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  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

    1

    Cambridge, Milton Keynes, Oxford, Northampton Growth

    Corridor

    Final Report for The National Infrastructure Commission

    8 November 2016

    Cambridge Econometrics

    Covent Garden

    Cambridge

    CB1 2HT

    UK

    +44 1223 533100

    alb@camecon.com

    www.camecon.com

  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

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    Cambridge Econometrics’ mission is to provide rigorous, accessible and

    relevant independent economic analysis to support strategic planners and

    policy-makers in business and government, doing work that we are interested

    in and can be proud of.

    Cambridge Econometrics Limited is owned by a charitable body,

    the Cambridge Trust for New Thinking in Economics.

    www.neweconomicthinking.org

  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

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    Authorisation and Version History

    Version Date Authorised

    for release by

    Description

    1.0 20/10/16 Anthony

    Barker

    First draft of chapters 1 and 2.

    2.0 04/11/16 Ben Gardiner Complete draft final without MSOA

    maps or executive summary

    3.0 08/11/16 Ben Gardiner Complete draft final

    4.0 09/12/16 Ben Gardiner Complete final report

  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

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    Contents

    Page

    Executive Summary 6

    1 Introduction 15

    1.1 Background to and purpose of the study 15

    1.2 Key definitions and terms 15

    1.3 Report structure 22

    2 Economic Framework 23

    2.1 Introduction 23

    2.2 Agglomeration cycle 23

    2.3 Growth corridors 29

    3 Policy and Growth Narratives 33

    3.1 Introduction 33

    3.2 Greater Cambridge – Northern Hertfordshire Sub-area 33

    3.3 The Greater Oxford-Swindon Area 41

    3.4 The Milton Keynes/Luton/Bedfordshire/Aylesbury Vale sub-area 49

    3.5 The Greater Northampton Area 57

    3.6 City Comparisons 65

    4 Case Studies 69

    4.1 Introduction 69

    4.2 Historic perspectives 69

    4.3 Evidence of the latent potential of the Corridor 82

    4.4 Evidence from elsewhere 94

    4.5 Conclusions 106

    5 Projections and Scenarios 108

    5.1 Introduction 108

    5.2 Scenario development 108

    5.3 Baseline Projection 109

    5.4 Incremental Growth Scenario 118

    5.5 Transformational Growth Scenario 128

    5.6 Comparison and Conclusions 139

  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

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    6 Conclusions 145

    Bibliography 152

    Appendix A: Quantifying the Evidence for Growth 156

    Appendix B: Maps 170

  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

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    Executive Summary

    Background, purpose and definitions

     This report presents research on the economic rationale for infrastructure

    investment in the Cambridge, Oxford, Milton Keynes, and Northampton

    area (henceforth known as CaMKOx-N). An economic framework is

    developed which explains the key drivers of and constraints on growth and

    specialisations, and investigates the nature of the inter-relationships

    between the four main urban centres that comprise the ‘corridor’.

     The focus is primarily, but not exclusively, on the knowledge-intensive

    sectors that make the study area worthy of special attention (as per

    George Osborne’s recommendation). For the purposes of analysis, the

    knowledge-intensive sectors are split into High-Tech Manufacturing (HTM)

    and Knowledge Intensive Business Services (KIBS) – the former is a key

    driver of productivity growth, but the latter is what drives knowledge-based

    jobs in most areas.

     The study area presents a complex geography with no precise definition,

    yet one is still required in order to undertake the analysis. Using data on

    knowledge-based sector specialisation at Local Authority District (LAD)

    level, a definition was agreed which allowed for splitting the area into four

    sub-geographies (as shown in Figure 1):

    - Greater Cambridge and northern Hertfordshire area. - Greater Oxford-Swindon area. - Milton Keynes-Bedfordshire-Luton-Aylesbury Vale region. - Greater Northampton area.

    Greater Cambridge and Northern Hertfordshire Sub- area

    Milton Keynes, Luton, Bedfordshire, Aylesbury Vale Sub-area

    Greater Oxford and Swindon Sub-area

    Greater Northampton Sub-area

    Figure 1: Defining the Study Area and its four sub-areas

  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

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    Developing an economic framework

     The economic framework used to assess the role played by improved

    transport infrastructure focusses on the agglomeration cycle, a self-

    reinforcing process in which high levels of human and physical capital

    combine to produce growth in output, employment, and knowledge-based

    assets, that then feedback to attract more human, physical and financial

    capital to the region. The framework is depicted in figure 2.

     Infrastructure investment, through improved connectivity, can support

    growth through a variety of channels, including better matching of local

    skills supply and demand, lowering travel and transport costs, and

    (ultimately) by allowing for agglomeration benefits to occur. The role that

    transport plays in connecting activity hubs within growth corridors is

    another manifestation of the benefits of infrastructure investment, and a

    particularly important one given the increasing urbanisation of the UK

    population.

     However, while it is clear that improved transport connectivity can play a

    facilitating role in promoting economic development and prosperity, the

    interplay between different factors (infrastructure, skills, agglomeration,

    specialisation, governance, etc) is too complex to capture in an empirical

    modelling framework. Thus, in order to calculate an effect on productivity

    from improvements in infrastructure (which facilitate greater employment

    density to occur), use is made of the well-established literature on Access

    to Economic Mass (ATEM), which provides a direct link between these

    measures.

    AGGLOMERATION PROCESS

    (Fundamentals)

    (Outcomes)

    Figure 2: Overview of the Logic Framework

  • Cambridge, Milton Keynes, Oxford, Northampton Growth Corridor

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    Profile and functionality of the study area

     Both Cambridge and Oxford have developed a considerable knowledge-

    intensive economy, with strong employment growth rates in the KIBS

    sectors, but also in the strong productivity growth in the HTM sectors.

    Cambridge experiences a higher relative degree of specialisation in the

    science and high-tech sectors, whereas Oxford’s knowledge economy is

    more diverse, with relatively greater levels of employment in more directly

    business focused sectors.

     Both cities benefit from outstanding assets linked to higher education and

    research and development institutions. However, they also face a wide

    range of challenges in the coming decades. Housing and employment

    space provision has been constrained within the cities themselves for

    some time now, and as the effective economic footprint of each city has

    rapidly grown outwards, the infrastructure provision has failed to keep up.

    This is currently a major constraint to future growth in the two areas.

     Milton Keynes benefits from good transport connectivity and it has been

    enabled by strong and effective governance and has seen rapid growth in

    housing, population and jobs over the past 50 years. However, whilst this

    growth has been impressive, the figures suggest it has not been driven by

    growth in knowledge intensive sectors, which only constitute 10% of

    overall growth, compared to figures of 25% and 30% in Oxford and

    Cambridge respectively, despite its geographical proximity to them.

     Better physical and economic linkages to these two centres may help drive

    forward knowledge intensive sector growth in the Milton Keynes region,

    both in the city itself, but also along the east-west route through Aylesbury

    Vale linking it to Oxford and through Central Bedfordshire to Cambridge.

     Northampton has experienced moderate to high levels of population and

    employment growth, particularly in its logistics and business support

    sectors, a function that doubles up with its status as a county town and

    local retail, public and residential services hub. Its comparatively

    affordable housing and commercial premises has been a major factor in its

    growth in recent years, and there appears to be an appetite for further

    growth in the immediate future. Its growing linkages with Milton Keynes

    mean it well positioned to benefit from strong economic growth in the

    central region of the s

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