New Towns and Old Cities
ANDY WESTWOOD AND JACK SHAW
The development of new towns in England presents a strategic opportunity to advance the Government’s broader goal of balanced economic growth. These towns can serve as catalysts for regional development by enhancing industrial capacity, expanding infrastructure, and unlocking human capital through new housing. When strategically located, they can amplify agglomeration effects—boosting productivity and innovation in surrounding city regions.
However, realising these benefits depends on effective coordination across all levels of government. Aligning new town planning with infrastructure investment and local growth strategies is essential to maximize their economic impact. Without this integration, the potential of new towns to contribute meaningfully to national growth objectives may be diminished.
As we approach the Comprehensive Spending Review on 11th June, a large number of the Labour Government’s policy plans and positions will also become significantly more detailed. Amongst many planned strategies and white papers, we are expecting the Industrial Strategy – a key driver of the wider growth mission – a Post-16 Skills Strategy including plans for higher education reform and a ten-year infrastructure strategy. We are also expecting initial decisions about the locations of at least five new towns – a longer-term commitment for new housing alongside the Government’s pledge to build 1.5 million homes in this Parliament.
The New Towns Taskforce under the chairmanship of Sir Michael Lyons, former Chief Executive of Birmingham City Council, was established in 2024 to advise the Government on potential locations. In February, their interim report suggested that ‘up to 12 new towns could be under construction by the next election after 100 potential locations in England were identified as part of their initial thinking, with each having the potential for at least 10,000 homes and ‘accompanying infrastructure’ either as stand alone ‘new towns’ or ‘urban extensions’ to existing places. The New Towns Taskforce has also advised that the high-level aims of the programme should be to ‘unlock potential economic growth, including through encouraging greater labour mobility and job opportunities, and promoting growth where it is currently constrained by the cost or availability of housing’. So, one of the most important factors in their deliberations will be establishing where developments are most likely to do so.
New towns and the Industrial Strategy
Co-ordination between economic growth – specifically industrial strategy – and the locations of new towns becomes more important when we consider the need for human capital to drive the growth of key firms and clusters. Access to a skilled workforce is amongst the most pressing concerns of growing firms and boosting the supply of new homes can help them to fill gaps and tackle mismatches if they are built in the right places. However, both the supply and demand for human capital need to be balanced and so it is vital that we also consider broader policies such as industrial strategy, local economic growth and the capacity of local institutions as ‘new town’ locations are chosen.
As the Office for Budget Responsibility (OBR, 2025) has noted, there is potential for the Government’s housing and planning reforms more broadly, to boost economic growth firstly through construction and building services but in addition, through enhanced labour mobility and increased agglomeration effects. In practice this means there will be more growth in the long term if new housing is able to better match people to jobs and larger, denser populations are able to trigger higher levels of economic activity and increased productivity.
‘By the fifth year of the forecast, we expect these reforms could add 0.2 per cent to the level of potential output thanks to a boost in the productivity of residential construction and the increased flow of housing services from the higher stock of houses. Over a longer horizon we would expect these effects to build to 0.4 per cent by 2034-35, and we would anticipate a further additional benefit from greater labour mobility and agglomeration effects, adding just under 0.1 per cent to potential GDP by 2034-35.’ Office for Budget Responsibility, 2025
However, this greater boost to growth will only be realised if mobility and agglomeration effects are maximised and that depends, in part, on where new towns and other housing are built. Not every place can deliver the same level of economic benefits either to would be residents of these homes or to the country as a whole. So, achieving these benefits will in turn require a clear spatial dimension to the government’s industrial strategy and wider growth thinking. That shouldn’t really come as a surprise; growth and industrial strategy tends to happen in specific places and more likely in some – those with more assets and capitals – than in others (those with less). But successive governments in the UK have been reluctant to pursue such explicit regional economic strategies or to engage in such spatial planning. A further issue is that the government came to power promising growth, good jobs and increasing living standards everywhere. They cannot escape the consequences of uneven geographical growth and so any policies or strategies should combine political as well as economic considerations. Recent local and mayoral election results reinforce this challenge and have pressed home the electoral consequences of places and people feeling neglected or ‘left behind’.
