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London’s growth least ‘inclusive’, as north/south divide grows

Findings from the Inclusive Growth Monitor highlight the ever-widening gap between south east England and the rest, and the need for a more regionally distributed economy, says Anthony Rafferty

This month the Inclusive Growth Analysis Unit, a joint venture between the Joseph Rowntree Foundation and University of Manchester, launched its second annual Inclusive Growth Monitor of local enterprise partnerships (leps).

Despite some improvements in many areas between 2010-2015 during economic recovery, the findings are of concern for anybody hoping for a regional economic rebalance or narrowing of the gap between the north/midlands and the south.

With London continuing to pull away from the other regions, a more inclusive model of growth still requires a better regionally distributed economy.

Using a range of 18 indicators, the IG Monitor considers the extent to which people living within different areas of England can be considered as included in the benefits of growth and national prosperity and are equipped with the skills that aid such participation. Each lep is given a score on 18 different indicators based on prosperity – skills, jobs, and economic output – and economic inclusion: how much this prosperity is accompanied by improvements in incomes at the bottom of the distribution, unemployment and economic inactivity, and the cost of living.

The findings of the report are likely to be interpreted differently by many. Over the five years of the study (2010-2015) what is clear is that London and the south east have continued to power away from much of the rest of the country in terms economic output, as well as broader factors that contribute to prosperity such the number and quality of jobs and the skills of the workforce.

‘An enlightened regionalism needs to be at the heart

of trade and investment deals struck and industrial strategy’

The fact that London stands as an economic giant compared to other cities and that the south east remains the most prosperous region is likely no surprise to anybody. What is concerning however is how much this gap has continued to widen.

Growth inside the capital however has not been anything near inclusive, with London facing its own challenges becoming an increasingly economically polarised city. Whereas London topped the charts in terms of improvements on the prosperity measures, it saw the least positive change of all the leps in terms of economic inclusion. It performed particularly badly in relation to the cost of living, linked to housing affordability, soaring rental prices, and had less progress than many other areas in reducing levels of fuel poverty.

Although a regional rebalance is necessary, the inequalities within our cities and regions should also not be overlooked. The near monopoly of London in the national economy also has knock-on effects for the quality of life of those living and working in the capital.

Interventions are needed

The UK benefits in many ways from a strong financial services sector centred around London in the jobs, prosperity and revenue it generates, but for the regions this severe imbalance in economic strength could be viewed as forcing a situation of economic reliance rather than self-determination, where many of the regions in the north and Midlands are ascribed the role of poorer cousins to the capital, by fate of history and de-industrialisation, but also through national policy and so not by choice.

Creating a fairer and better regionally distributed economy is no mean feat presenting challenges on several fronts. Stronger regional governance, public investment and better infrastructure are likely part of the picture, as well as a focus on affordable housing both in the north and the south.

More needs to be done however to decentralize the economy from London, to help support and provide incentives for companies to move northwards, attract foreign direct investment into the regions, and retain businesses that operate already away from the capital area.

An enlightened regionalism that understands geographical issues surrounding inclusive growth needs to be at the heart of trade and investment deals struck and industrial strategy. This will provide a fairer national economy and help release some of the pressures on the south east that arise from having such a high concentration of economic activity in one location.

The high costs of doing business in London present an opportunity for the regions and for businesses to improve their costs and competitiveness through moving out from the capital. Recent advances in the stability of ICT technology make the idea of a primary commuter city as the central point of economic organisation look increasingly out-dated.

National policy can do more to help improve productivity by supporting the modernisation of work organisation practices, supporting a regionalisation of the economy whilst improving work life-balance and the quality of life of the workforce and their families.

For national and local government the findings from this year’s IG Monitor highlight the need for policy to seek to address the regional imbalance in economic opportunities and skills. Left to the market these problems will not solve themselves and may continue to worsen.

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