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Only a better transport infrastructure will allow Northern Powerhouse impact, finds KPMG report

Big Four accountancy firm KPMG has released a new report today emphasising the need for an improved transport infrastructure to unlock the region’s productivity potential.

The inaugural UK regional productivity report recommends focus should be given to boosting the region’s connectivity with the rest of the North.

While the recent Transport for the North plans have been welcomed, KPMG is among many business voices stressing how much remains to be done to better the region.

In this report, KPMG has looked at the North East on three of the principle drivers of labour productivity: characteristics of businesses (e.g. the size and structure of regional businesses), infrastructure, and skills and education.

Unsurprisingly, the research concluded that transport presents real challenges in the North East. Its poor connections within the area stand as a key contributor in people needing to relocate – limiting the pool of available local talent.

Moreover, there is a shortage of skilled labour, with a mismatch between the skills school leavers possess and the jobs that actually exist today – and, above all, that will exist tomorrow, particularly with the unstoppable rise of digital technology.

Chris Hearld, Partner and North Region Chair at KPMG UK, concluded: “The Northern Powerhouse campaign was a clear statement of intent to increase investment in infrastructure and innovation in the North of England.

“Unfortunately, the campaign has had a limited impact in improving the productivity in the regions. What this study finds is that investment into transport links is crucial to unlocking the North’s true productivity potential.

“Infrastructure investment programmes should be a top priority in the coming years if the government is to meet the goals promised through the Northern Powerhouse initiatives.

“Speaking to our clients across the UK they feel that the best way to improve productivity is to give local leaders the power to influence the economic environment on their doorstep.”

Yael Selfin, Chief Economist at KPMG UK, commented on the findings: “The Chancellor is facing tough choices in his Budget next week. With little money to spare, priority should be given more than ever to initiatives that can raise productivity.

“The UK faces a number of challenges in the coming years, with economic growth likely to come under pressure. The Government has an opportunity to play an important role in securing better growth prospects for the UK through policy programmes which focus on lifting regional productivity levels.

“Our research shows that a regional approach to improving productivity can be an effective way to tackle the productivity puzzle. We hope to see measures addressing the different barriers, as well as a more regionally targeted approach, to improving productivity levels in the Chancellor’s Budget next week.

“Brexit is likely to put some strain on UK productivity performance, as the country’s international links and access to talent suffer. A concrete drive to increase productivity may go some way in offsetting these effects.”

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