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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  • Pete Baker

    If there is a small bright spot for Northern Ireland it is that in contrast with most other pereferal regions, private sector growth has slightly outpaced the public sector in the period since Labour came to office.

    Hmm.. has anyone told the Secretary of State for Wales and Northern Ireland, Peter Hain?

  • Brian Boru

    I think its a long way in the North from the runaway growth in the South. Oh well, you make your bed you lie in it…;)

  • Crataegus

    you make your bed you lie in it..

    30 years of murder and mayhem didn’t help though the current lack of real political purpose is a self inflicted wound. For the economy here to radically improve would need a fundamental change of attitude coupled with local control over local fiscal policy, but then would our politicians be willing to make some of the difficult decisions? Can’t see it.

  • Brian Boru

    English MPs will always put England first. Remember that.

  • DK

    There is regionalism within the Republic of Ireland as well – it would be interesting to see where NI would sit on a map of regional growth in the Republic (anyone have a link?)

  • Stephen Copeland

    a small bright spot for Northern Ireland … is that … private sector growth has slightly outpaced the public sector in the period since Labour came to office.

    This also happens to coincide with the Celtic Tiger a few km down the road. Maybe the reason for the growth in the north is the booming market in the south? This element appears to be lacking in the analysis.

    The south provides a booming market for raw materials (to Seán Quinn’s benefit), as well as foodstuffs and other products. It also provides a large market for northern workers, who then may go home to spend their money, artificially increasing the level of demand in the north as well.

  • IJP

    The lesson in this particular case goes well beyond NI.

    The truth is you need to create the conditions for wealth creation rather than just ‘throwing money at the problem’.

    This even applies, for example, in Africa. You can’t just throw money at the place – that just leads to corrupt elites and no difference for the majority. It is knowledge, education and information they need to create their own wealth that is necessary, not just a transfer of ours.

    Small chance of any proper decisions being taken in the North any time soon. Sure, our politicos would rather rant and rage about ‘not doing the Government’s dirty work’ (great idea lads, complain about direct rulers and then squander the wee bit of power you have) than take any real decisions.

  • Young Fogey

    Mick

    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.

    In spite of or because of?

    Brian Boru

    I think its a long way in the North from the runaway growth in the South.

    Yes, Brian, just remove that nasty border and Twinbrook will look like Dalkey overnight… it’s a bit more complex than that. In economic terms the presence of the border means nothing, anyway. In terms of legislative and fiscal environment, adapting Southern norms in the North will mean dismantling much of the public and ‘voluntary’ sector apparatus that exists in NI; no skin off my nose but I can’t see much of Northern Nationalism wearing it.

    Stephen Copeland

    It also provides a large market for northern workers, who then may go home to spend their money, artificially increasing the level of demand in the north as well.

    And there was me thinking you would think the border was the artificial thing, not the fact that workers cross it.

    IJP

    This even applies, for example, in Africa. You can’t just throw money at the place – that just leads to corrupt elites and no difference for the majority.

    That sounds like Northern Ireland alright. We should bring in some Botswanans to teach us how to kick start a stagnant economy.

  • Crataegus

    IJP

    “Small chance of any proper decisions being taken in the North any time soon”.

    Too true and it is a disgrace especially given the calibre of the current Labour Ministers, their muddled and often incoherent decisions and cynical lack of vision. Their collective decisions if executed will take decades to redeem.

    If I preformed in a manner similar to our political class I would never be out of court so with that in mind is it not time to consider if those standing for election should be required to sign a contract so that if elected we would have a clearer idea as to what their duties and responsibilities actually are?

    As for the economy if someone wants to set up a business we should have the attitude of trying to facilitate rather than doing our outmost to delay and cripple. The multiplicity of bodies with conflicting requirements beggars belief.

  • George

    Another survey from management consultancy Hay Group has shown that in terms of real pay the North-South divide may be a thing of the past.

