Home | Breaking News | Cambridge discovers the economic benefit of clustering
Punting on the River Cam in Cambridge. Photograph: Rex/Shutterstoc

Cambridge discovers the economic benefit of clustering

WT24 Desk

There are tourists punting on the river and cyclists thronging the street. On this summer day, many of the trains have been cancelled or face severe delays. It’s more than a century since the Victorian economist Alfred Marshall taught at Cambridge University – where the economics library still bears his name – yet he would still recognise plenty of things about the city today, The Guardian reports.

More than a century ago, the mentor to John Maynard Keynes developed the idea of the “industrial district” to explain how bringing jobs and businesses together in specific locations can help improve the productivity of work. There are advantages in huddling together; of encouraging technical dynamism in particular places. Knowledge can spread more quickly, often by accident. People with similar skills are drawn together to pursue careers in the same field.

In 1890 the most common examples of clustering were the cotton mills of 19th century Lancashire. Marshall suggested that, in a concentrated area, “the mysteries of the trade become no mysteries; but are as it were in the air”.

Modern day Cambridge might lack the dark satanic mills and Brexit might threaten the future of British industry. But there is still something in the clean, crisp Cambridgeshire air that could prove useful for the economy as Britain leaves the EU.

Recent years have seen the increasing development of Cambridge as a world-beating life sciences cluster, with around 430 companies ranging from tiny startups spawned from the university to global leaders in the pharmaceutical industry. There are more than 15,500 jobs generating about £2.9bn per year for the British economy.

The FTSE 100 pharmaceutical company AstraZeneca is making Cambridge its home for exactly these reasons. Spending about £500m building a global strategic research and development site, the company wants some of the rarified air identified by Marshall, and could breathe further life still into the area. More than 2,600 of the drugs company’s staff and scientists now work there, even before the completion of its new headquarters on the edge of Addenbrooke’s hospital.

Pharmaceutical companies have struggled with weaker levels of productivity in recent years having become reliant on drugs developed decades ago. Open collaboration with startups and universities could help them create new medicines. AstraZeneca has about 130 projects with Cambridge University, having only run half a dozen a decade ago.

According to a report by the consultancy Development Economics for the drugs firm, seen by the Guardian, the Cambridgecluster could create an additional 6,000 jobs over the next decade, generating an extra £1bn for the British economy. Most of the gains are from co-location.

But there are risks. The report warns a hard Brexit could curtail access to European research funding vital for life sciences, free movement of highly skilled scientists, and make it harder for firms to access startup finance. Combined, this could cost the cluster 4,300 jobs and almost £4.6bn in economic output by 2032.

Cambridge university is dependent on research funding for around 40% of its income each year and receives about 15% of that from the EU, or around £60m a year. Around a fifth of staff come from the EU. AstraZeneca has between 300 and 400 EU employees, while some senior scientists are already choosing not to move to the UK.

All of this might sound a bit like propaganda prepared for a multinational company, with business interests in both Britain and Sweden. Brexiters have attacked Airbus and BMW for warning of job losses and withholding investment in Britain in recent weeks. So the argument goes: why would they leave Britain? We are too important to ignore.

But there are serious dangers. Official figures show business investment has fallen since the EU referendum, linked directly by economists to the uncertainty over the UK’s future trading relationship with Brussels. The economy has almost ground to a halt and manufacturing output has fallen.

AstraZeneca has begun parallel testing of drugs manufacturing at its Swedish site in Gothenburg because of Brexit. Additional major investments at its manufacturing facility near Macclesfield are on hold until the company has greater clarity. Rival science clusters around the world could gain ground, from Boston to Amsterdam and emerging centres of excellence in the far east.

Faced with the prospect of losing access to 500 million potential customers in the EU should Brussels rules prevent the sale of UK-made drugs after Brexit, the company says it has no choice.

Andy Williams, who is overseeing the company’s move to Cambridge as vice-president for strategy and operations, says: “Brexiters say: ‘ah, well, it’ll get sorted out, as it doesn’t make sense.’

“You’re absolutely right it doesn’t, but when it’s your whole business and you’ve got patients waiting for those medicines, you can’t take that risk. It’s fine for politicians to take that risk but we can’t do that.”

Besides Brexit, there are domestic barriers also facing Cambridge. There are plenty of lessons for ministers. If investment in trains and housing needs to improve even here in the affluent south-east, think of the rest of the country’s needs. Recent chaos on the Great Northern and Thameslink line to the city attest that more work needs to be done.

“It’s not a great impression if we say Cambridge is a global centre, and then no one can get there from London,” says Williams of the recent delays and cancellations.

Failure to provide adequate local transport could result in a growth penalty of around 990 net jobs by 2032, according to the Development Economics report. Housing is also becoming an increasing issue for younger workers moving to the area, as prices in Cambridge skyrocket. Businesses also complain about the bus service and the state of the roads.

The government’s industrial strategy attempts to fix this, with a sector deal for the life sciences industry, but fails to go far enough. There is a commitment to lift R&D funding to 2.4% of GDP by 2027, yet taking a decade to get there and only bringing the UK into line with the OECD average – as opposed to where competitors such as the US and Germany already are.

But there are factors from clustering that could also protect jobs and the economy should Britain crash out of the EU. There are lessons from huddling together for warmth.

Stuart Hayes, a research scientist at Cancer Research UK, who works alongside AstraZeneca at the sprawling technology and biopharmaceutical campus of Granta Park, near Cambridge, said the benefits of clustering could help immunise the area from Brexit, to a degree.

“You reach a critical mass of scientific knowledge that actually you have the ability to overcome barriers, obstacles and people’s fears [about moving to the UK]. This is still the best place to work.”

Leave a Reply

Your email address will not be published. Required fields are marked *

*

%d bloggers like this: