UK interregional inequality in a historical and international comparative context

Publication date: 29 Jul 2020 | Publication type: National Institute Economic Review | External Author(s): Carrascal-Incera, A; McCann, P; Ortega-Argilés, R; Rodríguez-Pose, A | JEL Classification: R11, R12, O47, O50 | Journal: National Institute Economic Review Issue 253 | Publisher: Cambridge University Press

This paper explores the nature and scale of inter-regional and inter-urban inequalities in the UK in the context of international comparisons and our aim is to identify the extent to which such inequalities are associated with strong national economic performance. In order to do this, we first discuss the evolution of UK interregional inequalities relative to comparator European economies over more than a century. We then focus specifically on comparisons between the UK and the reunified Germany. These two exercises demonstrate that the experience of the UK has been rather different to other countries. We further explore UK inter-urban inequalities in the light of international evidence and then explain why observations of cities only tell us a partial story about the nature of interregional inequalities, especially in the case of the UK. Finally, we move onto an OECD-wide analysis of the relationships between economic growth and interregional inequality. What we observe is that any such relationships are very weak, and the only real evidence of a positive relationship is in the post-2008 crisis period, a result which points to differentials in regional resilience rather than inequality-led growth. Moreover, once former transition economies are removed from the sample, the relationship disappears, or if anything becomes slightly negative. As such, the international evidence suggests that the UK’s very high spatial inequalities have hampered, rather than facilitated, national economic growth. 

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