NIESR Press Release: Why we need to level up UK regional disparities - New research published by NIESR

Published: 29th July 2020

National Institute of Economic and Social Research

NIESR Press Release:  Why we need to level up UK regional disparities

New research published by NIESR
 

The forthcoming issue of the National Institute Economic Review, published on 29th July, will focus on regional or spatial inequalities that are the heart of the UK Government’s “levelling up” agenda. With Brexit and Covid-19 the UK is facing two large economic disruptions that are clearly affecting some places more negatively than others. In the absence of adequate policy intervention, they will likely worsen spatial disparities in the UK even further.  For example, regional gross disposable income per person in London is around 1.7 times higher than in the North East, Wales or Northern Ireland. 

 

Leading experts in the field provide in-depth analysis of various aspects of this major issue. The articles cover a wide range of topics including the role of devolution, the regional impact of Covid-19, regions’ resilience levels, regional productivity, and the state of regional data.

 

Some of the authors will discuss their findings at a public NIESR webinar on Wednesday 22 July at 3pm.

 

The four articles are:

 

  • UK interregional inequality in a historical and international comparative context, by Andre Carrascal-Incera (City-REDI Institute), Philip McCann (University of Sheffield), Raquel Ortega-Argilés (City-REDI Institute) and Andrés Rodríguez-Pose (London School of Economics).
  • Understanding regional economic performance and resilience in the UK: trends since the global financial crisis, by Marianne Sensier and Fiona Devine (Alliance Manchester Business School).
  • Regional disparities in labour productivity and the role of capital stock, by Ben Gardiner (Cambridge Econometrics), Bernard Fingleton and Ron Martin (University of Cambridge).
  • Reconciled estimates and nowcasts of regional output in the UK, by Gary Koop, Stuart McIntyre (University of Strathclyde), James Mitchell (Warwick Business School) and Aubrey Poon (University of Strathclyde)

 

David Nguyen, NIESR Senior Economist, who edited the collection, said: “Spatial inequalities in the UK are among the highest in Europe, and with economic disruptions from Brexit and Covid-19 this is only going to get worse. While the majority of jobs in London and the South East can be done from home, the share is much lower in other parts. Rapidly changing work patterns should put access to digital skills and digital infrastructure at the heart of policymaking.”

 

Jagjit S. Chadha, Managing Editor of the Review and Director of NIESR said: "As the 20270 Commission highlighted, and the Coid-19 crisis has underlined, the spatial consequences of economic growth are in urgent need of being addressed.  This issue provides clear guidance as to the scale of task, which will require years of careful and considered attention."

 

A carefully crafted process of further political devolution would help meet the “levelling up” agenda by reducing regional inequalities within the UK while at the same time boosting overall economic growth. Carrascal-Incera, McCann, Ortega-Argilés and Andrés Rodríguez-Pose show that the UK displays very high inter-urban inequalities by OECD-wide standards but that these regional gaps have not brought higher economic growth compared with similar economies. The argue that Britain’s hyper-centralised state structure has both fostered regional inequality and crimped national growth. Local authorities in the UK have among the lowest levels of revenue-raising and spending powers within the OECD, below both Romania and Ukraine, which have left them less able to generate high returns from public investments. However, the authors warn that the scale of what is required to address these issues should not be underestimated, nor should the political difficulties involved in making these changes.

 

The levels of regions’ resilience to the impact of a crisis will be crucial to determine how able they are to withstand the fall-out from the coronavirus pandemic. Sensier and Devine analysed the economic resilience of UK regions in light of the economic fallout from the global financial crisis in 2007/8. They found that the South East and South West were the most resilient regions in the UK, with Northern Ireland and the North East being the least resilient. Their resilience “scorecard” could be useful for national and local policymakers to help identify the regions that lacked economic resilience during and since the 2008 downturn in an aim to level up resources and investment for these areas to increase resilience in recovery from the 2020 coronavirus pandemic downturn.

 

Earlier this year the Industrial Strategy Council noted that one of the main knowledge gaps in understanding regional productivity patterns was the lack of data on regional capital stock estimates, referring to this as one of the missing pieces of the productivity puzzle. Gardiner, Fingleton and Martin fill that gap by using a new dataset on regional capital stocks to show that both physical and human capital are in fact important determinants of labour productivity. They find that the regional stock of human capital is increasingly becoming a more dominant force affecting productivity variations across regions. This implies that regions like London, which already has the highest levels of human capital, could pull away still further from other regions in the future. The authors conclude that raising the productivity levels of the UK is mainly a question of raising productivity outside of London and the South East.

 

The final article of this issue focuses on improving the availability of regional data in the UK. Koop, McIntyre, Mitchell and Poon produce more up-to-date data on quarterly regional economic output and labour productivity, at a higher frequency and with much less delay. Their method allows for nowcasting quarterly regional GDP shortly after the national quarterly GDP figures are released. Their figures show that between 1998 and 2018, Scotland and London have been the regions with the fastest average growth in productivity. The lowest average productivity growth was registered in Northern Ireland, South West and East of England.

 

 

ENDS

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Notes for editors:

The research reflects the authors’ views and does not necessarily reflect the views of the institutions that they may represent.

For full copies of these papers and queries for the authors please contact the NIESR Press Office: press [at] niesr.ac.uk  / l.pieri [at] niesr.ac.uk / 07930 544631

To register for the webinar, What Next for the Levelling-Up Agenda? Addressing New and Old Challenges in the UK Regional Inequalities Landscape at 3pm on Wednesday 22 July click here.

 

The National Institute Economic Review is a quarterly journal of NIESR. NIER is published by Cambridge University Press (CUP). Founded in 1534, CUP is the world's oldest publishing house and the second-largest university press in the world.

The Review is published in February, May, August and November, and it is available from Cambridge University Press at journals [at] cambridge.org    

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