The knowledge economy is one of four key sectors identified as offering the best prospects for growth in Merseyside. But just how well-placed is the region compared to other UK cities?

THE knowledge economy is usually spoken about as if it is a brand new idea, but it is hardly that.

While the term was first popularised in the late 1960s, the fundamental ideas underpinning it have been practised since the wheel was invented.

Robert Louis Stephenson’s Rocket steam engine, John Kay’s Spinning Jenny and ICI’s century- old investments in pharmaceuticals and chemicals are all examples of patented inventions that have turned out to have substantial commercial value.

Today, there are a number of definitions of the phrase. In his book, The Age of Discontinuity, management theorist Peter Drucker attempts to define knowledge economy. He writes: "Today the centre is the knowledge worker, the man or woman who applies to productive work ideas, concepts and information rather than manual skill or brawn . . . Where the farmer was the backbone of any economy a century or two ago, knowledge is now the main cost, the main investment and the main product of the advanced economy and the livelihood of the largest group in the population."

The Organisation for Economic Cooperation and Development has a similarly broad definition. It says the sector includes high to medium technology, manufacturing and knowledge intensive services such as financial and business services. The OECD also includes telecommunications, health and education.

The Mersey Partnership also adopts a broad definition. When it tallies up the number of people in the sub-region already engaged in knowledge economy activity, it includes blue-collar staff at Jaguar Land Rover and song and dance teachers at Liverpool Institute for Performing Arts.

Neil Lee, chief economist at the Work Foundation, agrees with the broad approach. He said: "I would be in favour of that definition.

"There are lots of ways of measuring the knowledge economy. Performing arts, along with the rest of the creative sector, is one that’s going to grow in the future. It’s something that Britain is good at.

"It’s not science, but it is intangible and has a high knowledge content.

"But it’s also important to include science."

Mr Lee acknowledged that the Merseyside region has a number of chemical and pharmaceutical businesses, as well as the universities and the teaching hospital. However, he added that, according to the Work Foundation’s analysis sectors, that can be thought of as belonging to the knowledge economy account for 23% of the local workforce. While this figures is similar to Birmingham and Sheffield, it is one of the lowest among British cities. It is significantly behind other places like Bristol (33%), Edinburgh (37%) and London (41%).

So, despite the many knowledge economy assets that do exist locally, other cities are better placed to claim a reputation in the sector.

The focus on the knowledge sector is driven by the fact that it results in high-value added productivity. One example of how this might be achieved is through the creation of the Merseyside BioMedical Campus linking Royal Liverpool University Hospital with the University of Liverpool. It could create thousands of jobs, which would add to the sub- region’s output per capita figures. But how many of those jobs are likely to taken by the residents of nearby Kensington?

Mr Lee said: "You need to improve the skills and qualifications of the residents of Liverpool."

The challenge of raising Liverpool’s profile as a knowledge economy base was highlighted by the former chief executive of Liverpool Science Park. On quitting the post a couple of years ago, Dr Sarah Tasker warned that the city did not possess a strong knowledge economy brand.