Large Local Firms and Skilled Labour matter

A report on Inward and Indigenous Investment by the Manchester Independent Economic Review concluded that investment by large domestic firms will have the biggest impact on productivity and employment in the region and that skilled labour is vital to attracting investment.

So why is the policy focus seemingly on international investments and small and medium sized enterprises (SMEs)?

Probably because the prevailing EU and UK policy frameworks are based on additionality principles which are easiest to demonstrate for new international investment and new businesses and the State Aids aversion to competitive displacement as a tool of diversification and productivity improvement.

But local firms can also close, contract and relocate which all increase the perceptions of risk in assisting them, and the assistance required is long term and resource intensive.

Surveys back in the 1960s were emphasising the significance of skilled labour as an investment factor, and structural changes can only have made it more significant since then.

But from a practitioner perspective, probably most staff time is spent with existing local firms and their infrastructural problems even although money/budgets for investment promotion and SME development are more visible priorities to outsiders.

The relationships between businesses (and institutions) of different types and sizes should be strengthening place competitiveness particularly in cities so maybe the issue is to communicate the balance of all economic and business development support activities more clearly? They all require enhanced skilled workforces to compete.

Inward and Indigenous Investment MIER 2009