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Mind the gap: bridging the growing North South divide
Boris Johnson has wasted no time in setting to work on his election pledge to increase investment in the North of England and Midlands, in a bid to boost economic growth and prosperity within some key first-time Tory constituencies. As widely reported by the press over the Christmas break, it is understood that HM Treasury could make wholesale changes to the way in which public investment is allocated to key economic growth interventions across the country, with value for money and economic appraisal assessments (as guided by the Treasury’s ‘Green Book’ guidance for nearly half a century) recast to focus explicitly on boosting economic wellbeing in the North and Midlands. This could affect future national government investment decisions in a range of transport, infrastructure and business growth projects, shifting the focus away from national economic growth outcomes (and overall scale of economic benefit) towards reducing inequality and the ‘productivity gap’ between northern and southern England. Further detail is expected in the Spring Budget – but on the face of it, these proposals could have a significant impact upon the spatial distribution of government resources and funding available to stimulate and encourage economic growth. The economic (and political) rationale is clear. The UK’s ‘economic divide’ – the disparity between the least and most productive parts of the country – is growing according to the latest regional output data released by ONS in December. The data shows that the gap in productivity (measured in terms of economic output or GDP per person) between the UK’s richest region (London) and the poorest (North East) widened last year, and that London’s share of, or contribution to, the national economy has increased at the expense of other regions (see Figure 1). Figure 1: Share of UK GDP at current prices Source: Financial Times Online, based on data from ONS The statistics underline the scale of the productivity challenge facing the new Conservative government, which prompted publication of the UK Industrial Strategy just over two years ago. This calls for all parts of the country to boost their economic contribution to UK plc, by drawing on their distinctive economic strengths, competitive advantages and growth opportunities (as summarised in a previous Lichfields blog). UK regional inequality is amongst the worst in the developed world and is a problem that successive governments have been grappling with for many years. Stark disparities in economic performance across the country, as shown in the map below, have become a familiar trend. Figure 2: Workforce productivity by local authority in England (2018) Source: Experian 2019 / Lichfields analysis Rightly then, the issue has been attracting increasing political attention over recent months and years, reinforced by the work of independent initiatives such as the UK2027 Commission, which calls for a long-term plan to tackle regional inequality and a national renewal fund along the lines of Germany’s East-West reunification strategy. Commission Chair Lord Kerslake’s keynote address at the recent Institute of Economic Development Conference referred to the UK being at a ‘turning point’. The Commission’s First Report published last year described previous government action to tackle inequalities across the UK as underpowered ‘pea shooter’ and ‘sticking plaster’ policies – too little and too short-lived. The report argues that if we are really to shift the dial on spatial inequalities, what we require for the future will need to be, “structural, generational, interlocking and at scale”. This begs the question: can the deliberate targeting of public investment away from London and the wider South East in itself help to bring about or instigate the structural shift needed? The proposals will no doubt be welcomed by many, but arguably need to be accompanied by a more holistic policy framework that is clear about how each part of the UK can play a complementary role in driving forward productivity improvements and genuinely inclusive growth. Indeed, the latest ONS output statistics identify some concerning trends within parts of the country that have traditionally performed well, such as the South East region which recorded zero per capita growth last year (Figure 3). The South West also recorded sluggish levels of growth, while the West Midlands (an area that could benefit from this ‘rebalancing’ investment) outstripped London in terms of per capita growth. There are also significant disparities within regions that can be obscured through use of broad regional measures, for example the presence of deprived coastal communities in the South East. As ever, there are clearly some spatial nuances at play. Figure 3: Annual % change in output by region (2018) Source: Financial Times Online, based on data from ONS We can expect a lot more coverage and comment on this topic between now and the Spring Budget, where the devil may well be in the detail.

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Shifting sands and sea change: How can our seaside towns respond to the productivity challenge?
