tter starting position to adapt to changes in the structure of the national economy throughout the 20th century. Services overtook manufacturing as the largest employment sector as early as the 1920s, and today it accounts for 84% of all jobs in England and Wales. Manufacturing accounts for just 9% of all employment, down from more than 40% in 1901.
The pace of this change varied hugely across cities. In 1901, services were already a bigger employer than manufacturing in Bournemouth. But it wasn’t until the 1970s that services employment overtook manufacturing in Rochdale.
Despite these employment trends, UK manufacturing is and will remain important to our economy. It is a big investor in research and development, and some of our manufacturers are world leaders. Nevertheless, looking at urban development over the last century tells us two things about future patterns of economic growth.
First, manufacturing is highly unlikely to be a net contributor to the jobs growth that the country needs. In order to remain competitive in the global marketplace, manufacturing is continually improving in productivity, producing more goods with fewer workers. The UK is not alone here; even Germany has seen manufacturing’s share of total employment halve in recent decades in response to global competition.
Second, cities need to continue adapting to changes in the national economy. Many cities have grappled with the impact of structural change in the second half of the 20th century and some of this industrial legacy continues to manifest itself to this day.
The answer is not to attempt to turn back the clock. The assets that helped cities thrive in the 1900s are no longer the economic strengths they were. Instead cities need to focus on the distinctive assets that will help them thrive in a 21st-century economy, and to invest more generally in skills and transport, which our work shows to be important for growth and prosperity in the 21st century.
Looking back at the last 110 years of urban development shows that history matters for a city’s economic performance. The challenge for current and future policy makers is to ensure that cities are not beholden to their past, but instead make the most of their assets as they look to the future.
Paul Swinney is an economist who leads on data analysis for Centre for Cities
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The local government finance bill returns to the Lords, but we must stimulate links between councils and small businesses
Today sees the local government finance bill receive its second reading in the House of Lords. It is fair to say that this will not seem of huge significance to most businesses, many of whom will understandably see more pressing concerns during these tough economic times.
However, the bill is important as it seeks to introduce a completely new system of business rates retention, whereby local authorities will be able to keep a proportion of business rates growth in their area.
The coalition government argues that this reform will provide councils with a “strong financial incentive to promote local economic growth”. Implicit in that statement is that councils could be doing more.
Although there are many excellent examples of councils and businesses working together to stimulate growth, London Chamber of Commerce and Industry (LCCI) believes that an even better and more productive relationship could be achieved if the right conditions are put in place.
The key question is whether the bill will create these conditions. In our report released today, Driving local growth: the business case (pdf), we conclude that the bill does not go far enough to create the right financial incentives for councils to fully engage with their local business base.
The government’s decision to exclude rateable value increases from the business rates retention scheme means that councils only stand to benefit under the new system if they permit new forms of physical growth in their are