Inspiration from the past drives new ambitions

Waterfront Liverpool UK
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Cities such as Glasgow, Liverpool and Manchester were once powerhouses of Britain’s economy. There is sound evidence that they again can and will be.

In 1809 the American consul in Liverpool sent back a report to his government on the state of the wheat trade with Britain. Imports of grain and flour from the plains of Kansas and the Dakotas, he wrote, had grown so fast through this northern port that prices had begun to tumble. Nevertheless, he added, there was reason to believe “in the permanency of this seemingly inexhaustible granary.” Liverpool, he concluded, was its principal point of access.

For most American traders of the 19th century, the great western seaports of Britain were far more familiar than London. It was on the docksides of Glasgow, Liverpool and Belfast that they unloaded their cargoes of grain, cotton and tobacco; from there they imported the machinery, textiles, iron and steel, the products of Britain’s industrial revolution; and it was out of these ports that the sailing packets, carrying millions of emigrants into the United States, tended to embark.

Two hundred years ago, the powerhouse of Britain was in the north. Glasgow was known as “the second city of empire.” The ship canal that linked Liverpool to Manchester opened up the mills and foundries of its industrial heartland. Great cities like Leeds, Newcastle and Birmingham in England, Glasgow and Dundee in Scotland, saw their populations expand as exports grew. The historian Niall Ferguson has calculated that at the height of Queen Victoria’s reign, in 1860, Britain owned roughly a third of the world’s entire merchant tonnage. “At no other time in history has one power so completely dominated the world’s oceans as Britain did in the mid-nineteenth century,” he wrote. And most of that sailed from its northern ports.

Political power was exercised as much in the great city chambers of the regions as it was in London. Joseph Chamberlain, Mayor of Birmingham in the 1870s, built a power base second only to that of the Prime Minister, regarding his move to take up ministerial office as a potentially backward step. That power, and the wealth that flowed from it can be seen to this day in the grand marble staircases and oak-lined corridors of city chambers in places like Glasgow and Newcastle.

It took a hundred years for the balance to shift. Towards the latter half of the 20th century, London and the south-east of England became the focus not just of political influence but financial dominance. As the heavy industries of shipping and manufacturing went into decline, so London gained from the growth of banking, investment, international business – and political power. Air travel took over from the sea, with traditional seaports losing out to east coast container terminals; export deals were hammered out in the boardrooms of the City rather than the factories of the north; it was to London that immigrants turned, whether they were West Indian bus-drivers or Russian oligarchs.

Two hundred years ago Britain’s powerhouse was in the north

The north-south divide By the turn of the century, the gap between north and south was widening to such an extent that one survey showed households in the south-east of England were nearly twice as likely to have wealth in excess of $1.54 million than those in the north of Britain. London also seemed more resilient than elsewhere. After the banking collapse of 2008 the capital bounced back quicker than elsewhere, with its economy growing by nearly 12.5% – twice as fast as the rest of the UK. Complaints that investment was being sucked into the wealthy south-east at the expense of the rest of the country fell mostly on deaf ears.

That trend is now being challenged. A new “northern powerhouse” is taking shape and it is changing the face of Britain. The cities of the north – in England and Scotland – are rediscovering something of the individual character that once made them great, and are insisting on taking control of their own fortunes. They are winning back power from London, and making decisions that reflect their own ambitions, rather than awaiting regulations from Westminster. And they are doing so with the positive encouragement of ministers in London, rather than in the teeth of their resistance.

The government has launched a City Deal investment program which gives British cities and their surrounding area the power to take charge and responsibility for decisions that affect economic development; to introduce their own policies for helping businesses to grow; and to decide how public money should be spent.

The initial deals it announced involved Birmingham, Bristol, Manchester, Leeds, Liverpool, Nottingham, Newcastle and Sheffield. Glasgow has now been added to the list. One estimate suggests that this new alliance of northern cities has the capacity to create 175,000 jobs and 37,000 new apprenticeships over the next 20 years.

In Scotland, a Scottish Cities Alliance was established in December 2011 as a partnership between the Scottish government and the cities of Aberdeen, Dundee, Edinburgh, Glasgow, Inverness, Perth and Stirling. Its stated aim was to maximize investment, stimulate economic activity and create jobs, and it claims to offer $15.4 billion worth of investment opportunities.

Earlier this year, George Osborne, Chancellor of the Exchequer in Prime Minister David Cameron’s government, took matters a step further, when he announced that Greater Manchester in the north of England – with a population of 2.7 million – was to be the focus of what he himself labelled a “northern powerhouse,” bringing a range of city services under the control of a new directly elected mayor, with planning powers to aid its already impressive expansion. It gives Manchester the kind of status that would be immediately recognizable in many US cities but which in Britain is relatively new. Leeds is to be the next city with an elected mayor.

Joined-up thinking Momentum would be gained, he argued, “by joining our northern cities together – not physically, or into some artificial political construct – but by providing the modern transport connections they need; by backing their science and universities; by backing their creative clusters; and giving them the local power and control that a powerhouse economy needs.”