With the summer holiday season just around the corner, coastal towns up and down the country will be hoping the sun comes out to tempt the great British public to the seaside. It can be easy to forget that many of these coastal communities are in desperate need of regeneration and economic revitalisation, suffering from ongoing decline of their core industries such as domestic tourism, fishing, shipbuilding and port activities, and the challenges of seasonality. Their location on the periphery of the country places them on the periphery of the economy, creating a host of socio-economic problems and in turn, barriers to economic prosperity for their communities. The recent publication of a House of Lords Select Committee report on “the future of seaside towns” provides a timely reminder of the scale and complexity of this challenge, and sets out a series of recommendations for how seaside towns can once again become prosperous and desirable places to live and visit. Reflecting the different stages of evolution of these places, the UK’s seaside economy is far from uniform. Some locations, like Bournemouth and Brighton on the south coast, have benefitted from a model of reinvention that is not available to all. Meanwhile, many smaller coastal towns have seen their unique selling point diminish. Their sense of isolation has left small town, seaside communities overlooked and facing profound economic and social challenges. Blackpool for instance, which tops the seaside destination ‘leader board’ in terms of visitor nights, faces some of the most acute deprivation in the country. The national imperative to drive up productivity and earning power of people across the country – as set out in the government’s Industrial Strategy – provides a further incentive and pertinent backdrop to the Select Committee’s recommendations. Last week saw the publication of a new Tourism Sector Deal setting out how the government will work in partnership with the tourism industry to boost productivity, develop skills and support destinations to enhance their visitor offer. It begs the question: how can Britain’s seaside towns respond to the UK’s productivity challenge and contribute towards national prosperity? The development of Local Industrial Strategies provides the most immediate opportunity for ensuring that the needs of coastal areas are better reflected in local plans to drive economic development, with most well underway via Local Enterprise Partnerships (LEPs) and Combined Authorities. Framed in context of the Industrial Strategy’s five foundations of productivity (ideas, people, infrastructure, business environment and place), there seem to be a number of key areas of opportunity to boost the economic prosperity of our seaside towns: Economic diversification: coastal communities increasingly need to recognise, promote and support diversification of their economies where a sole reliance on tourism is no longer a viable option. Much can be learned from places like Folkestone in Kent, where a new Creative Quarter has been delivered through a regeneration strategy based on the arts, the creative industries, and education. Transport connectivity: is holding back many coastal communities and hindering the realisation of their economic potential. Sub-optimal connections (such as inadequate rail connections and road access via single lane carriageways) can limit the potential for investment in economic diversification, and improvements to transport will be vital in supporting further economic development in isolated coastal communities quite literally at ‘the end of the line’. The forthcoming Shared Prosperity Fund is likely to provide a key source of funding in this regard, alongside the next round of the Coastal Communities Fund. Digital infrastructure: improved digital connectivity presents a significant opportunity to overcome the challenges of peripherality in coastal areas, and would help existing businesses, encourage new businesses, and enable people to work more flexibly from home to achieve the all-important work-life balance; a core part of the offer. Skills and aspirations: limited access to education, in particular to further education (FE) and higher education (HE) institutions, is severely restricting opportunities, denting aspirations for young people in some coastal areas and having a direct knock-on impact on local economic productivity and growth. Recognising that there is never going to be a ‘bricks-and-mortar offering’ of HE in every coastal town, this might necessitate greater scope for flexible access both to FE and HE, such as online, part-time and distance learning. Maximising unique assets: what makes coastal communities different is their unique asset: the coastal and marine environment that surrounds them. Seaside towns that have been most successful at reinventing themselves are those that have identified their own special character and USP. Key to this is a long-term, place-based vision that is supported by local leaders and grounded in each town’s unique assets, whether this be a combination of inherent geography, history, geology and ecology, or created features, such as attractions and culture. Examples of such assets include a university arts centre in Aberystwyth, The Stade historic fishing area in Hastings and a specialist university for the creative industries in Falmouth. The Stade historic fishing beach in Hastings, East Sussex Some of our recent work in the Lichfields economics team has focused on the huge growth potential of our seaside economies and making the case for targeted investment in infrastructure and associated projects to unlock this potential; in locations such as Gosport, Worthing, Southend-on-Sea and Eastbourne. With around half of all LEPs comprising coastal or estuarine areas, it will be interesting to see whether Local Industrial Strategies are embraced as an opportunity for renewed focus on addressing the skills gaps, low wage economies and aspiration challenges faced by many coastal communities. Whether by drawing on existing assets (such as historic infrastructure) or technologies of the future (such as emerging green industries that harness wind and wave power), it’s time for our much-loved seaside towns to play a more meaningful role in the UK’s plan to drive innovation and growth across the country.  

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