The City of Birmingham's population needs to double to 2 million, and that of the West Midlands to grow by at least 20% by 2040, if the city is to join London as one of the U.K.'s global cities.

So says a report by think tank Policy Exchange which recommends changes to  industrial strategy and how to power the Midlands Engine. The report discusses the "agglomeration effect" in Birmingham's history, and how similar effects could govern its future.

The report argues that the U.K. can cope with a second global city, and that denser population is they key.

“If Birmingham matched the OECD average for the relative size of a second city, it would be almost twice as large, or around 2 million people," the report said. “By itself, assuming standard agglomeration effects, this might increase productivity by 3-8 per cent, helping close the gap with the South East.

"The West Midlands Combined Authority should develop its own speculative infrastructure pipeline, and consider what it would take to substantially increase the size of Birmingham. The Midlands Engine should commission an independent
review exploring what it would take to grow the city 20% by 2040 and the potential barriers to this growth."

The document argued that the city was undersized and underperforming. "Many of the region’s cities have significant potential to expand, build up new strengths in services and increase employment. Birmingham should be bigger — but it is already underperforming for a city of its size. Understanding why is crucial to solving the region’s wider problems with economic productivity," it said.

The report does not pull its punches, drawing attention to low levels of graduate retention and low levels of business startups. "While some cities such as Chicago eventually made the jump to being a services powerhouse — albeit losing a quarter of its population in the process — British cities like Birmingham struggled to make the same transition. Post-war attempts at urban regeneration were largely a failure," the report said.

However, some of the report's recommendations will be controversial, including the abolition of national pay bargaining.