Innovation and the Manchester Economy

Introduction 

As senior university and political leaders in Greater Manchester, we welcome this opportunity to honour Bob Kerslake’s contribution to The University of Manchester, our city region and the UK’s higher-education sector. 

Lord Kerslake admired Greater Manchester’s tradition of doing things differently, our ability to harness our power across 10 local authorities through the Greater Manchester Combined Authority, and our ambition to push for continued devolution of decision-making from Westminster. We also remember Lord Kerslake in Manchester for another of his Kerslake Reports – the independent review into the preparedness for, and emergency response to, the Manchester Arena attack on 22 May 2017, which he oversaw with characteristic integrity and rigour. 

In the first part of this essay, we reflect on the origins and history of collaboration between The University of Manchester and its region. In the second section, we illustrate ways in which Bob Kerslake’s passion for civic partnerships between universities and their regional authorities has been reflected in Greater Manchester’s decision to prioritise advancing prosperity. And, thirdly, we set out three main ideas for how the impact of universities in their regions can be strengthened, so they can, as Lord Kerslake hoped, be truly civic. 

1. Two centuries of civic collaboration 

Many UK universities have histories that are entwined with the stories of the cities where they were founded – and this is particularly true of The University of Manchester, which in many ways was the original civic university. Its origins are found in the Mechanics’ Institute, developed in 1824 to meet the thirst for learning among the workers of the city, and to equip them with the scientific knowledge needed to improve the technologies that were driving the city’s industrial revolution. It can be found in the establishment of a medical school – the first in England outside London – to address the health needs of the growing population. And it can be found in Owens College, which quickly built a new vision for a university based on the German model. This would stress research – the creation of knowledge – rather than its transmission through teaching, which at that time was the dominant model of the UK’s ancient universities. Critically, the creation of knowledge in disciplines such as Chemistry, Physics and Biology was to be applied to address real industrial, health, economic and engineering challenges of the day. 

This spirit of civic collaboration continued into the 20th century. For example, a Manchester Joint Research Council was established in 1944 between the Victoria University of Manchester and the Manchester Chamber of Commerce, to bring science and industry closer, particularly helping smaller firms to grow and to be more productive. And in more recent history, the 2004 merger between the Victoria University of Manchester and UMIST had significant support from the North West Regional Development Agency, which recognised the importance the merged University of Manchester would bring to the region’s economy. 

2. The rebirth of the civic: partnerships for prosperity

In the seminal report, ‘Truly Civic’, Lord Kerslake reflected that: 

This challenge to be ‘truly civic’, in Lord Kerslake’s words, is something The University of Manchester has taken seriously, through the prioritisation of civic engagement in its strategic plan. The university’s overall strategy, ‘Our Future’, and an integrated plan for social responsibility and civic engagement, was constructed with the engagement of a wide range of regional stakeholders. The views of local residents, the strategic needs of our region and the capabilities of the university were aligned in five interrelated civic engagement priorities: social inclusion, prosperous communities, better health, environmental sustainability and cultural engagement. 

A focus on prosperity is particularly important for Greater Manchester, given the history of the last few decades. From being seemingly stuck in post-industrial decline, Greater Manchester has transformed itself, and is now one of the UK’s fastest growing city regions, with an economy bigger than Wales or Northern Ireland. It is widely seen as a place of pioneers, innovation, sport and culture, and is home to many thriving and diverse communities. 

But our city region’s productivity still remains stubbornly below the UK average, and far behind that of London and other global cities that exist outside their capitals, especially in countries such as France, Germany and the USA. This low productivity contributes directly to persistent problems: too many insecure, low-wage jobs, widespread deprivation, poor health outcomes and poor life prospects for too many of our children.

The Greater Manchester Strategy, developed by the Mayor of Greater Manchester and the Greater Manchester Combined Authority, places prosperity, alongside fairness and environmental sustainability, as one of its three core goals. This strategy builds on more than a decade of work, to which the university has made major contributions, building evidence and developing practical policy through initiatives such as the Greater Manchester Independent Prosperity Review and Greater Manchester Local Industrial Strategy. This has resulted in an alignment of thinking between regional political leaders, national politicians, local university leaders and the private sector, which has helped The University of Manchester to understand the needs of the region’s economy, and to recognise where it is best placed to shape and contribute to its success. 

The fundamental driver of productivity growth is innovation, which finds ways of reducing the inputs needed to produce existing goods and services, and develops entirely new, highly valued goods and services. Many argue that gross value added or gross domestic product aren’t everything, and of course they are right. But higher productivity is directly correlated with higher wages at the individual level, and it is correlated with wider measures of health and wellbeing. At a collective level, it will translate into more money for public services. As the Greater Manchester Strategy acknowledges, advancing regional prosperity underpins the other goals of being a fairer and greener place for people to grow up and get on. 

This is why, in Greater Manchester, there has been alignment between The University of Manchester and the Greater Manchester Combined Authority (GMCA) on growing our regional economy, building on our collective innovation assets and prioritising four key ‘frontier sectors’ we understand as key to improved productivity: advanced materials and manufacturing; health innovation; digital and creative; and clean growth. 

