Key points
The UK is exceptionally centralised, but replicating Manchester's success more widely is unlikely to be easy.
Real, growth-boosting devolution would require relaxing national standards and devolving revenues, alongside tackling the biggest national barriers to investment – energy costs, labour law, welfare.
Early signals point to a bigger, more interventionist state, with limited impact on the underlying growth trajectory; we have adjusted our expectations for UK gilts accordingly.
New UK Prime Minister, Andy Burnham, appears ready to bet his premiership on a single idea: that Britain's growth problem is rooted in geography.
He believes 15 years of stagnation are the product of an overly centralised state, in which Whitehall faces the classic information problem of the central planner: it cannot know enough about conditions in each town and region to make good decisions for all of them. Good intentions and real effort have produced little to show for either, and frustration has built among local populations, civil servants and politicians alike.
Burnham's cure is devolution, with the design and delivery of growth initiatives passing back to local leaders, repeating what he achieved over nine years as Mayor of Greater Manchester. He has promised "the biggest rebalancing of power our country has seen", built around a tailored growth plan in each area. Local leaders would design and run these plans, using their control of planning, transport and, increasingly, infrastructure and skills, backed by central financing. Private investors would then be crowded in, and agglomeration – the extra productivity firms and workers gain by clustering – would create a self-sustaining growth cycle in each region. Replicated across the country, national growth would inflect upwards and create the fiscal space for the rest of Labour's agenda.
Could this work?
We think the answer is "partly". Devolution can improve outcomes at the margin, but on its own it is unlikely to overcome the national policy constraints that have held back UK growth.
There is a great deal in the diagnosis that we think is right. The insistence that growth and productivity must come first is itself an important step, and it is true both that the British state is exceptionally centralised and that the productivity gap between regions is unusually wide.
Greater Manchester is the proof that devolved powers can make a difference, having delivered the fastest economic growth of any UK region since 2015, largely on the back of local initiatives in planning, transport and skills. Even so, the revival has features that would be hard to repeat elsewhere. High-value services have clustered around the city centre and the benefits have not spread far. The success owes much to Manchester's rise as the regional centre of the North, drawing in activity from surrounding towns and cities rather than creating new sources of growth.
The city has also enjoyed unusually good government, with three decades of continuity in its leadership, commitment to the doctrine that growth must come before redistribution, and an economic strategy shaped and tested by outside experts. Most English authorities have none of these advantages, yet a national rollout would hand them the same powers. Devolution is far from a new idea in Westminster, and the fact that repeated initiatives to push power outwards over the past 15 years have all withered, points to a problem that runs deeper than a simple lack of political will.
Why devolution is not a simple answer
In a democracy, citizens delegate three main responsibilities to their government. The government sets the standards and regulations that everyone must live by, it decides how public money is spent, and it raises the revenue to pay for it. Any serious devolution agenda has to consider the trade-offs in each area.
Deliberately high minimum standards have been set nationally across health, education, transport, safety, labour rights and the environment, leaving little to local discretion. Manchester shows that agglomeration and investment are possible within these limits, but a promise of good growth in every postcode, rather than in a handful of city centres, requires more discretion. For example, a uniformly high minimum wage floor, based on the national median wage, may limit the potential for employment-boosting measures in lower-pay areas.
For devolution to change what gets decided, rather than just who decides it, the standards themselves would have to be relaxed so that policy could be meaningfully tailored to each area. This cuts against the long-standing trend towards uniformly high standards – highlighted by Burnham's own promise of "equivalent living conditions in all parts of Britain".
On spending, the task is to strike a balance between control and freedom. If the fiscal constraints on local government are set too tightly there is not enough capital to invest. If they are set too loosely the incentive is to focus on lobbying for funds over making the tough decisions around trade-offs needed to actually boost growth, safe in the knowledge that the cost of over-spending or poor returns is borne centrally. What we've seen from Burnham so far suggests the latter is the bigger risk. Solving the incentive problem requires devolving revenues – councils that keep some of the taxes generated by local growth have a real stake in producing it. But meaningfully devolving revenue collection also makes transfers from richer to poorer regions more visible and politically contentious, limiting how far fiscal decentralisation can realistically go.
The blind spots
Even done well, Manchesterism would leave the biggest obstacles to investment untouched. Regulation, labour law, planning and energy policy are all set nationally, and they leave little room for local discretion however much money is devolved. Industrial electricity prices across the UK are the highest of any major economy, and are a serious deterrent to investment. Labour market incentives are also largely set nationally, whether through employment regulation or welfare policy.
The biggest blind spots are welfare and pensions, the fastest-growing strains on the public finances. Fixing these would mean welfare reform that strengthens the incentives to work, and reform of the pensions triple lock – the guarantee that the state pension rises each year by the highest of earnings growth, CPI inflation or 2.5% – which is ever harder to afford or to defend as equitable. With Labour itself acknowledging that the tax burden cannot rise much further on the current growth trajectory, nothing else releases fiscal space on the scale that a serious programme of public investment would need.
