Constrained North costing Treasury, says report

The UK economy would be £40bn better off if Northern economic potential was properly exploited and brought closer in line with other English regions, according to the Northern Economic Futures Commission.

A new report by the think-tank argues that if the government were to tackle head-on the unemployment problem in the North of England and brought it down to the average in the rest of England then the Treasury could £1.2bn better off. Unemployment currently stands at 9.9% across the North compared to 7.9% average in the rest of England. Narrowing the difference in output by 50% between the North and the other English regions would be equivalent to over £1,600 per English worker.

The Commission was established in July 2011 and is made up of business, academic and public sector figures, chaired by Geoff Muirhead, former chief executive of Manchester Airports Group.

The report's authors argue that a greater focus on the economic potential in the North of England would bring benefits for the whole of the UK but currently this potential is being constrained. The report finds that the value of export goods, business investment in R&D, and rates of entrepreneurship are all growing faster in the North than the South.

Rates of entrepreneurial activity over the last decade have:

• Increased by 59% in North East
• Increased by 56% in Yorkshire and Humber
• Increased by 25% in North West
• Increased by 29% in West Midlands
• Increased by 26% in East Midlands
• Increased by 4% in East
• Increased by 3.5% in South West
• Decreased 3.5% in London
• Decreased by 3.5% in South East

Business survival rates in the North have also been significantly higher than anywhere else in the country since 2008.

The Commission will lay out its recommendations on how to boost economic growth in the North of England for the benefit of the UK economy in its final report later in the year.

Geoff Muirhead, chairman of the Northern Economic Futures Commission, said: "The North-South divide has existed for too long and it's having a negative effect on the national economy which is desperate for growth. Our Commission is convinced that we can unlock potential for vital growth in the North of England if government creates a more level playing field.

"So-called 'spatially blind' policy-making has simply favoured short-term returns in London and the South East. The North doesn't need more hand-outs but a long-term economic strategy which recognises the differences between places and the need for more local approaches to skills, innovation and infrastructure."

Ed Cox, director of IPPR North and deputy chairman of the Commission, said: "In terms of sheer scale the North cannot be ignored. Twenty seven per cent of England's working age population lives in the north but contributes only 23% of national economic output. If the North was a country then it would rank as the 8th biggest economy in the EU, twice the size of Scotland and bigger than countries like Sweden and Denmark. If the national economy is to prosper the North needs to be performing strongly – it's in all our interests."

The Northern Economic Futures Interim report – Northern Prosperity is National Prosperity – was published on Monday.

The Northern Economic Futures Commission was established in July 2011 to spearhead a programme of activity and research to look at the critical issues facing the economy of the North and set out a new approach to local and regional economic policy, driven by decision-makers in the North of England. The aim of the Northern Economic Futures Commission is to articulate a ten-year strategy for long term and sustainable economic growth across the North of England. The Commission is now at its half way point and will publish its final report and recommendations later this year.

Commission members:

• Geoff Muirhead, former chief executive, Manchester Airports Group
• Ed Cox, director, IPPR North
• Bill Adams, regional secretary, Yorkshire and Humber TUC
• John Anderson, regional director for Yorkshire and Humber, BT Group
• Rhiannon Bearne, policy manager, Cyrenians
• Paul Callaghan, chairman, Leighton Group
• Adeeba Malik, deputy chief executive, QED-UK and co-chairman, National Ethnic Minorities Business Taskforce
• Philip McCann, lecturer, University of Groningen
• David McKeith, chairman, Chamber of Commerce Greater Manchester
• Rodger McMillan, therapy area head, respiratory and inflammation, Astrazeneca
• John Mothersole, chief executive, Sheffield City Council
• Peter Nears, strategic planning director, Peel Holdings
• Ann Pittard, large business development lead, Leeds City Region
• Philip Shapira, professor of innovation management and policy, University of Manchester
• Bill Tompson, head of rural and regional development unit, OECD
• Julia Unwin, chief executive, Joseph Rowntree Foundation