The rapid way in which cities in Victorian Britain grew have many lessons for how the economy should be managed now, according to a report today. The authors claim the need for some cities to grow means more care needs to be taken over the constraints placed on their development.

Professor Nick Crafts and Dr Tim Leunig will present their findings as part of the Economic History Society’s annual conference, which begins in Nottingham today. They argue that if the Green belt had been enforced in 1800 Britain would have been able to become the workshop of the world.

“So too today: high-skill cities such as Oxford and Cambridge have the potential to be a centre of high-wage agglomeration cities, just like Liverpool and Manchester a century ago. But unlike Liverpool and Manchester a century ago, their growth is constrained by highly restrictive planning laws,” they say.

Their study says that Britain in the 19th Century was as close as it is possible to get to a textbook free market economy, as the state was strong enough to enforce property rights, but not to constrain companies or individuals. Firms could build factories where they chose and people moved around the country to take up new opportunities.

The research shows that cities changed around 1900 when for the first time the number of people living nearby began to matter as well as the city itself and commuting became possible.

The researchers say the implications of their work for today are clear. Different industries prefer to locate in different areas. “You could not have moved a nineteenth-century cotton industry from Lancashire to London; nor today is it realistic to try to move the financial services industry from London to Lancashire,” the study says.

In a dynamic economy, they add, some towns rise and some towns shrink. Liverpool, for example, grew spectacularly in the nineteenth century, but has reduced in size recently. The findings are being presented to government economists at Business, Enterprise and Regulatory Reform and the Welsh Assembly.