Redistribution or reform?
None of this is likely to be lost on Burnham, who has shown a pragmatic streak. He quickly rowed back from his remarks about Britain being "in hock" to the bond market, he has committed to the fiscal rules, and he has assembled a serious team of advisers. A case can be made that he is working towards an "only Nixon could go to China" strategy, using his credibility with the left to sell the party and the country on a growth-boosting break from Labour orthodoxy, packaged as decentralisation. But will Burnham really cut welfare to make room for investment in housing, transport and infrastructure under regional growth plans? And will he adapt labour laws to make the market more flexible, selling the change alongside tougher immigration curbs?
For now, this looks a pipe dream. The policy signals to date lean towards traditional redistribution, in which spending on favoured regions and industries rises moderately at the expense of the centre, but without any meaningful relaxation of national standards or willingness to tolerate diverging outcomes. Procurement rules would sacrifice value for money to local preference and industrial policy would pick winners. The triple lock would remain in place, and welfare savings pursued solely through carrots such as better training, rather than through reformed incentives, are likely to underwhelm.
A spate of decentralisation initiatives would boost morale in parts of the country that have long felt neglected by Westminster, but without real discretion or sizeable investment the effect on growth would be small, and the public finances would end up on a worse trajectory. Meeting the commitment to the fiscal rules in letter but not in spirit, using optimistic growth assumptions and adjustments to the debt measure rather than enable borrowing, would do little to improve confidence in bond markets.
What Burnham means for markets
Manchesterism carries the promise of reform, though on present evidence it is more likely to produce a state that is bigger and more interventionist without being any more dynamic. Burnham speaks eloquently of a more effective, more productive and more decentralised government, but so far there are few tangible plans either for devolving genuine power while balancing accountability and legitimacy, or for the national reforms that the vision needs in order to work.
Over the coming months we will get a clearer picture of whether the plans amount to a credible programme for growth, or whether Manchesterism is a staging post on the way to an even larger government footprint in an economy already struggling to deliver long-term progress. To reflect this added uncertainty, we've raised our estimate of where UK government bond yields should fairly sit by a quarter of a percentage point – in effect, a penalty that points to somewhat lower bond prices. What this means for the pound is harder to say. Looser fiscal policy met with higher-for-longer interest rates from the Bank of England would tend to support sterling, while a loss of fiscal credibility that raises the risk premium on UK assets would weaken it.
In the interim we expect volatility in UK gilts and sterling to continue – potentially offering tactical opportunities to adjust exposure, as we have done in recent months. We will judge the government on its first Budget, the scope of its devolution legislation and its decisions on welfare and the triple lock; unless these show a genuine appetite for reform, our view on the UK government's growth agenda is likely to remain cautious.
Important information
This document is intended for retail investors and/or private clients. You should not act or rely on any information contained in this document without seeking advice from a professional adviser.
This is a marketing communication. Issued by Sarasin & Partners LLP, 50 George Street, London, W1U 7DY. Registered in England and Wales, No. OC329859. Authorised and regulated by the Financial Conduct Authority (FRN: 475111). Website: www.sarasinandpartners.com. Tel: +44 (0)207038 7000. Telephone calls may be recorded or monitored in accordance with applicable laws.
This document has been produced for marketing and informational purposes only. It is not a solicitation or an offer to buy or sell any security. The information on which the material is based has been obtained in good faith, from sources that we believe to be reliable, but we have not independently verified such information and we make no representation or warranty, express or implied, as to its accuracy. All expressions of opinion are subject to change without notice. This document should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this material when taking individual investment and/or strategic decisions.
Capital at risk. The value of investments and any income derived from them can fall as well as rise and investors may not get back the amount originally invested. If investing in foreign currencies, the return in the investor’s reference currency may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results and may not be repeated. Forecasts are not a reliable indicator of future performance.
Neither Sarasin & Partners LLP nor any other member of the J. Safra Sarasin Holding Ltd group accepts any liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this document or any part of its contents. The use of this document should not be regarded as a substitute for the exercise by the recipient of their own judgement. Sarasin & Partners LLP and/or any person connected with it may act upon or make use of the material referred to herein and/or any of the information upon which it is based, prior to publication of this document.
Where the data in this document comes partially from third-party sources the accuracy, completeness or correctness of the information contained in this publication is not guaranteed, and third-party data is provided without any warranties of any kind. Sarasin & Partners LLP shall have no liability in connection with third-party data.
© 2026 Sarasin & Partners LLP. All rights reserved. This document is subject to copyright and can only be reproduced or distributed with permission from Sarasin & Partners LLP. Any unauthorised use is strictly prohibited.
