The Recent Evolution of Regional
Economic Disparities:
From Boom to Bust and Beyond
Professor Ron Martin
Department of Geography
University of Cambridge
Newcastle, December 2009
© Ron Martin
1
A Challenging Time for Thinking About
Regional Economies
•
•
•
•
•
•
•
•
Rapidly changing global economy
The return of ‘boom and bust’
Problem of reforming finance system
Prospect of sustained period of substantial
public spending cuts
Prospect of change in UK government
Future of RDAs?
The challenge of climate change
New developments and debates in regional
economic theory
2
A Challenging Time for Thinking About
Regional Economies
• The dramatic change in economic conditions
- from boom to bust - over the past two years
poses several questions:
 Claim is that the ‘longest boom’ on record has been




followed by ‘deepest recession’ of post-war period
How did the regions fare in the ‘longest boom’?
Did regional inequalities narrow?
How have regions been hit by the current recession?
Are they being affected differently than in previous
recessions?
3
A Challenging Time for Thinking About
Regional Economies
• These questions have provoked debate over
regional growth:
 Boom has encouraged claims about benefits of
spatial agglomeration of economic activity for
regional growth: that there is a trade-off between
regional equity and national economic growth
 But are such claims valid, and do they ignore the
diseconomies of such agglomeration?
 How far is the pattern of long-run regional growth
shaped by successive booms and recessions?
 Do regions differ in their resilience to major
recessions?
 And how far does a region’s resilience influence
4
its long run growth?
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
Decade 1997-2007 claimed by New Labour
as longest period of ‘non-inflationary
continuous expansion’ (‘NICE’) on record
Britain is today experiencing the longest period of
sustained economic growth since records began
in the year 1701 (Gordon Brown, Budget
Statement, March 2005).
In fact, boom began in 1993, pre-dating New
Labour governments
5
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
Growth of GDP under New Labour was higher
than under Thatcher, but lower than the best of the
post-war boom
Period
Average Annual Real Growth
Rate (Percent)
1949-1964
2.9
1964-1973
3.3
1973-1979
2.3
1979-1990
2.3
1990-1997
1.9
1997-2007
2.9
Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/ 6
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
Brown repeatedly claimed that New Labour’s economic
policies - controlling inflation, maintaining macroeconomic stability through ‘monetary and fiscal
prudence’, and promoting productivity - had given
economy strong growth fundamentals
In fact, growth of UK economy over the ‘NICE’ period
was product of several factors:
 General global expansion
 Low import prices (especially Indian and Chinese goods)
 Debt-financed consumer boom, financed by excess of
cheap and easy credit
 And unprecedented asset price inflation in the housing
market
7
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
Three arguments were advanced to suggest
economic growth would be more spatially even than
in 1980s:
1. Deindustrialisation of the ‘North’ in 1980s had
largely removed the source of that area’s problem
(the ‘North-South divide’ was now ‘dead’):
“The traditional ‘north-south divide’ unemployment problem
has all but disappeared in the 1990s. This may prove to be a
permanent development, since the manufacturing and
production sectors, the main source of regional imbalance in
the past, no longer dominate shifts in the employment
structure to the same extent. Future shocks will have a more
balanced regional incidence than has been the case in the
past” (Jackman and Savouri, 1999).
8
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
2. Emergence of ‘New Economy’ would
provide all regions and cities with major growth
opportunities:
 Low barriers to entry in many such activities (ICT
available everywhere)
 The regeneration and reconfiguration of cities around
‘soft economy’ of knowledge-based, creative, cultural
and service sectors
 Most cities are major markets for such activities, which
can also compete in global markets from almost any
location
9
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
3. New Labour’s new regional policy model
was aimed at raising regional and local growth
 By promoting and enhancing ‘indigenous potential’ of
regions, cities and localities
 Focusing especially on knowledge-based and creative
industries
 Devolving policy to sub-national levels to ensure
delivery responsive to local opportunities and
challenges
 All intended to improve productivity and
competitiveness of regions and localities - and hence
the national economy - in the global market place
10
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
•
The aim of New Labour’s regional policy model
has been to close the growth gaps between the
regions:
“to make sustainable improvements in the economic
performance of all English regions by 2008 and over
the long term reduce the persistent gap in growth rates
between the regions, demonstrating progress by
2006…” (DTI PSA Target 7; HM Treasury, Target 2.3;
DCLG Target 2).
How did the regions fare during the long boom?
How much progress was made in ‘reducing the
persistent gap in growth rates between the
regions’?
