Photo Credit: TIME+SPACE/BBC

The Good Economy (TGE) will be in Birmingham on April 17^th for the third meeting of our Place-Based Impact Investing (PBII) Network, a unique collaboration of institutional investors and local authorities, hosted by the West Midlands Combined Authority. The recent insightful Bloomberg article by Sabah Meddings on Birmingham’s economy – Britain Looks to Peaky Blinders to Revive Industrial Wasteland – makes a good curtain-raiser for this event. It celebrates the return of Peaky Blinders – the new movie, not the popular TV series – to its rightful place in Birmingham. Set in Birmingham’s 1920s lawless slum neighborhoods, the TV series was actually shot in Leeds, Manchester, and Liverpool lured there by financial incentives. A perfect example of how places compete for economic and financial investment.

Birmingham – Left Behind

Places change with the times. Back in 1972, on leaving the University of Warwick, our co-Founder and Head of Research and Policy, Mark Hepworth, joined the West Midlands Economics Intelligence Unit (the Department of Environment regional office supporting Structural Planning). His econometric work demonstrated the increasing importance of the ‘service economy’ in a traditional manufacturing region featuring Britain’s equivalent of Detroit’s car industry. Historically, Birmingham hosted a world-leading gun manufacturing industrial district (the Gun Quarter), and another in the shape of Cadbury’s Bourneville. Places are characterised by their unique histories – Birmingham was then an industrial region, with 25% of the workforce engaged directly in manufacturing.

A lot has happened since then. Deindustrialisation accelerated in the early ‘Thatcher Years’ (2 million manufacturing jobs disappeared between 1979 and 1982) – manufacturing’s share of the region’s workforce is now in single digits. On ‘the other side’ of the economy, we witnessed the phenomenal rise of institutional investment, driven by ‘Big Bang’ reforms of the UK financial system and the converging mega trends of globalisation, digitalisation and financialisation. But, when all is said and done, the last 50 years of economic transformation have not delivered sustainable and inclusive development. So, Levelling Up is tantamount to an admission of state and market failure.

Child Poverty as a Measure of Economic Health

A good measure to assess the health of an economy is the child poverty rate. Measuring productivity in today’s intangible knowledge economy is a wild goose chase. We have known this since the 1960s, when Fritz Machlup published his seminal work on ‘the knowledge economy’. Sabah Meddings’ references to Birmingham’s high child poverty rates and MP Liam Byrne’s concerns that “recent investments will fail to benefit deprived areas of the city” are spot on.

The uncomfortable truth is that the UK has the worst record on child poverty in Europe. This makes the UK the worst economy in Europe. Mark argued this point in a pre-Christmas blog three years ago and nothing’s changed. We need basic income policies for certain.

PBII for Economic Reconstruction

To tackle the causes rather than symptoms of child poverty, we need a far-reaching programme of economic reconstruction. Start this ‘housebuilding’ with the foundations (bottom-up policies) not the roof (top-down policies), with everyone fully engaged as best they can. For resources, we need to convert a lot more financial investment into economic investment, and channel this productive capital into the real economy and social infrastructure. We need to go place by place, but always staying on the same path, leaving a visible trail of socio-financial innovation. This is what our place-based impact investing work is all about.

What is Place-Based Impact Investing?

In our groundbreaking white paper, Scaling Up Institutional Investment for Place-Based Impact, we defined PBII as “Investments made with the intention to yield appropriate risk-adjusted financial returns as well as positive local impact, with a focus on addressing the needs of specific places to enhance local economic resilience, prosperity, and sustainable development.” At its core, it’s a concept that reframes the impact investing narrative to include PLACES along with people and planet.

What are the Benefits of Place-Based Impact Investing to Local Communities?

• Addresses local needs: PBII focuses on understanding the unique needs and opportunities of a specific place, ensuring that investments are tailored to address local challenges. This could include different tenures of housing, access to healthcare and / or child care facilities, or even infrastructure to support local businesses.
• Empowers communities: By engaging with local stakeholders, PBII ensures that communities have a voice in shaping the investments that affect them. This leads to more effective and sustainable solutions.
• Local job creation: PBII often supports the creation of new businesses and social enterprises, generating employment opportunities within the community.
• Improves infrastructure: Investments in infrastructure, such as transportation, renewable energy, or community facilities, deliver significant positive social impact.
• Promotes environmental sustainability: PBII can support initiatives that protect the local environment, such as green spaces, sustainable agriculture, or clean energy projects.
• Attracts additional investment: Successful PBII initiatives can attract further investment to the area, leading to a virtuous cycle of economic and social improvement.

Local Government Challenges

We can’t avoid mention of the parlous state of Local Authority (LA) finances as an enemy of promise to the life opportunities of future generations. Birmingham is a the epicenter of the resource depletion of our local councils but is not alone. The Local Government Association has forecast that one in five LAs face effective bankruptcy through issuing section 114 notices, largely through increased demand for statutory services such as adult social care and a depletion of spending power of more than a quarter since 2010 to now. The impact on Birmingham’s crisis has been to enact sales of vital community assets, council tax increases as well as devasting cuts of £300m affecting every aspect of local services from libraries to environmental waste to streetlights. The child service sector of Birmingham’s provision will see 25% of services cut to contribute around £100m of savings.

Way Forward

There has to be another way. Illuminating the present from the past, the municipal, or gas and water socialism of Joseph Chamberlain in the mid-1870s improved life conditions of the urban industrial society. Recently Andy Haldane, the former Bank of England economist and co-author of the Levelling Up White Paper, has been preaching a new breed of civic gospel based on investing in local assets through urban wealth funds. In addition to avoiding asset fire sales, retaining public ownership and bringing in private sector commercial expertise, through such place-based impact investment frameworks, local government could then be in the commanding position to set civic, financial and environmental targets for areas such as affordable housing, net zero attainment and cultural and social fabric.

We are committed to helping to create a Good Economy in the UK, one that works for everyone. Get in touch to find out how we can help you to make a difference.

by Mark Hepworth and Jonathan Werran

About The Authors

Mark Hepworth, co-Founder and Director, Research and Policy, The Good Economy

Mark is a multidisciplinary economist and entrepreneur whose international career spans academia, public policy and business consultancy. As co-Founder of The Good Economy, he leads the firm’s Place-Based Impact Investing (PBII) work which includes research and policy thinking off the back of the ground breaking white paper Scaling Up Institutional Investment for Place-Based Impact, developed with the Impact Investing Institute and Pensions for Purpose.

Mark has deep knowledge of the UK economic development landscape through his research at the Universities of Newcastle and London and policy consultancy at the Local Futures Group, which he co-founded in 1997 (now part of Grant Thornton). Known for his seminal work on the IT revolution and the knowledge economy, he has taught at UK and overseas universities and acted as an expert adviser to the UN Economic Council, the OECD and the European Commission.

Jonathan Werran, Chief Executive, Localis

Jonathan has extensive experience in communications and journalism. After five years as a reporter, commentator and features editor for The Municipal Journal, in 2015 he became the first strategic communications officer for the District Councils’ Network. Prior to The MJ, he edited an online government property and public estate magazine and helped run communications and marketing for anti-poverty charity Elizabeth Finn Care.

Today Jonathan leads Localis, an independent think-tank focused on issues related to devolution, local economic growth and public service reform. Since inception they have produced influential research on a variety of issues including housing, local government finance and health and social care, and their work has directly influenced government policy and the wider policy debate.