Focus on existing cities
All of these factors demand closer co-ordination between the location of new towns and the Government’s full Industrial Strategy as both are finalised. Invest 2035, the UK Industrial Strategy already offers some options by pointing out that ‘city regions like Greater Manchester, the West Midlands, and Glasgow, are not generating the growth and local prosperity that urban agglomerations of their size should. Centre for Cities analysis shows that for the 8 largest cities outside London, the combined gap between actual and potential productivity is £47 billion per year’[1] The Resolution Foundation in its ‘Economy 2030’ inquiry also described the need to grow both the Manchester and Birmingham economies, with a requirement for over 160,000 high skilled workers and bigger populations in each, to include population inflows and increased retention of graduates into larger, more densely populated city centres.
‘Cities that grow their economies and populations but not their housing stocks get into real trouble… To be consistent with the population growth noted above, 116,000 more homes would be needed in Birmingham and 126,000 more across Greater Manchester. This requires a step change in house-building – doubling the building rate across Birmingham, for example – but is essential if the benefits of these cities’ prosperity are to be widely shared. If only half of the additional homes needed are built, around 30 per cent of the total gains to the typical household from these cities becoming higher-productivity could be wiped out.’ Resolution Foundation, ‘Ending Stagnation’ 2023
Alongside its sectoral priorities, the Industrial Strategy already has a spatial dimension – promising to concentrate efforts on places with the greatest potential for these growth sectors: on city regions, high-potential clusters, and strategic industrial sites. Furthermore, it aims to ‘explore how to build on existing place-based initiatives to support high-potential clusters and align them behind the industrial strategy.’ Ultimately, how it ‘can be a ‘lens’ for informing the recommendations for new towns locations, creating new large-scale settlements in places where high housing demand constrains the growth of high-potential clusters.’
There is already a raft of other place-based initiatives that might now come into scope including Investment Zones (IZs), Freeports and AI Growth Zones. Some or all of these are already established in English ‘second tier’ cities and the regions nearby. In Greater Manchester the IZ brings together the city centre with Atom Valley to the north (a location taking in parts of Oldham, Rochdale and Bury). In the West Midlands the IZ includes the development of a city centre innovation zone including in life sciences, green industries in Wolverhampton and a ‘gigapark’ in Coventry/Warwick. There are also IZs in the North East, Liverpool and the East Midlands. In addition, Rachel Reeves has also stressed the importance of other specific locations including Cambridge with the broader ‘OxCam Corridor’ described as a ‘high potential cluster’ that will drive national as well as regional growth.
Using industrial strategy as the lens to view new town development, the locations start to come more clearly into view. More so if we factor in ‘urban extensions’ and increased density and city centre size as specific requirements in our underperforming ‘second tier cities’. These are where the OBR’s greater agglomeration effects are most likely to be realised. Similarly, they are places where there are shortages of specific types of skills, according to Department for Science, Innovation and Technology (DSIT) and Department for Business and Trade (DBT) assessments, and a series of growth clusters are already established.
This suggests – perhaps unsurprisingly – not just locations in OxCam and the South East, but also in larger second tier cities where there is most potential for growth. New towns could then help to unlock growth in two distinct ways – firstly by releasing fast-growing places like Cambridge from existing constraints so they can continue to grow, and second by realising the potential of agglomeration economies in currently underperforming ‘second tier’ cities like Manchester, Birmingham and Leeds.
The good news is that, in at least some of these locations, there are already track records for both planning approval and building communities and urban extensions of this scale. There is capacity in place with masterplans, special vehicles, planners, developers and existing infrastructure. In Manchester for example, there is the GM Housing Investment Fund as well as experience of delivering Mayoral Development Zones in nearby Stockport. Holt Town is a development stretching along existing infrastructure, including the Metrolink tram, between Ancoats and Miles Platting near to the Etihad Stadium to the Northeast of Manchester City Centre. It currently has plans for 4,500 new homes. In Birmingham there are significant developments also in the pipeline such as the ‘Big City Plan’ to build 5000+ new homes within the city centre. Likewise in central Leeds, with thousands of homes in the Holbeck Urban Village and Southbank areas.
Ambitious plans to expand Cambridge are already in the pipeline and in other places in the OxCam Corridor, including in Milton Keynes – although growth in housing may not be matched either by necessary infrastructure nor by the institutional capacity that we see emerging in other cities. Beyond the relatively small scale Cambridgeshire and Peterborough Combined Authority, there is only a patchwork of local arrangements with major decisions more likely to be made at the centre of government. Resolving this should be a priority for both the Ministry of Housing, Communities and Local Government (MHCLG) in its devolution agenda and for HM Treasury and DBT in their economic one.