11
Regional Cumulative Differential Growth in
GDP per Head, 1980-2007
20
Rec'n
Thatcher Boom
Rec'n
Long Boom
London
15
South East
10
5
Northern Ireland
South West
0
Scotland
East Midlands
Eastern
West Midlands
Yorks-Humberside
Wales
-5
-10
North West
-15
North East
2006
2004
2002
2000
1998
1996
1994
New Labour
1992
1990
1988
1984
1982
-20
1986
Conservative
1980
Cumulative Differential Growth (from UK Average)
in GDP per Head (2000 Prices)
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
Source of data: Cambridge Econometrics and Eurostat (2007 estimated)
12
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
Average Annual Growth in Real GDP
per Capita (Percent), 1997-2007
The Uneven Boom: Pulling Ahead and Falling Behind, 1997-2007
3.4
CATCHING UP
PULLING AHEAD
3.2
South East
3
London
South West
N. Ireland
2.8
UK Average
2.77
Eastern
2.6
East Midlands
North West
Yorks-Humber
2.4
North East
Wales
2.2
Scotland
FALLING BEHIND
West Midlands
LOSING GROUND
2
60
80
100
120
140
Relative GDP per Capita, 1997 (UK=100)
160
13
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
The Growth in Regional Inequalities (Disparities in GDP per head),
1980-2006
NUTS1 Regions
NUTS2 Regions
NUTS3 Regions
0.75
3.54
3.53
0.7
3.52
0.65
3.51
0.6
3.5
3.49
0.55
3.48
0.5
3.47
0.45
3.46
Long Boom
Thatcher Boom
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
3.45
1982
0.4
Coefficient of Variation (Population Weighted)
NUTS3 Regions
3.55
1980
Coefficient of Variation (Population Weighted)
NUTS1 and NUTS2 Regions
0.8
Source of data: Cambridge Econometrics and Eurostat
14
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
•
•
•
Between 1980 and 1997, London had gained a 22
percent cumulative growth advantage over the North
East and North West; and the South East an 18
percent advantage
By 2007 this had increased to 30 percent in the case
of London, and 25 percent in the case of the South
East
In general, the long boom produced divergent
differential growth trajectories across the regions
Some suggestion that regional growth advantage of
London and South East may have stabilised after
2003 (as it did at end of Thatcher boom)
But no evidence, overall, that regional growth gaps
15
were reduced during the long boom
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
•
•
•
Nature of the boom helps explain its regional
complexion
Led particularly by rapid expansion in financial and
business services
Based mainly in London and South East, which
already had comparative advantage in these
sectors
Whereas northern regions more dependent on
public sector for their growth
This difference also reflected in regional differences
in productivity growth and wage growth
16
Banking &
finance
Other business
services
Transport &
commsunications
Retailing
Hotels & catering
Other services
Distribution
Conctruction
Education &
health
Manufacturing
Public admin. &
defence
Mining &
quarrying
Percentage Growth in
Gross Value Added (2003 Prices)
Finance and Banking in the Boom:
Growth in GVA, 1993-2007
200
150
100
50
0
-50
17
South West
North East
Northern Ireland
Wales
East Midlands
West Midlands
Yorkshire-Humberside
Source of data: Cambridge Econometrics
Scotland
Eastern
North West
South East
London
Percent Share of National Growth in
Gross Value Added in Financial and Business Services
(2003 prices)
London’s Dominance of the Financial
Services Boom, 1993-2007
40
35
30
25
20
15
10
5
0
-5
18
Different Modes of Regional Growth?
