Britain's Economic Resilience: A Tale of Two Cities

The 2007/8 global financial crisis had a profound impact on the UK economy, with varying effects on different regions. While some regions demonstrated remarkable resilience, others struggled to recover. This article explores the factors contributing to the differing levels of economic resilience among UK regions and offers insights into how policy makers can address these factors to improve overall resilience.

Initial Economic Conditions

Regions with stronger economies before the recession were better equipped to withstand the shock and recover more quickly. For instance, the South East region maintained its productivity levels better than other regions during the crisis, with a productivity level only 1.5% lower than its pre-recession peak in 2009 (Beatty and Fothergill, 2019). To improve resilience, policy makers should focus on promoting economic growth and diversification in regions with weaker initial economic conditions through targeted investments in infrastructure, education, and skills development.

Human Capital

Regions with a more skilled and educated workforce tend to be more resilient. To improve human capital, policy makers should invest in education and training programs that equip workers with the skills needed to adapt to changing economic conditions. This can be achieved through initiatives such as apprenticeships, bootcamps, and the Growth and Skills Levy.

Age Structure

Regions with a younger population may have more difficulty recovering from a recession due to lower employment rates and higher unemployment. To address this, policy makers should focus on creating job opportunities for young people and supporting them in their career development.

Urbanisation

Urban regions tend to be more resilient due to their diverse economies and access to a larger talent pool. To improve resilience in less urbanised regions, policy makers should invest in infrastructure and connectivity to facilitate the movement of people and goods, and encourage the development of knowledge-based industries.

Geography

Regions with better access to markets and resources tend to be more resilient. To address this, policy makers should invest in infrastructure projects that improve connectivity and facilitate the movement of goods and people.

To effectively address these factors, policy makers should work in collaboration with businesses and other stakeholders to develop a comprehensive strategy for improving economic resilience. This can be achieved through a formal 'operating model' for decision-making that aligns resilience with growth objectives, and the creation of a risk committee that brings together senior cross-Whitehall resilience leads, business representatives, and academics. Additionally, the government should expand successful engagement methods used for sanctions policy to other areas, helping businesses better understand foreign policy decisions that affect their operations. By working together, government and businesses can build a more resilient economy that is better equipped to withstand future shocks.

In conclusion, the varying levels of economic resilience among UK regions can be attributed to several factors, including initial economic conditions, human capital, age structure, urbanisation, and geography. To improve overall resilience, policy makers should address these factors through targeted policies and collaboration with businesses and other stakeholders. By doing so, the UK can build a more resilient economy that is better equipped to face future challenges.

Sources:
- Beatty, C. and Fothergill, S. (2019), ‘Local productivity: the real differences across UK cities and regions’, Centre for Regional Economic and Social Research (Sheffield Hallam University), available at: http://shura.shu.ac.uk/24893/.
- Beatty, C. and Fothergill, S. (2020), ‘Recovery or stagnation? Britain’s older industrial towns since the recession’, Regional Studies.