Extract 2 – Mitigating Regional Economic Disparities

The data in Table 2.1 compares the level of regional inequality in selected economies. The 90:10 figures denote the ratio between regional GDP per capita in the 90th percentile (the income level which only 10% of the country's regions exceed) to the 10th percentile (the level which only 10% of the country's regions earn less than).

Table 2.1 Measures of inequality in regional GDP per capita, by country (2023)

This data demonstrates the pressure for an active policy response by the UK government to close regional gaps. In early 2024, a £6.8 billion Regional Prosperity Fund (RPF) was implemented, focusing heavily on upgrading infrastructure and retraining workers in historically sidelined provincial areas.

This fund's launch follows a policy paper by the National Institute of Economic and Social Research, which outlined several distinct supply-side interventions to combat severe regional disparities:

• Invest in regional high-speed green transit networks: This addresses the current regional imbalance in transit infrastructure spending, which remains 3.5 times higher per capita in the capital and surrounding metropolitan areas than in outer provincial regions.
• Provide targeted R&D tax incentives and digital infrastructure subsidies: This fosters high-tech enterprise zones in former industrial and remote coastal towns, rectifying the current reality where capital-intensive digital investment in major cities is 2.4 times higher per capita than the national average.
• Decentralise public administration and executive bodies: Relocate major government departments and public agencies to provincial cities, targeting the stark imbalance where 28% of all administrative civil servants and nearly 65% of senior executive posts remain based in the capital.
• Devolve capital regeneration grants directly to local authorities: Provide direct funding to municipal governments to rehabilitate declining urban centers, rebuild community facilities, and expand vocational retraining centers.

Determining the most suitable supply-side intervention is further complicated by structural shifts in the labor market. Transitioning to a net-zero carbon economy may lead to the rapid obsolescence of traditional industrial skills in manufacturing hubs already enduring long-term structural unemployment. Conversely, some economists argue that the growth of green industries could yield significant structural employment gains if regional workforces are appropriately prepared.