100
Total Growth in Regional GVA
(Current prices)
Public Sector Share of Total
Growth
80
70
60
50
40
60
30
40
20
0
20
10
0
Public Sector Share of Growth (Percent)
120
Lo
nd
So
on
ut
h
Ea
So
st
ut
h
W
es
N
t
Ir
el
an
Ea d
Ea
st
st
er
n
M
id
W
la
es
nd
t
M
s
id
Yo
l
an
rk
sds
H
um
N
be
or
r
th
W
es
t
W
al
Sc es
ot
la
N
nd
or
th
Ea
st
Growth of Regional GVA, 1997-2006
Current Prices, Percent
Economic expansion in high growth regions has been
much more private sector based, and vice versa in slower growing
regions
Source of data: National Statistics Online,http://www.statistics.gov.uk/statbase/
19
Regional Divergence in Productivity, 1997-2006
(Relative to UK)
35
30
25
20
15
10
1997
2000
2003
2006
5
0
Source of
data: ONS and
Cambridge
Econometrics
-5
-10
-15
N
ot
h
Ea
or
st
Yo th
W
rk
es
sH
t
Ea
um
st
be
M
r
W
id
es
la
nd
t
M
s
id
la
nd
Ea s
st
er
Lo n
So ndo
n
ut
h
So
E
ut ast
h
W
es
t
W
a
Sc les
ot
la
n
N
Ir d
el
an
d
-20
N
GVA per Worker Relative to UK
(Percent Differential)
London and South East pulled ahead; Eastern and South
West regions achieved some catch up; but all other regions fell behind
20
Ea
N
st
or
Yo
th
rk
sW
H
es
um
t
be
Ea
rs
id
st
e
M
i
d
W
la
es
nd
t
s
M
id
la
nd
s
Ea
st
er
n
Lo
nd
on
So
ut
h
Ea
So
st
ut
h
W
es
t
W
al
es
Sc
ot
la
nd
N
Ir
el
an
d
or
th
N
Gross Average Weekly Earnings Relative to UK
(Percent Differential)
Gross Average Weekly Earnings by Region,
1998 and 2007
50
40
30
1998
2007
20
10
0
-10
-20
Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/
21
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
•
•
•
Together with the infiltration of NEG ideas, the long
boom exerted influence on Government thinking on
regional disparities
NEG focuses on increasing returns affects of
regional/spatial agglomeration of economic activity
Theory argues that national growth enhanced by
regional concentration of economic activity
That there may be an ‘equilibrium level of regional
disparity consistent with maximising national growth’
And that a ‘trade-off’ may thus exist between national
growth and reducing regional disparities
22
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
• We find the Treasury claiming that:
“Theory and empirical evidence suggests that
allowing regional concentration of economic activity
will increase national growth. As long as economies
of scale, knowledge spillovers and a local pool of
skilled labour result in productivity gains that outweigh
congestion costs, the economy will benefit from
agglomeration, in efficiency and growth terms at
least… policies that aim to spread growth amongst
regions are running counter to the natural growth
process and are difficult to justify on efficiency
grounds, unless significant congestion costs exist”
(HM Treasury, 2006)
23
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
• And a more extreme, but not unrelated, view
expressed by the Tory think tank, Policy Exchange:
“There is no realistic prospect that our [northern]
regeneration towns can converge with London and the
South East. There is, however, a very real prospect of
encouraging significant numbers of people to move from
those towns to London and the south East… The
implications of economic geography for the south and
particularly South East are clear. Britain will be
unambiguously richer if we allow more people to live in
London and its hinterland. In addition, Oxford and
Cambridge should the prime cities to see significant…
expansion” (Cities Unlimited, Policy Exchange, 2008).
24
The Regional Anatomy of New Labour’s
‘Long Economic Boom’
•
•
•
•
•
Despite its formal complexity, NEG theory is highly
simplified view of regional development
Which limits its plausibility and applicability as a basis
for regional policy
‘Trade-off’ is therefore open to debate conceptually and empirically
Further, one major effect of regionally imbalanced
growth in UK has been periodic emergence of
inflationary pressure in London/South East
Precisely what happened over 1997-2007 which saw
unprecedented house price bubble originate in these
core regions
25
How London and South East Led the House
Price Bubble
(Average Dwelling Price)
East Anglia
East Midlands
Greater London
South West
West Midlands
North West
North
Yorks-Humberside
South East
Northern Ireland
Scotland
Wales
Bubble begins in
300,000
250,000
200,000
150,000
London and South
East
100,000
50,000
Bubble begins in
North
Source of data: www.hbosplc.com/economy/historicaldata
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
0
1983
Average House Price (£), Seasonally Adjusted
350,000
26
How London and South East Led the Mortgage
Boom
45,000
South East
40,000
Greater London
North West
35,000
Yorkshire and Humberside
East Midlands
30,000
East Anglia
South West
West Midlands
25,000
Wales
Scotland
20,000
Northern Ireland
15,000
10,000
5,000
Source of data: Council of Mortgage Lenders
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
0
1983
Value of Mortgage Advances (£million)
Northern
27
From Boom to Bust: The Regional
Anatomy of the Recession
•
•
•
•
•
•
In output terms, current recession has been faster than
either 1990-92 or 1979-83
And deeper than 1990-92
But may prove shorter-lived than both
In employment terms, decline has been less than
expected given drop in output
Employment decline less pronounced than either of past
two recessions
Suggests that firms have hoarded labour more (and
workers more prepared to take wage and hours cuts)
28
From Boom to Bust: The Regional
Anatomy of the Recession
How does the current recession compare? - GDP (2005 prices)
102
98
96
94
1979(2)-1981(4)
1990(2)-1992(2)
2008(1)-
92
90
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
88
1
Peak Quarter = 100
100
Quarters from Beginning of Recession
Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/
29
From Boom to Bust: The Regional Anatomy
of the Recession
How does the current recession compare? Employment
102
Peak Quarter =100
100
98
96
1979(4) -1983(1)
1990(2)-1992(4)
2008(1)-2009(2)
94
92
90
37
35
33
31
29
27
25
23
21
19
17
15
13
11
9
7
5
3
1
88
Quarters from Beginning of Recession
Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/
30
From Boom to Bust: The Regional
Anatomy of the Recession
•
•
•
•
•
•
Initially, talk was about the epicentre of the recession being in
London as this was key node in financial crisis
Predicted that London would lose at 70,000-100,000 financial
jobs
With negative multiplier effects on other jobs in London
economy and surrounding areas in South East
Also argued that the structural shifts of 1980s and 1990s
removed much of the traditional vulnerability of northern
regions to economic shocks
And others have argued that the growing dependence of
northern regions on public sector activity during the 1990s
and 2000s should shield them from the worst of the recession
Estimated that 66 percent of output in North East, and 70
percent in Wales, accounted for by State sector, compared to
36 percent in South East
31
A Manufacturing rather than Financial
Services Recession
Gross Value Added (2003-3 =100)
130
Fall in GVA 2008(1)
to 2009(1) = 2.0%
125
120
115
Fall in GVA 2008(1)
to 2009(1) = 3.0%
110
105
100
Fall in GVA 2008(1)
to 2009(1) = 13.7%
95
90
Manufacturing
85
All Services
Financial and Business Services
2009-1
2008-3
2008-1
2007-3
2007-1
2006-3
2006-1
2005-3
2005-1
2004-3
2004-1
2003-3
80
Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/
32
From Boom to Bust: The Regional
Anatomy of the Recession
•
What can we say about the regional impact of the
recession thus far?
 Output decline has been more severe than
employment decline
 Full employment impact across regions probably not
yet felt
 But impact has been regionally uneven
 London has fared much better than predicted
 Midlands and North East hit harder than elsewhere
 These patterns have left regional unemployment
disparities largely unaltered, with rate in North East
double that in South East
33
Regional Impact of the Recession
Output
2008(1)- 2009(2)
Percent Change
Employment
2008(1)- 2009(2)
Percent Change
London
-4.8
-1.9
South East
-4.9
-2.9
Eastern
-4.8
1.3
South West
-5.0
-2.5
West Midlands
-8.2
-3.4
East Midlands
-7.6
-4.4
Yorks-Humber
-7.3
-3.5
North West
-6.7
-2.3
North East
-8.6
-3.6
Wales
-6.9
-1.8
Scotland
-4.7
-2.4
Ireland
-5.3
NA
Sources of data: Experian (Output estimates) and ONS (Employment)
34
The Regional Impact of the Recession:
Unemployment Rate, 2007-2009
East
South East
7.0
London
South West
East Midlands
6.0
West Midlands
Yorks-Humberside
North West
5.0
North East
Wales
4.0
Scotland
3.0
2.0
1.0
-0
M 7
ar
M 07
ay
-0
7
Ju
l0
Se 7
p07
N
ov
-0
Ja 7
n0
M 8
ar
M 08
ay
-0
8
Ju
l0
Se 8
p08
N
ov
-0
Ja 8
n0
M 9
ar
M 09
ay
-0
9
Ju
l0
Se 9
p09
0.0
Ja
n
Unemployment Rate (Claimant Count)
8.0
Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/
35
From Boom to Bust: The Regional
Anatomy of the Recession
• Some Questions
 How does the regional impact of this recession
compare to previous recessions?
 How quickly will the regions recover? Will some
regions (eg London, South East, Eastern) recover
sooner than others (eg Midlands, North West,
North East)?