A large part of our city region’s success has been the willingness of actors to work together in common purpose. Formed in 2011, the GMCA is made up of the 10 Greater Manchester councils (Bolton, Bury, Manchester, Oldham, Rochdale, Salford, Stockport, Tameside, Trafford and Wigan) and a directly elected city-regional mayor. The GMCA provides the overarching strategy and consistent geographical footprint for other significant regional actors, such as the local enterprise partnership, the Greater Manchester Integrated Care Partnership, and Transport for Greater Manchester. For The University of Manchester, this has provided a stable, convenient and strategic footprint to channel the majority of its regional innovation and civic-engagement strengths.

This is just some of what has been achieved to date. But what more could be done to accelerate this work?

3. Three opportunities to accelerate impact

We now present three ideas that can unleash the power of universities to contribute more to their regions by advancing prosperity. This involves:

Changing place-blind drivers and incentives

Building the demand-side for innovation

Unleashing the power of partnership

3.1. Changing place-blind drivers and incentives

Universities are very responsive to incentives – but currently very few of these incentives reward civic engagement. Most research funding is awarded on a place-blind basis, rewarding a particular interpretation of excellence that is largely measured against international benchmarks rather than local or regional impact. But there is a natural dynamic that means that place-blind funding leads to concentration – the Matthew Effect, by which places with a good infrastructure and a strong reputation attract the best researchers to work there, in turn attracting further funding and entrenching accumulated advantage. This ultimately accentuates existing patterns of excellence concentrated in London and the South East.

Excellence is important, and in the UK we rightly congratulate ourselves on the strength of our science base, as measured by research impact, Nobel Prizes won by UK-based scientists and so on. Excellence in this sense is measured by the Research Excellence Framework (REF), which drives funding. Measures of research impact in the REF tend to reward and incentivise national and global impact ahead of the contributions that university research makes to its city or region. 

The more recent Knowledge Exchange Framework (KEF) does attempt to remedy this, but it does not yet drive funding. KEF has helped to highlight the rich and varied knowledge-exchange practices found across the sector, in areas including: public and community engagement; research partnerships; working with businesses; the public and third sectors; continuing professional development and graduate start-ups; IP commercialisation; and local growth and regeneration. 

Drivers for teaching, learning and skills strategies, particularly through the UK’s Teaching Excellence Framework (TEF) system, also provide little incentive to prioritise place-based approaches to advancing prosperity. National and individual student-driven units of funding are blind to place, with no incentive, beyond market necessity, for higher-education institutions to prioritise the recruitment and nurturing of local talent. This can lead to a perverse situation where those regions of the country most needing to nurture and retain skilled people to drive prosperity can end up as net exporters of students, who may never return. A related concern is the TEF excellence measure on whether graduates from a university earn above the national median for 25 to 29 year olds. Of the top performing 43 English institutions in the first TEF, 28 were in London or the South East, and none was in the North West. Of the lowest performing universities on this measure, more than half were in the North. 

Relatively small changes to REF and KEF would give more weight to civic engagement. In the measures of excellence in impact used in REF, regional impact should be accorded status on a par with national or international impact to incentivise greater local translation. 

We support the KEF as a way of ensuring that other valuable areas of university activity, such as public engagement, are accorded more status and management priority. However, because of data limitations, perhaps too many of the metrics reflect input rather than outcome or impact. For example, the metric on local growth and regional regeneration assesses universities using an input measure of income for regeneration and development, rather than assessing the impact of its activities in addressing local prosperity and productivity. 

KEF could also usefully take more account of a university’s role in place-making, for example looking at what the university can do to support innovation districts. KEF doesn’t incentivise collaboration enough; to this end, it could capture the valuable convening power universities wield in their regions. And it doesn’t capture the valuable anchor-institution role performed by universities in being sizeable and often good employers that, in many cases, commit to paying a living wage to their least well-off workers. 

Modifications to TEF are also required; we would argue that a greater emphasis should be made in TEF judgements on education and skills practices that encourage the development, import or retention of talent in areas matched to the growth priorities of the region.

Finally, most core research funding will, rightly, continue to be allocated on the basis of excellence in competitive, peer-reviewed processes. However, regionally rebalancing research and development funding will require some new approaches, particularly for funding directly related to knowledge exchange and regional innovation. The Engineering and Physical Sciences Research Council’s Place Based Innovation Acceleration Accounts, as well as Research England’s recent pilot Regional Innovation Fund are encouraging new developments that should be extended and built on. And, as we will discuss in more detail below, the recent Innovation Accelerator pilot offers a new way of developing collaborative innovation programmes that are truly responsive to the needs of city regions – these should be broadened and extended.

3.2. Building the demand-side for innovation

Science policy has been based on a model of correcting market failure, with an overwhelming emphasis on the supply side – ensuring strong basic science and a supply of skilled people. But the problem of the weak innovation economies that characterise the UK’s economically lagging cities and regions is better described as a system failure rather than a market failure. In these circumstances, a supply-side science policy isn’t enough; we need to create the demand for innovation, taking positive measures to increase the research and development intensity of the private-sector economy. 

