Universities and the five drivers of productivity
By Ed Cox, Director, IPPR North
Universities are a key resource in closing the productivity gap between the North and South of England and facilitating the growth of the Northern regions as they act on each of the five drivers of productivity – investment, innovation, skills, enterprise and competition.
IPPR North’s Northern Economic Futures Commission is considering ways in which the Northern regions and LEPs can further exploit their university assets to drive productivity.
Universities encourage investment by providing the potential for high-value added business activity and the availability of highly skilled workers; evidence published by the OECD suggests that investment in universities is more effective in generating research-intensive foreign direct investment than offering financial incentives to foreign investors. Numerous examples can be found of firms that cite universities as their reason for investing in the Northern regions, especially where Science Parks are located.
Universities are important innovation assets, as the nature of academic research is to challenge and improve on current ways of thinking and doing. The university environment is one of constant innovation and a resource for local businesses to tap into through formal (e.g. consultancy work) and informal means (e.g. spillover effects). Indeed, the UK government’s own research has found that those firms that engage with universities show higher market share, better product quality and a greater product range. For example, universities in the North East are heavily involved in innovation in the region’s automotive production industry; Newcastle University is working with private sector partners to develop more efficient electric cars and the University of Sunderland has specialised in working with domestic and foreign firms to develop hydrogen fuel cell prototypes.
Universities are the main providers of higher level skills training and therefore act to attract and retain skilled workers within local economies, providing the potential for areas to diversify their economic base and facilitate the creation and location of high value added firms. Research has also found that universities tend to increase the demand for highly skilled workers in the local economy beyond the direct effect of those employed by the university. Universities play a crucial role in upskilling the local population and increasing social mobility. An interesting example is the University of Cumbria, which is at the forefront of innovative ways of delivering learning over a wide geographic area via learning centres and online resources, providing easy access for local people to increase their skills.
Universities are becoming increasingly important in the creation of new enterprise through the commercialisation of academic research, the formation of firms exploiting the expertise of university staff and new graduates getting involved in start-ups. Recognising the potential of students and graduates in driving local business growth, the Liverpool John Moores University’s Enterprise fellowship programme provides business support for graduate start-ups in Merseyside. This year Liverpool City Council have launched a sponsorship scheme to fund 30 places on the programme which seeks to create additional businesses in the city, especially in the digital and knowledge-based industries.
Firms that engage with universities show higher market share, better product quality and a greater product range.
Taking the above together, universities help to lower the costs of production and encourage new entry into markets leading to greater competition between firms.
It is welcome that university representation appears integral to most of the recognised Local Enterprise Partnerships (LEPs). IPPR North’s Northern Economic Futures Commission is considering ways in which the Northern regions and LEPs can further exploit their university assets to drive productivity improvements as part of a wider programme of work into the critical issues facing the economy of the North and new approaches to local and regional economic policy.
Recent research by Imperial College London found that the £3.5 billion annual research council funding resulted in a £45 billion annual increase in the output of UK firms. Given how important private sector growth is to the economic recovery and reducing regional disparities, policymakers would be foolish to ignore the centrality of universities to this objective.
Ed Cox is Director of IPPR North and Deputy Chair of the recently launched Northern Economic Futures Commission.The Commission is aiming to articulate a 10¬year strategy for economic growth across the North of England.
