A comprehensive set of local industrial strategies, consistently-applied is key to “levelling-up” the UK

Regional differences in performance across the UK are larger than in most other large, high income countries and are at very high levels by historical comparison.  That underscores the importance of the Government’s strategy of “levelling-up” the UK. 

A number of British cities are “steaming ahead” with high levels and growth rates of productivity and income.  But not all cities are doing well.  And in a number of towns, coastal regions and rural areas levels and growth rates of productivity are low, causing them to be “left behind”. 

There is no simple or single reason for these wide and widening differences in spatial performance.  In practice, highly productive regions tend to out-perform low-productivity regions along a number of dimensions – from the skills and health of the workforce to the quality of local institutions and infrastructures.

Nonetheless, experience and empirical evidence, from the UK and internationally, point towards three key explanations for these regional differences:

• Place-based fundamentals:  Geography, local culture, governance and infrastructure are important factors determining the economic activities of a region.  These shape the nature of the local workforce and the type and volume of private investments a place can attract.

• Agglomeration:  Places attract clusters of economic activity which become self-sustaining.  These agglomeration effects arise because specialised firms benefit from the ability to trade with other firms in their industry and because these firms benefit from sharing the common resources offered by large cities.

• Sorting:  Workers, especially highly-skilled workers, also tend to cluster.  This means small initial differences between places can generate large disparities in the skills of the workforce, which then shape regions’ industries, attractiveness and productivity.

In practice, these factors tend to be complementary and mutually-reinforcing in their impact over time which is why, without policy intervention, regional differences tend to widen.

What works for regions?

The Council’s review of evidence, both in the UK and internationally, suggests that reducing regional disparities – “levelling up” – is possible with the right set of policy interventions.  Some of the key factors in policy success are:

• Consistency and continuity in regional policy:  UK regional policy has been hallmarked by a lack of continuity and consistency over time, contributing to widening differences.  Local areas need that policy continuity if the factors closing those differences are to become self-sustaining and self-supporting. 
• Local growth strategies need to be multi-faceted:  As the causes of regional differences are multi-faceted, so too must be the policy response to them.  A broad and integrated package of policy interventions are likely to be needed, embracing social and health policy, housing and transport policy, and investment and innovation policy.
• Focus on the “local” and on the “left behind”:  As spatial differences are local, so too must be the design and implementation of policies to correct these differences.  The value of these interventions is likely to be greatest among places falling furthest and fastest behind.

Andy Haldane, Chair of the Industrial Strategy Council said:

“Although the UK has a long history of regional disparities, they are currently at their highest levels in more than a century.  Chopping and changing UK regional policies has contributed to these widening differences. That is why the Industrial Strategy Council welcomes the new Government’s commitment to “levelling-up” the UK.  We hope this evidence review provides useful material for the Government when designing and implementing the policies necessary to secure that goal.  While it is challenging, it is eminently achievable and highly desirable.”

ENDS

Notes to editors

1. The Industrial Strategy Council is an independent non-statutory advisory group set up to develop measures of success for, and assess the progress of, the government’s Industrial Strategy. The Council comprises leading men and women from business, academia and civil society.

2. ‘UK Regional Productivity Differences: An Evidence Review’ is available on the Council’s website (www.industrialstrategycouncil.org).

For more information please contact industrialstrategycouncil@beis.gov.uk