 Such questions raise the interesting issue of the
economic ‘resilience’ of the regions
36
Comparing the Current Recession with Previous
Downturns - Output (GVA, 2005 prices)
Percent
Change
1979-82
1990-92
London
-5.3
-2.1
-4.8
South East
-1.4
-1.0
-4.9
Eastern
-2.2
-1.2
-4.8
South West
-1.0
-1.6
-5.0
West Midlands
-9.6
-1.2
-8.2
East Midlands
-2.6
-1.1
-7.6
Yorks-Humber
-1.3
-1.0
-7.3
North West
-5.6
-0.9
-6.7
North East
-3.6
-1.1
-8.6
Wales
-5.5
-1.0
-6.9
Scotland
-1.1
-0.1
-4.7
N Ireland
-3.2
-0.3
-5.3
Source of data: Cambridge Econometrics and Experian
2008(1)2009(2)*
*=Estimate
37
Comparing the Current Recession with Previous
Downturns - Employment
Percent
Change
1979(4)1983(1)
1990(2)1992(4)
2008(1)2009(2)
London
-6.6
-11.2
-1.9
South East
-2.2
-8.6
-2.9
Eastern
-1.3
-7.5
1.3
South West
-1.4
-4.6
-2.5
West Midlands
-8.1
-9.6
-3.4
East Midlands
-4.8
-5.2
-4.4
Yorks-Humber
-8.0
-6.2
-3.5
North West
-11.1
-5.7
-2.3
North East
-11.8
-5.2
-3.6
Wales
-10.4
-2.6
-1.8
Scotland
-8.3
-1.3
-2.4
N Ireland
-4.0
-1.0
NA
Source of data: National Statistics Online, http://www.statistics.gov.uk/statbase/
38
From Boom to Bust: The Regional
Anatomy of the Recession
•
•
Regions have not reacted in consistent way (in terms
of employment) to last three recessions
Pattern of response has varied:
•
•
•
•
•
Early-1980s recession most pronounced in industrial
regions of North
Early-1990s recession most pronounced in London, South
East and West Midlands
Current recession more mixed pattern, though London least
affected, and North East and West Midlands more affected
Does the severity of a region’s response to recession
influence its recovery?
Is a region’s reaction to recession influenced by its
preceding growth phase?
39
The Issue of Regional Resilience
•
•
•
The notion of ‘resilience’ is relevant to such questions
Resilience idea is attracting growing interest in
regional studies (and indeed in other disciplines,
where there is concern over how complex systems
respond to shocks)
Resilience - Latin resilire, “to leap back or rebound” the ability of a system to ‘recover form and position
elastically’ following a shock or disturbance of some
kind:
“the ability of a region to recover successfully from
shocks to its economy that either throw it off its
growth path or have the potential to throw it off its
growth path” (Hill et al, 2008)
40
The Issue of Regional Resilience
•
•
•
•
But idea of resilience is not unambiguous
Should notion refer not just to ability of regional
economy to recover from a shock, but also the degree
of resistance to the shock in the first place?
Further, does the concept refer to the ability of a
regional economy to retain its structure and function
despite the shock to it; or to the ability of a region
economy to change its structure and function rapidly
and successfully in response to a shock - that is
regional economic adaptability?
Also does the resilience of a regional economy change
over time?
41
The Issue of Regional Resilience
•
Two definitions in evolutionary ecology (where concept of
resilience originated)
•
•
•
1. ‘Engineering resilience’: stability of a system near an
equilibrium or steady state, where resistance to disturbance
and the speed of return to the pre-existing equilibrium are
key
2. ‘Ecological resilience’: the magnitude of the shock of
disturbance that can be absorbed before the system
changes its structure and function and becomes shaped by
a different set of processes - ie movement of system to new
equilibrium (steady) state
Both have counterparts in mainstream economics - (1)
self-correcting return to unique equilibrium, and (2)
hysteretic shift to new equilibrium (linked to idea of
multiple equilibria)
42
Stylised Responses of a Regional
Economy to a Major Shock
Source: Martin and Simmie (2009)
43
The Issue of Regional Resilience
•
•
Regions have had different, divergent long-run
growth paths over past 40 years
Consider long-run paths of employment growth in
South East and North East:
 Between 1971 and 2007 South East increased its

•
•
employment by 50 percent
Over same period employment in North East showed no
overall increase
And the two regions have had quite different patterns
of response to and recovery from successive
recessions
These patterns help explain the long-run divergence
in employment between the two regions
44
Long Run Divergent Regional Growth, 1971(1)-2009(2)
(GVA in 2005 prices, 1971(1)=100)
350
GVA 1971(1)=100
300
250
South East
North East
North West
Eastern
East Midlands
West Midlands
Yorks-Humber
200
150
100
19
71
19 Q1
73
19 Q1
75
19 Q1
77
19 Q1
79
19 Q1
81
19 Q1
83
19 Q1
85
19 Q1
87
19 Q1
89
19 Q1
91
19 Q1
93
19 Q1
95
19 Q1
97
19 Q1
99
20 Q1
01
20 Q1
03
20 Q1
05
20 Q1
07
20 Q1
09
Q
1
50
