role for Mayors and CAs in rail creates opportunities for better integration of rail with the wider transport network, and more efficient, customer-responsive services. Major rail schemes such as Transpennine Route Upgrade and East-West Rail will unlock big opportunities for growth, and I hope to see the plans for faster east-west rail connections in the north progress at pace, as well as more work done on the approach to tackling the big connectivity challenges between the Midlands and the North. It is notable how Mayors and city leaders are making the running here, for example through the Midlands North West Rail Link proposals, the Liverpool to Manchester Railway initiative, and the proposals for better links and a new station for Bradford.
12. Urban Transport. It was good to see backing last year for the Rail and Urban Transport Review. In 2025 Government will take forward some of its main recommendations - a more stable investment pipeline, greater devolution, a playbook for more private finance, a Greener, Faster, Cheaper approach to infrastructure planning. There was a big boost in the City Region Sustainable Transport Settlements in the Autumn budget. 2024 ended with the Government introducing the Bus Services Bill, and the new year started with the final stage of Greater Manchester taking back control of its busses, and with proposals for bus franchising progressing elsewhere. And 2025 will be a year when the plans for a West Yorkshire mass transit network take a big step forward.
13. New Towns. The New Towns initiative, with the guidance of the New Towns Taskforce, will see Government, Mayors and Councils really get behind plans for major housing growth through large-scale regeneration, plan-led expansion and new settlements, helping unlock substantial private sector investment to build much needed new homes.
14. Clean energy. The big investments in clean energy announced in the autumn budget and the formation of Great British Energy, will create significant economic opportunities across supply chains. Investment in nuclear, facilitated by Great British Nuclear, could do likewise, and I hope we see a clearer commitment to backing Small Modular Reactors - a technology that the UK has world leading capabilities in. I hope we see a stronger focus on supporting places with carbon-intensive economies to make a transition to clean energy in a way that maximises economic opportunities and mitigates the economic risks, and that we also see progress in bringing down the UK's high industrial energy prices.
15. National security. While the risk of global conflict is nothing to celebrate, the need to build more sovereign capabilities, and initiatives such as AUKUS trilateral security partnership will create real opportunities for UK Industry. Through initiatives such as the Defence Appropriations Act, and the CHIPS and Science Act, national security and economic security were brought together as a core part of Bidenomics. Indeed Centre for Cities have called for a UK version of the CHIPS Act focused on our main cities.
16. Investment Zones and Freeports. It was positive that the Government are continuing with the Investment Zones initiative, one of the better designed policy initiatives they inherited. I hope to see them build on this. Also, the continuation of the Freeports programme is positive; I believe it making a difference in supporting places to leverage their ports assets to drive greater economic value, not just volume of freight throughput.
17. Long Term Plan for Towns. It was also good to see the Government announce in the autumn budget that it would be taking forward in a refocused way the previous administration's proposals for a Long Term Plan for Towns. The concept of long term strategies for how towns can develop and change, formulated and supported by town boards that bring together community groups and businesses have real merit.
18. Getting people working. The Government, is taking forward a new approach to tackle worklessness and drive up employment through the Get Britain Working White Paper. The new policy approach gives a far greater role for local leaders, with new work, health and skills plans for the economically inactive, led by Mayors and local areas. The focus will be more on tackling contributing factors such as ill-health, or access to transport and childcare. There will be a new national jobs and career service to help get more people into work, and (importantly) to progress within their careers, and there will be a youth guarantee for all young people aged 18 to 21. All really important and sensible stuff, which should make a positive difference.
19. Tackling homelessness. The UK has some of the highest rates of homelessness among the developed world. Rough sleeping is the tip of the iceberg, with a huge issue of people (including many children living in temporary accommodation. The human and fiscal costs are horrendous Therefore the recent Government announcement of almost £1bn to prevent and tackle homelessness was very welcome, and in particular the focus on getting upstream to intervene earlier with preventative measures. I am proud to be involved in the Royal Foundation's Homewards campaign, which has an ambition to make homelessness rare, brief and non-repeating. 2025 will see the launch of the six action plans in the Homewards pilot locations, where ambitious strategies and broad-based partnerships are being mobilised to seek to end homelessness.
20. Better regulation. The Government recently asked regulatory bodies for ideas on how to grow the economy, prompting much criticism, including from one commentator who said that this was "like asking a vegetarian how they like their steak cooked." I disagree. Better regulation is surely a good thing, and I think we will see more of it in 2025 as a result of this pragmatic move.
21. Retrofit. 2025 could be the year when we see domestic retrofit at scale really take off. The Government's Warm Homes Plan and investment has the potential to be a catalyst for economies of scale, investment and upskilling in areas such as energy efficiency and heat pumps. For local areas there is an opportunity to position retrofit at scale as part of wider projects to boost regeneration, boost skills in a growth sector, and tackle poverty.
22. Missions and test-and-learn. The Government's missions have the potential to enable genuinely more joined-up, long-term, evidence-based, and innovative policy making, as I have argued previously. At a time when many people understandably feel Government has failed them there is a need to do things differently, and a mission-focused approach has huge potential, as has been argued by Peter Hyman, and indeed the Prime Minister in his "tepid bath of managed decline" speech. The "Test and Learn" proposals also have great potential for more agile, faster, and entrepreneurial policy making.
23. Return to the Office. It has not been an easy few years for the office market, with the triple whammy of higher build costs, WFH, and investor sentiment all impacting the development pipelines. But investor sentiment is out of kilter with occupier sentiment; strong demand has remained for how quality, well-located space with good sustainability performance (the "flight to quality"). There are now signs that more workers are returning to the office in London and main cities. I believe this is good for the economy, and good for the future prospects for the office sector. Now is the time for the public sector to work closely with developers to share risk and return and get more office space built.
24. Culture. The UK's cultural sector is a great strength. Culture also has the power to bring people together, raise aspirations, and help towns and cities project a positive, ambitious image of themselves. As a resident of the district I am particularly excited about Bradford 2025 as the the UK City of Culture.
25. Institutional investment. The Chancellor has built on the farsighted Mansion House reforms proposals of her predecessor to seek to unlock more long-term institutional investment into growth businesses, and infrastructure. This includes plans to create pension mega-funds, and the creation of the National Wealth Fund (building on the previous UK Infrastructure Bank).

So perhaps it is time less doom and gloom, and for greater optimism and a more positive narrative for the UK economy, and for UK cities and towns. Time for us to invest in growth. Happy New Year!

Positive & Negative Attitudes

What is your best advice for someone who is struggling to believe that things will all work out?