Professor Rebecca Riley expands on arguments she recently made in a letter published in the Financial Times in response to an article by Michael Spence, President and Provost of UCL, on London’s role in the UK’s innovation economy. The issues it raises about innovation, regional growth and institutional capacity deserve a lengthier discussion than a newspaper letter can accommodate.
Recent debates about economic growth have once again placed innovation policy at the centre of national conversation. In his Financial Times article, Michael Spence made a compelling case for London’s position as one of the world’s leading innovation ecosystems. He highlighted the capital’s strengths in AI, life sciences, fintech and the wider Knowledge Quarter, arguing that London remains a critical engine of UK growth. I largely agree with that argument. London is one of the UK’s most important economic assets and should continue to be supported and celebrated. Where I differ is how the debate is often framed.
Too frequently, discussions about innovation policy present policymakers with a binary choice: should we concentrate investment in the locations that are already performing strongly, or should we spread funding more widely across the country? In my view, this is the wrong question. The evidence increasingly suggests the real challenge is not primarily where investment goes, but how it is deployed and whether places have the capability to translate investment into long-term growth.
At City-REDI, we have spent more than a decade examining the relationship between place, investment and economic development. Our research has consistently found that successful outcomes depend not only on funding levels, but on governance, leadership, institutional capacity and the ability of local actors to deliver and sustain change over time. Investment matters. But institutions matter too.
London’s success is built on more than proximity
One strength of Michael Spence’s argument is his recognition that innovation ecosystems cannot be created overnight. London’s Knowledge Quarter is successful not simply because organisations happen to be located close together. It works because decades of investment, collaboration and institution building have created an environment where ideas, talent and capital interact effectively.
Cities and regions across the UK have spent years building their own innovation ecosystems. These may look different from London’s, but they are no less important. Birmingham, for example, has developed significant strengths through the work of the University of Birmingham, University Hospitals Birmingham, businesses, local government and wider regional partners. Similar stories can be found across Manchester, Leeds, Glasgow, Cardiff and many other places.
Innovation happens across the country
One of the findings from our research on the UK’s innovation ecosystem is that funding, infrastructure and support often remain heavily concentrated within the so-called Golden Triangle of London, Oxford and Cambridge. While these areas are globally competitive and contribute enormously to national prosperity, they do not represent the full extent of UK innovation capability.
Across the Midlands and the North, emerging clusters are generating innovation in advanced manufacturing, health technologies, creative industries, clean growth and artificial intelligence. Many of these places have developed distinctive strengths based on their own industrial histories, research assets and local opportunities. Yet too often national innovation strategies under-recognise them.
The challenge is not that the UK lacks places worth investing in, it’s how we connect and support them at scale.
What international evidence tells us
This is not a uniquely British issue. Around the world, governments are grappling with how to balance the success of capital cities with broader regional development.
Research we conducted jointly with CIPFA, comparing experiences in England and Japan, highlighted the importance of supporting strong second cities alongside capital regions. Looking at Birmingham and Osaka, we found that sustained growth outside major capital cities depends on stable governance arrangements, meaningful fiscal autonomy, strong local leadership and long-term institutional support.
The lesson is straightforward. Places are most successful when they are empowered to shape their own futures. Investment matters, but it achieves the most when it is paired with the institutions and governance mechanisms that can turn resources into long-term outcomes.
Why fiscal devolution matters
This is also why discussions about innovation cannot be separated from debates about fiscal devolution.
In a recent review of the evidence surrounding local investment powers, I examined whether emerging proposals for greater fiscal devolution could genuinely unlock growth. The evidence suggests that devolving responsibility can support economic development, but only when accompanied by robust equalisation mechanisms, genuine fiscal powers and sustained investment in institutional capacity. Otherwise, responsibility may be transferred without the means to deliver meaningful change.
This challenge affects London as much as any other place. Successful innovation ecosystems require certainty, capability and the ability to invest over the long term. These are governance questions as much as they are economic ones.
Moving beyond a false choice
For me, the debate should never be framed as London versus the regions.
London should continue to be backed as one of the world’s leading innovation centres. But so too should Birmingham, Manchester and the growing range of innovation clusters emerging across the Midlands, the North, Scotland, Wales and other parts of the UK. The question is not whether to support London. The question is whether we can create a system that supports multiple clusters, each with different strengths, opportunities and development pathways.
Our research on public funding allocations repeatedly points towards the same conclusion. The UK’s greatest challenge is not a shortage of innovative places. It is the fragmented, short-term and often competitive nature of the funding environment within which those places operate. If we want innovation-led growth to reach its full potential, we need investment mechanisms that build long-term capacity rather than simply fund short-term projects.
The opportunity ahead
I agree with Michael Spence on a fundamental point: London’s innovation economy is one of the country’s greatest strengths. The UK should keep nurturing and investing in it.
But the future of UK growth will not be secured by a single cluster, however successful. It will depend on our ability to build and connect a network of strong innovation ecosystems across the country, each supported by the institutions, governance arrangements and investment frameworks needed to thrive.
The real policy challenge is not choosing between backing London and backing the regions. It is creating the conditions that allow both to succeed.
This blog was written by Rebecca Riley, Associate Professor for Enterprise, Engagement and Impact and Co-Director of City-REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the author and not necessarily those of City-REDI or the University of Birmingham.