Transport and productivity: what would it really take to move the dial?

The UK has a productivity problem. Since the financial crisis, GDP per head has grown at roughly 0.6% per year. Had long-run growth trends continued, the country would be approximately 30% richer today. The consequences are visible everywhere: stretched public services, stagnant living standards and a sense of economic drift. 

At a recent Frontier Economics Transport Summit, senior figures from across government and industry framed the challenge as: what would transport policy need to look like if it were designed not “transport up”, but “economy down”? In other words, what would we prioritise if the objective was to increase productivity? 

Three themes stood out. 

1. Where should connectivity be prioritised? 

Transport networks connect people to jobs and firms to markets. But connectivity is not an end in itself. The question is where additional connectivity generates the greatest economic spillovers. 

One strand of the discussion focused on the UK’s stark spatial imbalance. London and the South East have consistently outperformed, while many large cities elsewhere lag comparable European peers. Strengthening connections between northern cities - Manchester, Liverpool, Leeds, Sheffield and beyond - could increase effective economic mass, deepen labour markets and unlock agglomeration effects. The point was made that this would be consistent with increased economic dynamism over the past years in many of those cities. 

But transport infrastructure does not generate growth in isolation. Rail lines and roads interact with housing supply, land use, skills, planning frameworks and local governance. Without sufficient homes near stations, flexible labour markets and aligned spatial planning, the productivity gains from inter-city investment will be diluted. 

Another strand of conversation emphasised intra-urban connectivity. Evidence from city regions suggests that improving transport within urban areas - expanding tram systems, enhancing bus networks, reducing journey times across metropolitan areas - can materially improve labour market integration and productivity. These schemes are often less capital-intensive than major inter-city projects and more directly connected to everyday economic activity. 

Any discussion also needs to consider the opportunity cost of investments. In a context of constrained capital budgets and ageing assets, prioritisation must be explicit.  The conversation suggested that, rather than assessing each scheme in isolation, transport investment should be anchored in a clear 2050 vision for the UK’s economic geography, and then work backwards to understand how individual projects contributed to the whole, rather than being assessed as standalone bets. 

Designing ‘economy down’ transport policy would mean anchoring connectivity decisions in a clear vision of the UK’s future economic goals and ensuring, through rigorous macro and microeconomic analysis, that each investment advances that vision. 

2. Who should take responsibility? 

Institutional architecture shapes economic outcomes. For transport to support growth, institutions must have both the capability to act and the credibility to sustain commitment.  

The UK is highly centralised by international standards. Outside London, mayoral authorities typically have limited revenue-raising powers and constrained borrowing capacity. In many cases, local government lacks the balance sheet strength to finance large-scale infrastructure investment without substantial central government backing. Devolution without fiscal tools risks devolving responsibility without autonomy.  

Meaningful local empowerment requires stable funding settlements, revenue flexibility and diversification, and clarity over risk-sharing between central and local government. Without this, transport strategies may lack the financial depth required to support long-term economic transformation. 

An economy-led transport strategy would therefore depend on both governance and funding structures that place responsibility, resource and accountability in the same hands. Where local leaders are expected to deliver growth, they must have both the fiscal capability and the institutional clarity to do so. 

3. How can costs be managed and funding found?  

Another stream of discussion focused on confronting how much it costs to build transport (and other infrastructure) in the UK. The UK’s infrastructure costs are persistently high by international comparison. Major road and rail schemes frequently cost significantly more per kilometre than in peer countries, as UK government sources show here and here.

This is not (usually) a matter of engineering complexity: planning processes are lengthy and uncertain, and environmental and regulatory requirements layer upon one another. Responsibilities are fragmented across transport, housing and planning, with different government departments and multiple regulators overlapping and, sometimes, contradicting each other. Poor risk allocation and late-stage scope changes often further inflate costs.

These structural features increase uncertainty, extend delivery timelines and raise the final price of infrastructure. The consequence is not only higher fiscal exposure, but a reduced ability to pursue strategic ambition at scale. 

If these systemic drivers are not addressed, ambition will continue to be scaled back to fit within an inefficient delivery environment. Reforming how infrastructure is delivered may be as important as deciding what to build. 

But cost is only half the equation; funding is the other key component. Two funding tools are particularly relevant: