How to make ‘levelling up’ work for business

The writing has long been on the wall for levelling up, the previous government’s strategy for spreading prosperity across the UK. For business leaders, that means facing the familiar challenge of getting to grips with another set of policies aimed at boosting investment in the regions.
There is a huge opportunity to create something that is fit for purpose. Doing so is essential because if the whole of the country is not firing on all cylinders, the government’s industrial strategy and its central growth mission will struggle from the outset.
Businesses outside London and the southeast do not need handouts, but they do need an environment that gives them the confidence to invest in future. We need to be thinking today about the skills and technological capabilities that will be needed in ten years’ time.
As co-chief executive of a big company based in the West Midlands, I understand the positive impact that a strong business environment can have on local communities. I have also witnessed at first-hand the impact of decades of neglect and poor local planning on a region that is capable of building numerous world-class businesses but has generally underperformed.
While a stable wider economic environment is a prerequisite for growth, it is wrong to assume that rapid growth is guaranteed simply by creating one. To achieve that, we need an environment in which entrepreneurs can build up their organisations and the technological capability required to win. It takes time and it takes nerve.
In business, when we plan, we approach it from the top down and the bottom up. The former is about strategy, the latter about detail. The same is essential now as the UK embarks on a new industrial strategy. Yes, we need vision and becoming the fastest-growing economy in the G7 is a good start, especially from our present position as a laggard. The goals around net zero and the creation of a new green economy also make sense as aspirations, even if our global competitors are all entertaining similar strategies.
But it is the detail that really matters — and this is where the regions can play a starring role. There are pockets of great strength that must form the basis of any review of how the regions can power the UK’s growth. These include financial services in Edinburgh, Leeds and Birmingham; the golden research triangle in the south and east; light industries in the northeast; and aerospace in the northwest and southwest.
Driving these sectoral reviews requires both central co-ordination to allow for consistency and on-the-ground leadership to solve the Rubik’s cube challenge of aligning industry, skills, education, workforce and productivity. To enable the regional governments to plan, we must match the training of skilled workers in further education colleges and institutes for technology with the needs of local industry.
It is tempting to look at the fastest-growing areas of the global economy and to go directly for the spoils. This simplicity is doomed to failure. We have to analyse the skills and capabilities we have, especially regionally, along with the resources we are prepared to invest and an understanding of the role we can play on the global stage.
It is about picking the right battles. You only have to look at Germany’s failed plan to dominate the solar business with $2.5 billion invested, which has been eclipsed by China in little more than a decade with $50 billion of investment.
How do we avoid a similar fate for our chosen industries? I am a big believer in the power of clusters. These are complex, economically significant ecosystems in which people can meet, exchange ideas, develop innovations and create business together.
We have eighteen in the UK, according to an analysis by the consultancy McKinsey, three of which — London, Oxford and Cambridge — are competitive at a global level. These clusters are often in exciting, vibrant places, where something is in the air to draw together world-class talent to deliver fresh products and innovations. If you work in one, you know the feeling.
The Midlands is a microcosm of both the challenges and opportunities of building regional clusters. The region’s manufacturing sector has the potential to become genuinely significant if it can overcome an image problem and tackle significant productivity issues. The West Midlands, for example, has a 13 per cent output deficit per hour relative to the UK.
The manufacturing businesses in Coventry, Birmingham and the Black Country might not be sexy, high-growth companies that figure prominently in our industrial strategy, but they are strategically critical to the region. Manufacturing in the Midlands has a growth trajectory of only 2.5 per cent, yet it is vital that these businesses thrive because they will form the bedrock of a skilled, productive industry of the future.
A successful regional strategy has eluded successive governments for decades, but it is a prize that is worth fighting for. Get it right and it is good news for the regions, and great news for the UK.
Steve Rigby is the co-chief executive of Rigby Group, a technology-focused family business, and a board member of Family Business UK