London also remains a major growth location with key clusters and sectors as well as skills and housing shortages. Existing and planned developments also show the capacity and capabilities drawn from public, private and voluntary sector partners including through major developments in Stratford and the Old Oak Opportunity Area, both overseen by development corporations, and in places such as South Barking and the Thames Estuary, which are connected to a mayoral development corporation and a freeport. These are also developments with innovative approaches to raising finance such as the Mayoral Community Infrastructure Levy (MCIL) and its support for infrastructure in and around Wembley Stadium and Business Rate Supplements funding the Northern Line extension.
The right places with the right infrastructure?
As the New Towns Taskforce states, its aim is to ‘provide housing for strong communities with the necessary infrastructure, services, and amenities – ensuring residents have access to education, healthcare, transportation, cultural and sporting facilities, and green spaces.’ if we see new housing as ways of triggering growth through the supply of additional human capital and labour mobility then people moving into such places will need to be able to get to work easily and affordably. This links directly to the Chancellor’s announcement for improves transport investment in many of our city regions including Greater Manchester, the West Midlands and West Yorkshire. But equally important will be other infrastructure and services including ICT, education and health. There will also be wider social infrastructure required if we want to attract the individuals and households that will form workforces for growing sectors and clusters.
But it is not clear that this will be guaranteed or delivered in a coordinated, timely way. Individual departments and local government are under considerable financial pressure, and this may not be seen as a primary requirement. It will be much harder to co-ordinate and deliver in more ‘greenfield’ or stand-alone sites such as at Tempsford or Hatfield Peverel. These issues can already be seen in new communities such as Northstowe near Cambridge and also where new housing has been attached to existing towns. Here new developments are often putting pressure on existing services although residents are more likely to support new developments if they are matched with increased infrastructure and investment.
In some cities this isn’t just a discussion about new towns – there is existing infrastructure like the tramlines and police, hospitals, schools and colleges in northeast Manchester – that connect to and serve older towns too (e.g. Oldham, Rochdale and Middleton). Likewise, from Birmingham’s city centre towards the Black Country and to other communities in between. Properly and deliberately connecting these places and the people that live in them to the opportunities and services offered in new towns and in growing cities nearby will be a crucial political as well as economic imperative. This is the clear focus and intention behind the Government’s recent announcement of £15.6 billion improving transport infrastructure in our largest city regions.
But the work will only really start when the New Towns Taskforce makes its recommendations. Effective partnerships between central government and its agencies and the relevant local and strategic authorities must then be formed and empowered. That involves improved co-ordination between a significant range of strategic, institutional and political actors, including the NHS, local authorities, colleges, universities, strategies authorities and across Whitehall. For successive governments in England that has proved to be very difficult to do.
There are, finally, unresolved questions of sequencing, scale and ambition. Local Growth Plans (LGPs) across England are already at an advanced stage. Designed to be the ‘cornerstone of the place-based approach’, these locally owned, long-term strategies are meant to set out how strategic authorities and others will drive growth in their places, and ‘crowd in’ both public and private investment. According to HMT, DBT and MHCLG, they ‘represent strategic partnerships between central government and Mayoral Combined Authorities to identify priorities for growth and will be aligned to the industrial strategy.’ Those in the most important locations should be rapidly scaled up. Furthermore, they should also be the places for experimenting and taking risks – with new approaches to funding infrastructure, improving public services, boosting local growth and to the governance arrangements most likely to support them.
The establishment of new towns present a generational opportunity. But they will not achieve all of the Government’s objectives if designated in places without sufficient infrastructure or potential for economic growth. Furthermore, our track record of delivering regional and industrial policy is characterised by too many disconnected small-scale initiatives from Whitehall departments pursuing their own individual strategies and priorities. These cultures and practices desperately need to change. The New Towns Taskforce may need to be maintained in some form in order to oversee implementation and co-ordination across different parts of government if we are to maximise the economic benefits we desperately need. That might be just as significant – and quite a bit harder – than selecting the locations in the first place. But it is work that must be done if we are to build places that can help drive growth throughout the country.
[1] The gap between actual and potential productivity is calculated by comparing its current performance against a predicted “potential” based on its size and export base, multiplied by the number of people in commutable distance of the city.
