Centre for Public Policy

Article by Professor Graeme Roy

This article was originally published in The Herald on Monday 10 February 2025.

The Chancellor promised in a major speech last month that the UK Government will "fight" for economic growth. Indeed, growth is to be the "number one mission" of the government.

In many ways, this narrative is reminiscent of the early years of the first SNP-led Scottish Government in 2007. Back then, the Salmond administration put "sustainable economic growth" as the single "purpose" for government.

But most of the ambitious targets set by the government fell by the wayside. The Chancellor will be hoping for more success, but the scale of the challenge is daunting.

Even before the 2008 financial crisis, UK productivity growth was slowing. Since then, it’s flatlined. The result has been average living standards that have barely improved in well over a decade.

Recent news hasn’t been encouraging. Growth weakened towards the tail end of 2024, whilst figures released last month warned that businesses are reducing their workforce at the fastest rate since 2009. Many are citing rising uncertainty and cost pressures, including upcoming tax rises.

Sadly, there is no quick or easy fix to the UK’s economic ills. Many of the investments, and reforms to planning and regulation, announced by the Chancellor will take years to have effect.

A somewhat surprising part of the speech was the resurfacing of the ambition to create a "UK Silicon Valley" targeted around the Cambridge-Oxford-London triangle. I say surprising as, although no-one doubts the potential of UK scientists and research to drive growth, it is a rather tired narrative that sits at odds with talk of a bold new vision for the UK economy.

Instead, seeking to replicate Silicon Valley speaks to a very narrow view of economic development, both sectorally and regionally. Silicon Valley's success stems from distinctive factors – including a dynamic (some might say lax) environment for venture capital, a culture of risk-taking, and a unique network of entrepreneurs. These are impossible, nor even desirable, to seek to fully replicate. Many regions have tried but failed.

At the same time, a "UK Silicon Valley" narrative conjures impressions of a tech-led model for growth and innovation. The tech sector clearly does have a role to play, and the work in Scotland from Mark Logan’s review is promising. But it can only, and ever, be a small part of a diverse growth model.

As many successful European nations have recognised, it is far better to focus upon innovation systems that fit a national economy’s underlying strengths. Indeed, even in the US, more start-ups, patents and research take place in cities like Rayleigh, Seattle and Boston across sectors from pharmaceuticals, advanced manufacturing to healthcare, than in Silicon Valley.

Whether intentional, this language also creates the impression that Whitehall favours the concentration – once again – of wealth in London and its hinterlands. This risks exacerbating regional inequalities in the UK which, as the Productivity Institute has pointed out, are amongst the highest of any high-income economy.

It also does not reflect the full potential of UK research and innovation across the country. As one group of vice chancellors from the Midlands pointed out in the FT last week, their region produces just as many spinouts as Oxford and Cambridge. Crucially too, their spinouts are much more likely to remain within the region and to create local jobs.

As we have argued before, developing a flourishing environment for innovation and entrepreneurship in second-tier cities – including Glasgow – will help ensure a more equitable and resilient economy. This requires not just a focus upon chasing the next "unicorn", but on the technology and skills needs of local businesses with growth potential.

To be fair, this is the first step in a series of announcements from the Chancellor as the government set out its plans for growth. Indeed, the speech did hint at further announcements, including from the new National Wealth Fund for cities like Glasgow. Moreover, the phrase "Silicon Valley" might just be a neat political cover for several – politically challenging – housing and transport projects.

But narratives are important. There is a risk that talk of a new "silicon somewhere" creates the impression of a strategy at odds with the government’s broader ambitions for prosperity across all the UK. Hopefully, as more detail is added to the new industrial strategy in the months to come, such concerns can be put to rest.

Author

Graeme Roy is Professor in Economics (Economics), Dean of External Engagement and Deputy Head of College and Assistant VP (Social Sciences College Senior Management). He is a Senior Fellow of the Centre for Public Policy.

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First published: 12 February 2025