Source of data: Experian
45
Long Run Divergent Employment Growth, 1971-2007
(1971=100)
160
South East
North East
East Midlands
West Midlands
Eastern
Yorks-Humber
North West
Employment Index 1971=100
150
140
130
120
110
100
90
80
70
Source of data: Cambridge Econometrics
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
60
46
Contrasting (and Evolving) Regional Economic
Resilience? South East and North East
Source of data: Cambridge Econometrics
47
Manufacturing Employment Across Recessions
and Recoveries: South East and North East
120
Recession
Recession
South East
North East
80
60
40
20
2007
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
0
1971
Employment 1971=100
100
48
Service Employment Across Recessions
and Recoveries: South East and North East
200
150
125
100
South East
North East
75
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
50
1971
Employment 1971=100
Recession
Recession
175
49
The Issue of Regional Resilience
•
•
•
•
•
•
In both regions, jobs lost in manufacturing in recessions
have not been regained in subsequent booms
Key difference is that South East has more than
compensated by strong growth in service activities in the
booms
Put another way, South East economy has adapted much
more and faster
Adaptation in response to shocks is central to resilience
Suggest we need to give much more attention to how
regional economies adapt over time
Increasing interest in adaptive growth within evolutionary
economics - though as yet no definitive model or theory
50
The Issue of Regional Resilience
•
What makes for a resilient (adaptive) regional
economy?
 Hysteretic and path dependence effects
 Economic diversity
 Skill and educational levels of workforce
 Innovative capacity
 Business and industry creation capacity
 Quality of infrastructures
 Institutional arrangements
 Influence over national economic policy priorities and
spending
51
Conclusions
•
•
•
•
Despite ‘long boom’, no convergence of regional growth
rates or incomes
Little progress towards New Labour’s regional policy aim
to “reduce the persistent gap in growth rates between the
regions…” (DTI PSA Target 7; HM Treasury, Target 2.3;
DCLG Target 2)
Even if growth rates could be equalised across regions,
(ie growth rates of northern regions raised to those of
South East and London), regional disparities in GDP per
head would continue to widen
Current recession looks as though it will further frustrate
that aim
52
Conclusions
•
•
•
•
•
•
Major differences in economic resilience across regions
South East and London seem more able to recover from
recessions - more adaptable economies
Likelihood is that these regions will pull away faster than
other regions from the current recession
The task confronting regional policy remains as
challenging as ever
Need to question the increasing agglomeration of
economic activity in London and South East
And grip of London and South East over national policy
53
54
National Growth and Regional Disparity in
NEG Theory
National Growth
SS
g*
g1
A1
A*
Agglomeration
r1
RR
r*
Regional Income Inequality
55
An ‘Adaptive Cycle’ Model of Regional
Economic Resilience
Reorganisation
Phase of restructuring
Emergence of new sectors
Accumulation – low and varied
Connectedness – low
Resilience (adaptability) - increases
Conservation
Phase of stability and
increasing rigidity
Inertia of established sectors
Accumulation – slows
Connectedness – high
Resilience (adaptability) - declines
Shock
Exploitation
Phase of growth and seizing
of opportunities
Rapid growth of new sectors
Accumulation – fast and focused
Connectedness – low and rising
Resilience (adaptability) - high
Release
Phase of contraction
Sectors decline
Accumulation – disinvestment
Connectedness – declines
Resilience (adaptability) - low
56
Gross Average Household Income and Poverty Rate by
Postcode District, 2006
Source of data: CACI
Equivalised Average
Household Income (£000s)
before tax and including
benefits
Percent Households
with incomes less
than 60% UK
median
57
From Boom to Bust: The Regional
Anatomy of the Recession
“The traditional ‘north-south divide’ unemployment problem has
all but disappeared in the 1990s. This may prove to be a
permanent development, since the manufacturing and
production sectors, the main source of regional imbalance in the
past, no longer dominate shifts in the employment structure to
the same extent. Future shocks will have a more balanced
regional incidence than has been the case in the past”
(Jackman and Savouri, 1999, p. 27).
“Newcastle and areas like that have a large public sector which
will at least shield traditionally very depressed areas from the
battering the South East is going to get” (Vince Cable, Liberal
Democrat Treasury Spokesman, 2009)
58