In this episode of LED Confidential, David and Mike are joined by Professor Philip McCann, Chair of Urban and Regional Economics at Alliance Manchester Business School and The Productivity Institute. They discuss his work on the complex ‘puzzles’ of regional economic development. Philip dissects the spatial dimensions of UK’s current economic position. Hear how better understanding of the data, enhanced devolution and a greater enthusiasm for learning from other countries and models is needed if the UK is to seriously redress its regional economic disparities.
Unpacking the UK’s regional economic development challenges
The episode discusses how, from the late 1970s, the UK departed from the pattern of inter-regional economic convergence seen during the post-war period. While other countries continued the trend towards smaller inter-regional variations, with weaker regions catching up to more prosperous ones, the UK began experiencing divergence and widening inequality between places. This was exacerbated by the breakdown of diffusion mechanisms from London’s reinvention as a successful world city that were supposed to spread wealth and growth to the rest of the country. Philiip covers challenges that have prevented policymakers from seeing and responding to these changes – including gaps in data and understanding addressed by modern research. But he also highlights the critical importance of framing policy questions in the right way. Underlying, unchallenged assumptions about marketisation, London dominance in national discourse, and the unitary centralising state exacerbated regional disparities.
How the UK can learn from other countries
Philip draws on his extensive experience working with governments across the world. Approaches in countries including New Zealand, Australia, and the Netherlands, are shaped by geographical factors like population distribution and density in ways unrelated to the British model. Through comparisons of governance systems, he also examines how more bottom-up, decentralised structures, such as in the Netherlands contrast with the top-down approach traditionally taken to setting policy objectives in the UK. Philip’s career as a British academic working overseas enabled his learning from frameworks which have proven successful abroad. By recognising variances in framing across nations, the UK could identify new ways of thinking and draw lessons from other countries and models in addressing long-term regional development challenges.
What’s driving the disparities in the UK’s regional economic development?
Philip analyses the causes of growing regional disparities in the UK through the lens of ‘3 Gs’ - geography, globalisation, and governance. London and the South East’s dominance in economic and political geography exacerbates spatial differences. The economic shocks of deindustrialisation were deeper due to the UK's global markets response compared to other nations. Meanwhile, increasingly centralised governance ran counter to international trends towards decentralisation from the 1980s onward. These factors fed into a divergence that became increasingly visible. The global financial crisis then truncated ongoing growth in ‘less advantaged’ places and surfaced divergence more starkly. Many areas were left with little to no growth with prosperity concentrated elsewhere. Philip’s work analysing risk premia in property markets across the OECD highlights how data and quantitative analysis can shed light on how private investors perceive different places – with particularly high regional differences in the UK.
Reversing the trend to greater regional inequality
What can be done to address the UK’s increasing spatial inequalities? The episode covers potential remedies such as establishing a long-term national spatial strategy, as seen in some other high-income nations, such as the Netherlands. This approach could help to prioritise and coordinate infrastructure investment and development planning. But could this work without fundamental reform of the planning system? And does the problematic history and experiments with regional planning documents suggest such an approach could translate to a British context? The jury is out…
Philip advocates meaningful devolution that empowers local areas with real decision-making authority, capabilities, resources and legal powers over economic matters. By bringing governance closer to the sharp end of delivery and investment decisions, places could better convene private stakeholders to build confidence and narrow the risk premiums with London uncovered by his research.
Conclusion
If you haven’t listened to it already, then don’t miss out! While decades of assumptions and policies have left the country with deep-seated economic imbalances, new data and (perhaps) greater self-awareness point to solutions. If the lessons of spatial planning, governance, decentralised governance seen abroad, and from the UK’s own past, can be applied, the country has reasons to be modestly optimistic about tackling its regional inequalities.
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