Diverging economies within the UK

Much of the recent engaged economic debate has been within the all island context. However, the FT has an interesting piece on how the UK is running on a two track economy: one with a flours hing private sector in in London, the South East, Eastern and South West regions; and the others effectively bust, and held up mostly by a massive degree of public expenditure. If there is a small bright spot for Northern Ireland it is that in contrast with most other peripheral regions, private sector growth has slightly outpaced the public sector in the period since Labour came to office. Chris Giles notes:

What seems to be happening, according to Prof Henley, is a divergence on a local as well as a national level: “Just as London and the South-East are pulling away from the rest of the UK, so Cardiff is pulling away from the real periphery in Wales.”

The pattern becomes clear from a simple analysis of the hot spots in the economy and the weakest localities. Half of the 10 top performing localities were from London and the South-East and they all enjoyed increases in prosperity per head of 3.5 per cent or more a year on average since 1997.

In contrast, 11 localities have suffered a decrease in gross value added per person since 1997, and four of the bottom five are in far-flung parts of Scotland or Wales. The existence of boom and bust within a nation is rare, according to the OECD. Between 1996 and 2001, only Turkey of the 30 OECD countries had a wider spread of growth rates between its strongest and its weakest regions.

It is difficult to escape the conclusion that regional and local UK economies under Mr Blair’s government have become more divergent more quickly than under Lady Thatcher, in spite of the massive equalising force of surging public expenditure.

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