The Importance of Connectivity: If HS2 and the Midlands Rail Hub Are Delivered the Whole Region Will Benefit

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In the latest City-REDI West Midlands Economic Monitor we noted how Midlands Connect has submitted a £2 billion plan for a Midlands Rail Hub The proposal would see 24 extra passenger trains for East-West connectivity, including faster connectivity times for towns and cities across the Midlands, including Nottingham and Hereford. The plan would see Moor Street transformed, doubling the size of the concourse and introducing two new platforms.

The Midlands Rail Hub would sit next to Hs2’s Curzon Street station and is an integral part of ensuring HS2 unlocks a transport revolution in the region, delivering shorter commute times for passengers and linking Birmingham and the West Midlands to the wider Midlands’ region.

Transport investments of this kind create several different kinds of regional economic impact. The first and most obvious is the short-term uplift in jobs and local supply chain multiplier effects from construction activities. Land values and property prices also improve, but this tends to benefit a small number of existing (and already well-off) owners and speculators.

Over the longer term, much less obviously, but far more importantly, better connectivity removes some major constraints on economic growth. By reducing congestion, travel times and travel costs it allows more goods and people to move into and across our regions. This immediately increases productivity. Businesses can also develop better scale economies and gain access to specialist skills and other sources of innovation. But because it reduces the time and cost of the journey-to-work better transport connectivity also improves labour mobility, resulting in a more efficient match between the regional supply and demand for skills. In a country with low unemployment levels and an overall skills shortage, this is critical for economic growth.

Those on lower incomes are particularly limited in terms of where they can afford to live and what they can spend on getting to work. If transport investments are made in the right places, in the right ways, this supports inclusive economic growth by providing access to jobs for lower-income, lower-skilled communities. Greater productivity, reduced inequality and improved well-being can all result if this is done right.

So HS2, like most transport investments, will have generative and distributive effects on regional economies. Because of its scale and scope, these are likely to be considerable. In terms of short-term effects, particularly in the construction industry, HS2 is predicted to generate 15,000 jobs by 2020. However, the uncertainty surrounding HS2 has already seen the forecasts for the construction industry revised down to 1.0% and 1.4% from 1.4% and 1.7%.

In terms of longer-term effects, delivering a transport package for the West Midlands that includes rail, metro, sprint, and bus, means spreading a variety of spill-over effects across a larger geographical area and populace than investment in rail or roads alone. These include changes to productivity, industrial agglomeration, a change in the travel behaviour of residents, spatial business opportunities and knowledge sharing.

During the 1990’s Portugal’s economic development strategy was centred on transportation infrastructure development. Research by Alfredo Pereira and Jorge Andraz suggested that for every €1, the public sector received €3.3 euros in tax collection. Their model also indicated a positive impact on employment and output, with public investment in transportation increasing long-term labour productivity, with the labour-output ratio responding to public investment in transport infrastructure.

Labour productivity in the West Midlands in 2017 was 11.9% below the national average. The trend suggests that things are improving, with overall productivity rising 5%, the highest rise in the UK. Continued investment in transport is key to maintain this trend and ensure the West Midlands reaches and then surpasses the national average.

To fulfil the West Midlands Combined Authority’s ambition for growth, investment in public transport infrastructure is thus a vital and indispensable ingredient. HS2 is a generational opportunity to change the south-north divide and put Birmingham at the beating heart of the nation’s economic growth.

This blog was written by Professor Simon Collinson, Director, City-REDI and Ben Brittain, Data and Policy Analyst, City-REDI.

The opinions presented here belong to the author rather than the University of Birmingham.

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