One of the big challenges is that the imbalances in growth are partly the result of sector dominance in certain regions and are therefore partly structural. Future policy will need to be sufficiently powerful to overcome these headwinds.
Tilt the playing field
The recent initiatives to improve geographic economic balance in the UK have been successful in boosting performance in some locations but have not affected performance significantly across the country, especially in some of the places with the lowest economic growth rates. If we are serious about improving growth rates more widely then more targeted intervention might be required. Our sector forecasts show the public sector, manufacturing and technology sectors are the most important for rebalancing. First, the Government needs to ensure that public spending plans do not unduly impact the places facing the most challenging economic conditions.
Second, the Industrial Strategy has the potential to support targeted initiatives. As EY’s research on foreign direct investment (FDI) with the Centre For Towns demonstrated, compared to services sector projects, significant manufacturing investment does flow to a wider range of places. Extending the Industrial Strategy to drive manufacturing activity at a local level, offers the potential to boost growth in a wide range of places.
Third, manufacturing cannot single-handedly drive nationwide geographic rebalancing. The technology sector is fast growing and concentrated in the South of England. For a sector that has the potential to operate virtually, and across geographic boundaries, there does appear to be potential to use technology to drive greater geographic balance. A faster roll-out of high-speed fibre would be a key prerequisite but this strategy would need to be broader and include skills development, support for training, and applications development that enable people to work virtually.
Summary
- Leading cities will continue to outperform with GVA expected to grow 2.2% annually on average, compared to growth of 1.6% for towns. Large city employment will grow twice as fast than in towns
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