The economic underperformance of the UK's regions has been a persistent problem for decades, leaving second cities such as Birmingham and Manchester struggling to keep pace with London and the South East. According to data from international benchmarking reports, productivity levels in these regions lag behind those in France, Germany, and Italy by a significant 20-30%. This regional disparity not only affects economic growth but also has far-reaching implications for the country's overall prosperity.
Advocates of devolution, including Andy Burnham, Mayor of Greater Manchester, argue that granting more autonomy to regions could be the key to unlocking their full potential. By empowering local authorities to make decisions on investment and policy, they believe that productivity levels can be boosted and economic growth accelerated. A notable example of this approach is Germany's reunification programme, which invested heavily in the East, resulting in a significant improvement in productivity levels.
A recent report by the OECD, 'Enhancing Productivity in UK core cities', highlights the need for innovative solutions to address the region-London productivity gap. The report identifies low skill levels and an over-reliance on lower-productivity industries as key contributing factors. Similarly, esteemed economists Abhijit Banerjee and Esther Duflo argue that place-based projects are essential in addressing regional underperformance in their book 'Good Economics for Hard Times'. They stress the importance of investing in local infrastructure and human capital to drive economic growth.
While the success of devolution will depend on factors such as investment levels and the extent of power devolved to local authorities, one thing is clear: radical policies are needed to address the regional productivity gap. With the UK's regions underperforming economically, it is imperative that policymakers consider bold solutions to unlock their potential.