UK’s twin track economy…

There’s an excellent series of articles in the FT this week under the heading of New Britain. Yesterday’s piece focused on the Tees Valley of the North East, and the Thames Valley in the south. Middlesbrough and Slough in fact. The stats they have compiled show two quite separate economic realities: one flexible and outward looking, the other inward looking and experiencing negative growth. Perhaps more worryingly (see graph), the wealth creation capacity of the poorest in society has dropped slowly but steadily since Labour took over in 1997.

Statistics compiled by the FT reveal a dramatic divergence in fortunes between regions. In 2003, the last year for which detailed figures are available, gross value added per head – the best measure of economic performance – was £11,100 ($20,840, €16,440) in south Teesside. In Berkshire, the county that includes the borough of Windsor and Maidenhead, it was £26,500.

In the past nine years, Berkshire has soared ahead, growing by 35 per cent in real terms. In south Teesside, growth has gone into reverse, falling 0.5 per cent.

The example cannot be dismissed as extreme: regional disparities have grown in all parts of the UK since 1997. The Financial Times has calculated that the poorest 20 per cent of Britain, measured by a region’s average value added per head, was responsible for 14 per cent of national economic output in 1997. By 2003, the equivalent areas contributed only 13.3 per cent. Meanwhile rich areas became significantly richer: the 20 per cent of Britons living in the most prosperous areas contributed 30.2 per cent of the economy in 1997 and 31.9 per cent in 2003.

However, these trends predate by some the ascent of Labour into office:

Where globalisation has ripped the old heart out of the Tees Valley economy, it has powered a 15-year boom for the Thames Valley. Windsor and Maidenhead’s location – close to Heathrow, an hour’s drive from central London – have proved a powerful lure for international companies. In the past 15 years, CA (formerly known as Computer Associates), Nortel, Hitachi and Hutchison 3G have located their European headquarters in the borough.

The neighbouring town of Slough boasts more European headquarters than Scotland, Wales and Northern Ireland together [my italics]. The wider Thames Valley region is home to a host of companies including Vodafone, Oracle, Microsoft, Cisco, Dell and Siemens. Even though many of these global companies have faced hard times in recent years, those who lost their jobs have seldom found themselves out of work for long, their skills in ready demand at other companies in the region.

The key is not simply in attracting large scale investment. Giles argues that there is a passivity in Teeside, that has its routes in the idea that large industrial concerns should supply large numbers of well paid jobs to the local population.

Part of the reason seems to lie in a less tangible difference in regional psyches that predisposes one valley to success and the other to failure. Talk to anyone involved in running, supporting or researching companies in the Tees Valley and you sense what Ray Hudson, a professor at Durham University who has studied the area for 30 years, calls a “pervasive way of thought” that only large companies offer security.

Last year the number of VAT-registered companies per 10,000 population – considered the best gauge of entrepreneurialism – stood at 166 in Middlesbrough compared with 641 in Windsor and Maidenhead. Moreover, the handful of start-up companies that exist in the Tees Valley tend to be in low-value added sectors, predominantly car repair operations and beauty salons, which will never expand to serve a regional – let alone national – market, according to David Storey, a Warwick University professor.

In the offices of Bob Little & Co, a rare Tees Valley success story, Kath Taylor complains: “Success here isn’t measured by you as an individual but by your position in a large company.” She is seeking central government funds to promote enterprise in schools, aware that the absence of a risk culture is holding the Tees Valley back.

I’ve requested that VAT Registered figure for Northern Ireland from Invest Northern Ireland to see where we sit on the scale.