A Growth Policy to Close Britain's Regional Divides: What Needs to be Done

Abstract

Britain has huge geographic inequalities in economic outcomes, health, education and social mobility. While these have existed for centuries, they have widened in recent years. These divides, both between and within regions, not only waste talent and potential but also fuel a politically destabilising “geography of discontent”. The fact that UK’s national productivity growth has stagnated over the past eighteen years is a further impetus to action – tackling regional divides is vital to tackling this national malaise.

We believe policy can and should do much more to respond to these deep and widening regional divides and raise UK-wide productivity growth. The UK has had regional policy for many years, and the prominence of ‘Levelling Up’, its latest incarnation, shows the political impetus to act on rising inequalities. But policy efforts are not working. Regional disparities have persisted and even worsened in recent years, despite the rhetoric.

Tackling stagnant growth and low regional productivity is now a cross-party imperative.

The Conservatives cannot hold together their 2019 electoral coalition without realising the promise of growth in the regions after leaving the European Union.

Labour cannot achieve its growth mission of driving growth to the highest rates in the G7 without tackling regional underperformance.

And the prize is significant: 78% of the UK’s GDP is generated outside London. If our non-London cities had the same skills profile as the national average, and saw the agglomeration benefits typical of West European cities of similar size, UK GDP could rise by £55bn, bringing in around £13bn of additional tax revenue every year.

In this year of a General Election, we will see whether either or both parties can bring the leadership and mandate needed to reverse generational challenges facing the UK’s regions and nations.

Our two previous papers in this series give us reason to believe that there are policies that could better support all regions of the UK to prosper: our first paper identified reforms that could help unlock the growth potential of all the UK’s regions; our second identified the political and administrative barriers that were preventing us from realising that opportunity.