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‘TIC’ing off another success?

Authors: Jonathan Wright Jonathan Wright

07 April 2011


Yesterday (7 Apr) South Yorkshire welcomed the news that Rolls-Royce plans to build three new factories at the Advanced Manufacturing Park in Rotherham – the Advanced Manufacturing Research Centre at the AMP is part of the Coalition’s first Technology and Innovation Centre for high value manufacturing. The factories would provide 700 high-tech manufacturing jobs in a part of the country that has experienced considerable job losses in recent years. Moreover, this is an example of sustainable economic development policy - building on a local economy’s embedded strengths and harnessing local research capacity.  

In contrast, other economic policies announced by the Coalition in recent weeks have tended to be relatively more short-termist, and may prove ineffectual. Last month, the Chancellor praised cuts to corporation tax for the return of WPP – a world leading advertising firm. In 2006 WPP relocated to Ireland due to its low corporation tax, and now it is looking to return its headquarters to the UK following the demise of Ireland’s economy.  

This might sound like a quick win, but it poses a number of risks. First, stimulating unsustainable growth based on low corporation tax could lead us into a similar boom as Ireland experienced before the recession. Second, WPP’s move is unlikely to create many jobs in the UK – most of its activities are carried out overseas. The only significant benefit is the increased tax revenue for the Exchequer – yet the Budget forecast that the tax cut would cost £5 billion by 2015/16.  Meanwhile, total spending on enterprise, youth unemployment etc announced in this year’s budget was closer to £500 million.

However, Osborne’s support for manufacturing in his ‘pro-growth’ budget is far more positive.  Alongside the Technology and Innovation Centre for high-value manufacturing, this includes nine new centres for Innovative Manufacturing, and an extra £100 million for science.  In response to skills shortages and gaps, the government has announced 24 new University Technical Colleges, and more money for high-level apprenticeships.

Ultimately, the Rotherham and Sheffield AMP is a success story for grounded local economic development policy with a long-term perspective. Rolls-Royce has been attracted to the site because of its supply of people with relevant skills, its existing supply chains, central location and international connections, and the company's existing collaboration with Sheffield University at the AMRC.  Rolls-Royce is also keen to double the number of trainees it takes on each year and the factories would offer apprenticeship places.

Both our Ideopolis and Knowledge Economy programmes at The Work Foundation have called for and are supportive of longer term, locally sensitive approaches to economic development.  This type of activity will accelerate the Coalition’s aim to rebalance the UK economy and create high-value private sector jobs. The Government has shown it knows how to invest in the future of our economy – this must be the focus - not short-term tax breaks.