UK productivity: the London effect

For many years the UK government has pumped billions of pounds into depressed English regions in the hope it would help narrow their growth, employment and productivity gap with London and the South East. But new research by Martin Boddy and colleagues at the University of the West of England suggests that those large regional differences can largely be explained. Regional Productivity Differentials: Explaining the Gap (UWE discussion paper 05-15) argues that these differences "can be explained by a fairly limited set of variables", including travel-time from London.

Issues of productivity and competitiveness at a regional level have increasingly been a focus for both academic and policy concern. Significant and persistent differences in productivity are evident both in the UK and across Europe as a whole. This paper uses data relating to individual business units to examine the determinants of regional productivity differentials across British regions. It demonstrates that the substantial differences in regional productivity can be explained by a fairly limited set of variables. These include industry mix, the capital employed by the firm, business ownership and the skills of the local labour force. Also important are location-specific factors including travel-time from London and population density.

Taken together, these factors largely explain regional productivity differentials. The analysis extends those studies that have identified but not quantified the role of different ‘productivity drivers’ in a systematic fashion or that have focused on only a limited set of drivers. It has important policy implications particular in relation to the role of travel time and possible effects of density and agglomeration.

If they're right, the sensible public policy response might be to reduce regional assistance and spend the money on improving transport links with London instead.

Comments

[geographer in the styx]

Having found this blog on a google search......When I first read the final comment "the sensible public policy response might be to reduce regional assistance and spend the money on improving transport links with London instead", my immediate thought was they author must be based in London, and yes! lo and behold, comment from a 'London based economist'. I'm continually depressed by the London-centric view that dominates many people who could perhaps be in a position to advise those in power about Regional Policy. I wonder if they have ever left London long enough to realise that there are tens of millions people outside of Greater London, who would consider an extended commute to London an asinine solution to the 'Regional problem'. There are many instances where strong a regional re-distribution leads to stronger national economy - Germany springs to mind. Maybe a solution would be to break the strong geographical proximity between Government and the 'City'- as the Government always seems to have a tendancy to do what good for the 'City' rather that the regions....??