    “The Real Pay in the UK report examined detailed salary and cost-of-living information at all levels of employment, from un-skilled work to senior management, to show real pay levels for 13 regions across the UK.

    It reveals that employees in Scotland, Yorkshire and the North East are significantly better off than the rest of the country. And while high salaries in central London more than compensate for the high cost of living, salaries for employees in the South East, South West and East Anglia leave employees relatively out of pocket.”

    1st (joint): Central London, Scotland
    2nd: Yorkshire
    3rd: North East
    4th (joint): Outer London, Wales
    5th (joint): North West, East Midlands
    6th: West Midlands
    7th (joint): South East, South West
    8th: East Anglia
    9th: Northern Ireland

    The link:
    http://www.personneltoday.com/Articles/2006/03/21/34523/Is+the+North-South+divide+a+thing+of+the+past.htm

  • smcgiff

    George,

    Kudos for resisting the urge to actually point out that NI came last! 😉

  • Stephen Copeland

    Actually smgiff, not only George resisted the temptation to mention Northern Ireland. Look at that telling phrase at the end of the article:

    salaries for employees in the South East, South West and East Anglia leave employees relatively out of pocket.

    In other words, the writer of the article doesn’t really see NI as part of the UK labour market. He had to include it in the stats, but omits it from the commentary. Hain’s north-south economy obviously includes a north-south labour market, and his vision is shared wider than some unionists may like to think.

  • Young Fogey

    In other words, the writer of the article doesn’t really see NI as part of the UK labour market

    Goodness me, you’re really straining to hear the sounds of revolution under every bush today, Stephen. Possibly he doesn’t – and who would blame him with people like you running about in it? 😉

    Alternatively, he might be commenting on the fact that the perception is that the South of England is perceived as a wealthy area by most people, but this doesn’t match reality once high house prices are taken into account. The general perception of Northern Ireland is not that of a wealthy area and therefore no-one is surprised to see it come last in an economic league table.

    Belive it or not, not everything revolves around a United Ireland, whether or not it makes economic space and whether our breeding patterns are going to make it more likely or not.

    As for the all-Ireland labour market – that’s a no brainer – you drive to the South (or at least you do until the eco-fundies ban it) and you fly to England (or at least you… you get the idea).

  • PHIL

    Brian Boru

    “English MPs will always put England first. Remember that”.

    And Irish, Scottish and Welsh MP’s will always vote on English matters that they have no mandate to meddle in. remember that too.

  • Crataegus

    Phil

    You don’t have some blow ins, belonging to a government that allegedly allocates peerages on the basis of loans, making all sorts of strange planning decisions, ignoring local consultation and completely up ending local education, local administration, the water service, selling off public assets etc etc.

    I am not saying our local political riff raff are entirely blameless but there is a difference in scale. In my personal opinion the current batch of Labour Ministers are simply lamentable.

  • “…mean dismantling much of the public and ‘voluntary’ sector apparatus that exists in NI; no skin off my nose but I can’t see much of Northern Nationalism wearing it.” Posted by Young Fogey on Mar 21, 2006 @ 11:27 AM

    Goodness me, you’re really straining NOT to hear the sounds of change over the last 30 odd years under every bush today, Young Fogey…

    Is one even allowed say these type of things these days?

  • George Dutton

    Please whatever you do don`t think I like Thatcher I think she was one of the greatest evils to have ever walked this earth.
    But I have to tell you this there has always been the north/south divide and all governments have done to all intent and purpose very little to change this.Given that the UK is a small place the only reason I can come up with is to keep the wealth concentrated for the few.But to blame Thatcher for the gap that now exits is not true she kept it going with a relish would be more to the truth.The gap really grew in the early 1970s.In 1969 a three bed thomson semi cost about £6,500 in a good part of North London the same house in the North East of England cost about £4,300.By 1975 the same house in North London was selling for in excess of £75,000 the same house in the North East was selling for £4,900.Well you all know what they cost today.