Andy Burnham won the Makerfield by-election last night in one of Reform’s target seats, returning to Westminster and all but declaring a challenge to Keir Starmer’s leadership. For entrepreneurs, the question I’m being asked is: what could it mean for them and their businesses? There will be plenty to come over the coming weeks, but the best place to start is Manchesterism.
Burnham describes it as economic progress alongside social progress, delivered locally through devolution. After all, since the first devolution deal, the city region has averaged around 3% growth annually, with the highest productivity growth in the country. Oxford Economics called it the “star performer of the UK economy since 2008,” with central Manchester’s employment growth in the top five in Europe.
If you want Burnham’s own case, Politics UK published it in May. Politico has perhaps the most comprehensive account of what Manchesterism means in practice and whether it can scale, including the observation from Jim O’Neill that the story “pre-dates Andy” and rested on decades of political and policy stability. The Centre for Cities offers a sympathetic view of the devolution mechanics, while the New Statesman argues that Manchesterism is not socialism, and that Burnham has largely inherited rather than built the model.
The most rigorous empirical treatment is Michael Hill’s recent piece on our Adviser Sam Dumitriu’s Notes on Growth substack, asking whether Manchesterism is working. His conclusion is more nuanced than many: Greater Manchester is a genuinely strong performer among British city regions, though Edinburgh and Bristol have done better, and the growth has been concentrated in the centre, which Hill argues is a feature of agglomeration economics, not a flaw. If you want to be the smartest person in the room when this topic inevitably gets raised, this is the article for you.
It would be premature to judge Burnham. Events may yet conspire against his ambitions for the top job. Not that you’ll find many people to take the other side of that bet right now.
Sunset Boulevard
The British state is fast becoming a sizeable shareholder in startups and scaleups. Given the direction of travel, it’s worth revisiting Josh Lerner’s Boulevard of Broken Dreams.
Lerner is the foremost expert on the economics of venture capital and how governments try (and mostly fail) to nurture it. He is no enemy of state support; he’s just a realist on its limits. There are, he argues, two ways to help venture capital: raise the demand for it, by making the country somewhere worth building in, or raise the supply, by writing cheques. Politicians reach for the cheques, because the money is the satisfying part.
The neglected half is what Lerner calls setting the table — the tax, regulatory and labour conditions that decide whether the capital has anywhere worth going. His starkest example is Japan, which funded a venture industry directly for years. The moment the money stopped, the industry went with it.
His other recurring complaint is the urge to be fair with the butter — to spread it so thinly across every region that it cannot be tasted anywhere, when venture is lumpy and rewards concentration. Geographic mandates have a poor record.
Then there is the picking itself. Take a stake in a company, the argument runs, and Whitehall gains a reason to clear its regulatory path. But if a barrier is worth removing for the firm the state owns a slice of, it is worth removing for all of them.
None of which is a case for doing nothing. The interventions that have worked share a shape. They match private money rather than allocate it directly, so the market signals where it should go. They keep ministers at arm’s length from the picking, behind the sort of moat New Zealand built around its fund of funds. And they carry sunset clauses and honest evaluation, so a scheme that isn’t working is allowed to end rather than harden into a permanent subsidy.
Backing British firms is the easy part. Setting the table is the hard part.
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Ink-redible
Congratulations to our Patron Chris Hulatt, co-founder of Octopus, who was made a CBE in the King’s Birthday Honours for services to entrepreneurship. In his own words:
“When we started Octopus, many people told us we were crazy and that our idea would never work — but entrepreneurship rewards the bold. From cold-calling 15,000 people from the Yellow Pages to raise our start-up capital, Octopus has grown into a group of businesses spanning energy, money and investments, education, death and divorce.”
As I argued in this week’s Three Big Ideas, honours for entrepreneurship remain far too rare. More of this, please – including a new order of chivalry for innovators.