Developing Scotland’s Cities
Written by 13 May 2013on
Report: The prosperity, well-being and success of our cities is pivotal to Scotland’s economic future. Today’s knowledge-based goods and services are the products of science, creativity and collaboration. Urban density supports the creation and sharing of new knowledge and ideas and eases interaction amongst Universities, hi-Tech Companies, entrepreneurial and cultural networks.
Successful cities develop their cultural and educational assets and invest in modern communications infrastructure to make themselves as attractive as possible to globally-mobile talent and investment. In turn, such cities tend to become hubs for developing and disseminating new products, trends and ideas.
Economic performance varies greatly across UK cities: but even our strongest performers fall some 25% short of achieving the levels of economic output, as measured by gross value added (GVA) per capita, of the top performing European cities.
To improve their competitiveness, our cities need to raise economic activity and productivity, by getting more people into work and increasing the output of the existing workforce through investment in education, skills and technology. Failing to compete with more productive cities reduces the prospect of attracting new investment and, over time, creates a downward spiral of fewer jobs, higher unemployment and attendant social challenges, such as poverty and ill health.
Cities constantly need to manage demographic and economic changes. In growing cities the need to accommodate more people places pressure on housing, land supply and infrastructure. In declining cities, the viability of some communities can be put at risk from an ageing and workless population and the flight of talent and capital to other locations. The social consequences of failure to manage such change can be enormous.
To add to these challenges, the quality of life and long term sustainability of our cities is under threat from resource depletion, climate change and environmental degradation. There is huge pressure on urban infrastructure and a compelling need to replace failing, outdated systems with low-carbon infrastructure that will improve the resilience of cities and their capacity, to deal with, and recover quickly from, extreme weather and other threats. Given the current state of public finances, this challenge calls for innovative solutions and new forms of engagement with private and institutional investors.
In recent years, the growing body of experience in emergency planning has helped improve city preparedness to cope with extreme weather events, terrorist attacks, disease pandemics and similar threats. However, cities also need to develop strategies for resilience over the longer term if they are to develop the strength and flexibility to respond to, and recover quickly from, new threats and scenarios.
In terms of economic resilience, the failure to develop a modern, well diversified economy can leave cities particularly vulnerable to changes affecting individual industries, technologies and markets and less able to cope with the social and economic consequences of disinvestment and attendant job losses. By contrast, cities with a diverse, knowledge-intensive economy and a more highly skilled and flexible workforce are better able to withstand episodic shocks and ride out structural changes and downturns in the economic cycle. The ability to anticipate, prepare for and manage such changes has become a core competence for city leaders.
Whilst much attention currently remains focused on policy responses, at the national and international levels, and problems such as sovereign debt, at a micro economic level, it is the contribution of entrepreneurial, knowledge-based businesses which will be vital if the UK is to achieve sustained recovery from stagnation. Such businesses flourish best in cities where, as they grow, they can access the talent, resources and knowledge they need to achieve competitive advantage in international markets. In fact, the bottom up nature of urban innovation is such that attracting smart people, and providing an environment where they can flourish and get on with things, may be the single best economic strategy for our cities to pursue.
Attracting and growing such businesses is, of course, easier for cities that are already rich in knowledge-based assets, such as universities and company headquarters. However, in all cities, economic growth can only be sustained within the finite limits of resource availability. Cities need therefore to have plans for using resources sustainably and a vision of a future that is greener, cleaner, better, safer and more vibrant, enterprising and attractive to talent and investment, than the present reality. They then need to commit to action, in the sure knowledge of the need to make adjustments as they go along.
The Harvard University academic Rosabeth Moss-Kanter, has written about how American companies need to develop to compete internationally. She describes the 3 ‘C’s of ‘world class’ business performance: – concepts, competences and connections – and argues that businesses with the best knowledge and ideas, and the competence and connections to deliver internationally, will win out in the global economy.
This construct could equally be applied to cities. Scotland’s city development plans already feature strong concepts such as Edinburgh’s BioQuarter and Exchange Financial District; Glasgow’s Pacific Quay Media Village and International Financial Services District; Dundee’s Waterfront and Aberdeen’s Energy Corridor.
By differentiating Scotland’s offer through imaginative concepts which draw upon the distinctive strengths, economic, intellectual and cultural assets of our cities, both individually and collectively, persuasive investment propositions can be developed and marketed to international investors. In this way, competitive advantage can be built and sustained through the clustering of key skills and expertise in and around each city.
To do this successfully, the planning system needs to be supportive and finance for enabling infrastructure needs to be given priority by government, regardless of whether it is ultimately funded by tax payers, the private sector or end users.
In a fast moving, competitive world, speed of execution of new ideas is a critical aspect of competitive advantage. Too often, good concepts fail to reach market in a timely manner because of delays in planning or inadequate investment in infrastructure. Scotland’s economic development has also witnessed some poorly-conceived, planned and executed projects including some failed ‘me too’ attempts to emulate projects elsewhere. It makes no real sense to drive into the future whilst looking in the rear view mirror at markets and technologies that may already be in decline. Catch up development invariably means riding the diminishing power of the last wave of technology rather than catching the next one as it rises. It is important therefore to understand the history and context of established projects when trying to emulate their success. Almost always, when adopting established models, implementation needs to be adapted to address the context, technological possibilities and needs of the time.
Many public investment decisions affecting Scotland’s cities continue to be made at a Scottish or UK level. In some instances, they are the product of silo-based thinking within Government Departments, Non-Departmental Public Bodies or Executive Agencies. Even when the initial concepts are sound some fail as a result of poor planning and execution, or poor governance and scrutiny. Despite the detailed findings of inquiries into projects such as the Millennium Dome and Scottish Parliament there remains work to be done to achieve consistency in the delivery of major infrastructure projects, on time and to budget. Infrastructure investment also needs to be freed from optimism bias through better use of cost benefit analysis, investment criteria and risk appraisal to guide decisions.
Like companies, cities compete internationally to attract talent and resources. They therefore need to be ‘competent’ in delivering consistently, to the best international standards, on the key factors supporting strong economic performance such as excellence in education and research, business environment, human capital, supply of development sites/buildings, physical infrastructure, energy supply and transport and communications. The delivery of these basic requirements is a taken for granted assumption on the part of most astute investors: in effect, the table stakes for participating in the inward investment game. However, beyond the basics, the task of attracting the brightest and best talent, in the face of global competition, requires cities to offer a better quality of life, for example, by investing in their cultural and entertainment assets, green space and public realm. Cities can further benefit through strong branding and promotion of their key strengths sending clear messages to target markets such as inward investors, property developers, tourists, students, artists and entrepreneurs.
Professor Richard Florida highlights the importance of the arts, toleration for alternative lifestyles and a fun, happening downtown as key talent attractors for cities; this is particularly relevant for young people. However, for mid-career talent, especially those with young families it is as important to get the basics right: safe streets, easy commutes, good schools and affordable workspace. Such factors can be benchmarked against competitor cities. It may not be possible to achieve world class performance overnight, but cities with detailed plans and policies and a leadership committed to improvement will give encouragement to the market about their longer term resilience and investment prospects.
Moss-Kanter’s third C – ‘connections’ concerns the ability to form fruitful relationships and gain access to resources from around the world. This is clearly made easier by good connectivity to economic hubs in Europe and further afield, especially through direct air routes and arguably Scotland starts from a position of relative disdavantage. However, the way in which connections are managed is also important. The Scottish Government aims to provide a ‘one door’ approach by managing international trade and investment through Scottish Development International and tourism marketing through VisitScotland; our Further and Higher Education sectors are also active in international development. And whilst links between national agencies and cities appear to be improving, more needs to be done to reinforce the strategic and operational alignment around key city investment priorities and offer an ‘any door’ route into Scotland. Cities often develop their civic connections with other cities across the globe, for historic and cultural reasons, rather than because of explicit economic and trade benefits. However, in recent years Edinburgh has leveraged its civic and festival connections to promote trade, attract new talent and investment. Glasgow’s City Marketing Bureau has also shown how city branding and marketing can yield dividends in attracting visitors, events and exhibitions and improving the city’s image and profile, whilst Aberdeen has been hugely successful in leveraging its oil community links internationally. The Scottish Council Development and Industry (SCDI) and the Globalscot Network have also helped ambitious Scottish companies to make key connections in international markets. Developments arising from the application of clean-tech, low carbon technologies to cities and Glasgow’s current ‘smart city’ demonstrator project present obvious opportunities for future development, especially given the fortuitous location of the Green Investment Bank in Edinburgh.
However, despite much good work, more needs to be done to create truly compelling investment propositions that will help Scotland prosper in the global economy despite the relative disadvantage the country faces, in terms of distance to major consumer markets. The planned extension of high-speed rail to Manchester and Leeds and the outcome of the debate about expanding Heathrow or building a new hub airport for the south east, may well have an adverse effect on Scotland’s relative attractiveness to investors. UK government policy on ‘city deals’ that are giving provincial English cities greater scope to use tax resources to manage their growth and shape their own economic destinies could also place Scotland’s cities at a disadvantage. We need to be planning now how best to prepare for stronger competition on our doorstep.
Competition amongst cities for investment is, of course, healthy and can encourage them to deliver better public services, become more innovative, raise productivity and reduce costs. But if Scotland’s cities are to compete effectively we need to develop investor-friendly policies and projects and make the best possible use of each city’s distinctive assets.
It is at arguable that the loss of local enterprise companies has diminished the economic development capacity of our cities and, whilst Councils and Universities have taken up some of the slack, and private sector leadership has remained to the fore to varying degrees, in each of our main cities, it may soon be time to re-appraise the case for introducing city development agencies to stimulate the next wave of economic development and to look closely at the potential benefits of directly elected mayors or city region economic forums with more than advisory powers.
It is probably unrealistic to expect that such a debate can be resolved prior to the referendum on Scotland’s constitutional future so in the short term, it remains vital that the connections made externally by the Scottish Government and its Agencies with the rest of the world are matched by strong internal connections to our city Councils and city-based business groups. Scotland already has many of the concepts, competences and connections needed to deliver world class performance. But our cities need strong governance and leadership, a supportive policy environment and continuing investment if they are to fulfil their potential for growth and innovation and remain resilient in the face of the considerable economic, social and environmental challenges ahead.