Evidence suggests that the most effective method of university knowledge exchange is through skilled people. So any sustained effort to improve a region’s productivity must focus on creating a joined-up education and skills system at all levels. However, this needs to be developed hand in hand with an innovation strategy that focuses on the demand side. 

The University of Manchester is the single biggest innovation asset that the North of England has. We are a significant strategic player, and so can make a difference – through venture capital, meeting employer skills needs, incubating businesses, accelerating knowledge transfer and so on. Modern civic universities – like The University of Manchester – need to take an explicit responsibility for building up their city’s innovation ecosystems.

We are working to ensure that The University of Manchester’s multiple innovation engines help advance regional innovation and productivity. Examples include: the Graphene Engineering Innovation Centre and the Henry Royce Institute, focused on advanced materials; the Turing Innovation Catalyst, focused on artificial intelligence and deep digital tech; and the Christabel Pankhurst Institute, focused on health-technology research and innovation. These are underpinned by our shared plans for ID Manchester: a £1.7 billion joint venture between The University of Manchester and Bruntwood SciTech, supported by GMCA and Manchester City Council, to create an innovation district for entrepreneurs, students, professionals and families, where ideas from the university grow into the discoveries, technologies and businesses of tomorrow. We also acknowledge our shared political role in driving regional productivity across the less prosperous outer boroughs of Greater Manchester – our own North-South divide, if you like – through research programmes with businesses across the Atom Valley mayoral development zone in Rochdale, Oldham and Bury. 

But a single university, no matter how large or research intensive, cannot do this alone. That’s why partnerships – with other higher-education institutions, with local authorities and mayoral combined authorities, and with the private sector – are so important.

3.3. Unleashing the power of partnership

National policy drivers have set up a system that often pits institutions against one other – for students, for research grants, for reputation. But when it comes to the prosperity of our city and the wellbeing of its citizens, we should all have a common goal: a more prosperous, fairer city serves all our interests and aspirations. Working together to achieve this therefore takes us beyond a zero-sum competition for the allocation of finite resources, to a situation where everyone gains from working together. 

The lessons from Greater Manchester tell us that partnerships between universities, the private sector and city and city-region government achieve far more than universities working in isolation. This can mean for some universities giving up power and being recognised for what we participate in, rather than what we create. 

Moves towards this are already happening in other parts of the system in Greater Manchester. There are plans for clearer technical pathways for young people who do not want to go to university. Any sustained effort to improve a region’s productivity must focus on creating a joined-up education and skills system at all levels. Unless this more systematically includes university education, skills and training – whether the level is undergraduate, master’s, PhD or provision for lifelong learning – we are missing a vital part of our system. 

In Greater Manchester, we are building institutions to support deep collaboration. To bring together the universities, we have the Greater Manchester Civic University Agreement – the largest of its kind in the UK, covering a population of around 2.8 million people. Inspired by the emphasis in ‘Truly Civic’ to work together around a common plan, and sponsored by the elected mayor, this is a partnership of all five publicly funded higher-education institutions in Greater Manchester, together with the Greater Manchester Combined Authority, to address and respond to shared challenges. 

It has been successful in involving citizens in decision-making through a Greater Manchester citizens’ panel, ensuring each higher-education institution commits to being a good employer, working with the Greater Manchester Student Assembly to ensure that student housing, safety and transport needs are understood and prioritised, and fostering collaboration with the further-education sector on regional skills priorities. 

Another example includes Innovation GM – a business-led partnership that harnesses the collaborative power of businesses, universities and local government to drive productivity through collaboration, research and innovation. Innovation GM has been central in the implementation of the Innovation Accelerator pilot. This is a Government-funded programme launched in the Levelling Up White Paper, with £100 million funding for three pilot cities: Greater Manchester, Glasgow and the West Midlands.

A key part of the Innovation Accelerator programme has been the development of an innovation plan for Greater Manchester, agreed with Government and, in Greater Manchester’s case, building on the extensive work that underpins the wider economic strategy. The focus of the programmes we have developed has been to build a stronger innovation ecosystem across the whole conurbation, with strong involvement of the private sector and of Greater Manchester’s devolved health and social-care system, through the organisation Health Innovation Manchester. 

In contrast with competitive programmes run from central Government, the Innovation Accelerator programme has incentivised collaboration between institutions and responsiveness to the city region’s priorities. An example of the benefits we are already seeing is the way in which Greater Manchester’s further-education colleges have been brought closer to the wider innovation system, through InnovateUK’s recently announced Further Education Innovation Fund. These initiatives should be extended beyond their pilot phase, and broadened to other city regions.

Partnership is crucial – and incentives and programmes need to be designed to promote it. We believe that universities cannot be ‘truly civic’ unless they work together, engage closely with their local communities, work with their city and city-region governments and understand the skills and innovation needs of their private-sector business base.