How to stop the "brain drain"

One of the most common interpretations of the Brexit vote is that it illustrated the UK’s stark economic divides—with the “left behind places” in regions such as the northeast and Midlands venting their anger at the disparities between them and London and the southeast.

Prime Minister Theresa May had these concerns in mind in August when she announced plans for a new economic and industrial strategy to “drive growth up and down the country” and to “build an economy that works for everyone.” This rhetoric also underpinned in last week’s autumn statement, in which Chancellor Philip Hammond pledged to address the “damaging imbalances” in the UK’s economy.

For May and Hammond to make good on those ambitions, one of their top priorities should be tackling the UK’s internal brain drain. Many cities are losing out on the high-achieving graduates critical to driving growth and jobs across their local economies—with top-ranking students instead flocking to London.

A new report by the Centre for Cities highlights the scale of the issue. Of all new graduates from UK universities in 2014 and 2015, a quarter were working in London within six months of finishing their degree, around five times more than were working in Manchester, the second most popular city for new graduates.

Those statistics are perhaps not that surprising, especially given that the capital is home to around a fifth of all UK jobs. But the UK’s highest-achieving graduates in particular are choosing the capital over other cities. In 2014-15, London attracted 38 per cent of new Russell Group graduates with first-class or upper-second class degrees who moved for a job—around 13 times more than Manchester, again the second most popular destination for this group.

This trend was even stronger for new Oxbridge graduates, with London gaining 52 per cent of those who moved for work after finishing university, compared to just 2 per cent in Birmingham and Bristol respectively, the capital’s nearest competitors.

The biggest factor influencing where these graduates choose to live is not high starting salaries, but instead opportunities for career progression. For example, Slough, Newport and Derby are all home to some of the highest average graduate salaries in the UK. But they struggle to attract large shares of new graduates compared to bigger cities which have lower starter wages but offer more long-term progression. Top-ranking graduates are not merely thinking about their first job—they are looking ahead to their second and third jobs, and will choose places which they believe offer the best opportunities for their career.

So what lessons can policymakers tasked with driving growth across the country take from these findings? Firstly, specific policies to encourage graduates to move or stay in a place, such as offering wage subsidies, will not be effective. Instead, city leaders need to focus primarily on strengthening their economies by investing in transport, housing, innovation and enterprise. This will help to generate more graduate jobs and opportunities for career progression, making places more attractive for high-skilled workers.

The second key lesson is that national and local government need to prioritise developing more homegrown talent in cities outside the southeast, rather than focusing mainly on attracting graduates from other places. Improving skills at all levels—from early years to GCSE attainment, further education and technical qualifications—will be critical in increase the supply of homegrown high-skilled workers. That in turn will enable regional cities to attract more high-value jobs and businesses, and boost their appeal for all graduates.

It was somewhat disappointing then, that while the chancellor used the autumn statement to stress the need to tackle regional economic disparities, there was no mention of investment in improving skills across the country. Similarly, Hammond reaffirmed the government’s commitment to devolving more powers to regional cities to help them drive growth in their local economies. But aside from announcements on new borrowing powers for the metro-mayors due to take office next year in places such as Greater Manchester, the chancellor made no move to give places more of the fiscal powers that would incentivise them to grow their economies.

As the government develops its economic and industrial strategy, it should therefore prioritise addressing the skills gaps that many UK cities face, as well as giving those places more powers to drive growth in their economies. Otherwise, the disparities between London and other parts of the country will only continue to increase.