The cities of the north are more than ready to take advantage. This is a development that owes as much to political reality as to economics. Fifteen years ago, the people of Scotland voted overwhelmingly for devolution – the transfer of powers over such things as health, education, transport and planning – to a parliament in Edinburgh rather than London. Over that time it has thrived, with Edinburgh, its capital, becoming the second wealthiest financial center in Britain, and Glasgow winning the coveted title of City of Culture in 2000 and hosting the Commonwealth Games in 2014. Most surveys have indicated that the Scots want more power rather than less, and though, last year, they voted in a national referendum to stay in the United Kingdom rather than opt for independence, the General Election of May this year saw a landslide victory for the Scottish National Party, which took all but three of the Scottish seats at Westminster. The party is pledged to seek further tax powers for Scotland and reserves the right to hold another referendum on independence if and when it judges that the people want it.

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Liverpool in the 19th century was a much more important port of access for US trade than London

Watching intently, cities in the north of England like Newcastle, Liverpool and Leeds have also seen the opportunity to expand. Liverpool, emulating Glasgow, won the City of Culture honor in 2008, transforming its previous image as a city in decline, engendering a multi-million dollar investment program which has transformed its dockside and transport infrastructure and began to reverse its population decline.

Sir Howard Bernstein, Manchester’s Chief Executive, commenting on the lessons of Scottish devolution, says that cities in the north have learned from it. He welcomed the so called Greater Manchester Agreement, announced last year, which gives the city more powers over public services that had previously been in the hands of central government. He would like to see this go even further, with some UK taxes devolved to the regions. “Manchester, has been in the forefront of moves towards increased devolution to our cities,” he said, “and it’s essential there be no respite in this momentum. The benefits for our people are huge.”

He can point to a $1.54 billion city center development, which will give Manchester a facility even London cannot equal. It will include an arts institution known as The Factory, which will act as conference center, opera house, and the biggest nightclub in Europe.

Announcing it, the city’s council leader Sir Richard Leese, described it as “a new cultural institution, the like of which doesn’t really exist anywhere else in the world, never mind the country.”

Newcastle, once a somewhat rundown city in the north east, known for its high levels of deprivation, has created over the past 20 years a cultural center which boasts one of Europe’s biggest contemporary arts spaces – the Baltic; a concert hall which now draws world-class orchestras as well as rock groups; and a riverside cultural development which draws young people every weekend from across Europe.

Given that Newcastle, facing east, sees itself as a gateway to trade with Europe, while enjoying close links with Manchester and Liverpool facing the west and America, this kind of profile is invaluable. For US firms, who see Britain not just as an investment center itself but as a platform for trading with Europe, the connections across the whole of the north of England are invaluable.

Culture of change Meanwhile, alert to the power of a strong cultural image, Dundee, on the east coast of Scotland, is investing more than $123 million in a state of the art outpost of the Victoria and Albert Museum in London, designed by the Japanese architect Kengo Kuma.

In pursuit of strategies like these, city bosses like Sir Richard Leese are becoming power-brokers in their own right. Writing recently in The Guardian newspaper, the distinguished columnist Simon Jenkins named eight Labour politicians who, in his view, were more powerful figures than any of the candidates currently bidding for the leadership of the UK Labour party; five of them were from northern cities.

They have seen the potential in linking private enterprise with an equally enterprising public sector, and harnessing the energy of both. In a seminal report on the power inherent in Britain’s cities, called No Stone Unturned, Michael Heseltine, a former minister in Margaret Thatcher’s government, set out a strategy he believed would be to the benefit, not just of individual towns and cities, but to the national economy as well.

He had seen how a city like Liverpool, torn apart by riots in 1981, had fallen victim to extreme left-wing politics, and how it had gradually reinvented itself by wresting back power and taking control of its own commercial future. He saw lessons that others could adopt and in typically punchy style, he set them out:

“There is opportunity [here] on a grand scale. Huge infrastructure demands and hungry institutional funds – link them. Excellence in industry, commerce, academia – extend it. England’s cities pulsing with energy – unleash it. Every one of us needs to rise to the challenge.”

Those lessons are being learned – and they are of deep significance to the United States, whether as an importer of UK goods, or an exporter from the US. UK trade in goods and services to the US now amounts to $207 billion, and shows a steady 3% increase year on year. Around 17% of all British exports go to the US and both countries are each other’s largest foreign investors, supporting approximately one million jobs on either side of the Atlantic.

Meanwhile, US exports to the UK of goods and services combined are estimated to be worth about $110 billion last year.

The major categories, which include aerospace, building products, cyber security and medical equipment, all have strong representation in the north of England and in Scotland. It is revealing that some of the top UK companies, such as BAE, GKN, Rolls- Royce, and the Drax power station, list major branches across the north, while Drax and Rolls-Royce in particular are based there.

This, then, is the northern powerhouse that is emerging in Britain, and which is changing the way that it does business. For US exporters, getting in on the ground floor of a development that is just beginning to take shape, offers real potential for growth.

It may not quite emulate the days when cotton and tobacco were king, and American wheat barons sent their steamships across the Atlantic to trade with Liverpool and Glasgow, but it has the same ring of entrepreneurial endeavor about it. Britain these days is more than just London. It is time for US business to look north as well.