The UK Regional and Urban Agenda: Today’s Realities and Tomorrow’s Challenges

Philip McCann Insights emerging from the book

The UK Regional-National Economic Problem: Geography, Globalisation and Governance, 2016, Routledge, 566 pp ISBN: 978-1-138-64723-7

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The reality of the UK regional and urban problem: A regional problem • Is a regional problem, overlaying urban issues • The problem direction is regional to urban, not urban to regional • The problem is primarily due to the differential regional impacts of globalisation • UK regional imbalances are NOT: – A geography of education problem; or a spatial ‘sorting’ problem; or an urban economics or a New Economic Geography problem; or a city-size problem: or a problem of land use planning constraints • Internally the UK is interregionally decoupling, dislocating and disconnecting 2

The reality of the UK regional and urban problem: worst in OECD UK Interregional problem is the worst in the OECD London and hinterland is decoupling from the rest

UK is diverging, dislocating and decoupling into 3 different economies - London + SE, E, SW - Scotland - WM, EM, NW, YH, NE, W, NI 3

The reality of the UK regional and urban problem: also a governance problem • UK regional imbalances also secondarily a governance problem • UK centralised/top down governance systems unsuited to addressing the economic geography of globalisation • Also, more typical of developing or recently industrialised nation • Other advanced economies have better adjustment mechanisms – Federal systems (USA , Canada, Germany, Austria, Australia, Belgium) – Or bottom-up centralised systems (Nordic countries, The Netherlands) – Or rapidly decentralising countries with enhanced intermediate governance (France, Japan)

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The reality of the UK regional and urban problem: with two economic systems • Two different economic systems - The Economist 30.11.2013 analogy of co-existence of rugby league and rugby union

• Ostensibly the same …BUT… different rules, different rewards, different playing field, different institutions, different teams, different audience, different culture, different geography 5

The reality of the UK regional and urban problem: shaped by perceptions of London An issue of perceptions – UK economic narratives overwhelmingly shaped by the experience of London + hinterland – not by the UK as a whole

… is the UK dynamic or stuck?.. …is it fast or slow?...... ….is it overtaking or not?

UK is only an average economic performer by both EU and OECD standards – because almost exactly half of the UK underperforms to the same degree as half of the UK over performs – comparisons with Germany and USA 6

The reality of the UK regional and urban problem: shaped by impact of globalisation • The causes of dislocation and decoupling relate primarily to the different UK regional impacts of globalisation

• London and the rest of the UK are totally different in magnitude of investment capital, human capital, social capital, and infrastructure capital • Driven by London’s global city status and role in the era of modern globalisation 7

UK Regional and Urban Agenda: Today’s Realities: uni-directional to London ….but internally within the UK these connectivity and capital flows are largely uni-directional …….

… with little or no spillovers or linkages between London + hinterland and the rest

… rather than being multi-directional …. to all regions

Policy mistakes compounded by.. • ‘Jam spreading’ analogy

• London as a motor or engine for the whole of the UK with spread effects cascading across the whole country

• London as a ‘dark star’ sucking in resources from all of the UK 9

Tomorrow's challenge for UK’s Cities and Regions: Lots of reforms … but…?

Tommorrow’s challenge for UK’s Cities and Regions: top down and horizontal failure • UK almost uniquely faces both a top-down governance failure and also a horizontal governance failure – Top-down failure is a capability/enabling/mobilisation/engagement problem – Horizontal failure is a coordination and representation problem • The EU referendum and the Scottish independence referendum both reflect a geography of fundamentally different social and political perceptions, shaped by differential regional impacts of globalisation • Post-Brexit shocks - most UK regions are 2, 3 or 4 times more dependent on EU markets than either London or Scotland • Disconnection: Most pro-Brexit regions are also the most dependent on EU markets 11

16,0% Leicestershire, Rutland and Eastern Yorkshire and North Northamptonshire Cumbria Lincolnshire Gloucestershire, Wiltshire and Lancashire Bristol/Bath area Hampshire and Isle of Wight Herefordshire, Worcestershire and Warwickshire Dorset and Somerset Kent

14,0%

Shropshire and Staffordshire

Cheshire 12,0%

% region's GDP exported to the EU

North Yorkshire

Devon

Essex West Yorkshire Lincolnshire Greater Manchester Derbyshire and Notts Berkshire, Bucks and Oxfordshire West Mids East Anglia South Yorks Northumberland & Tyne and Bedfordshire and Hertfordshire Tees Valley and Durham Wear Cornwall and Isles of Scilly Surrey, East and West Sussex South Western Scotland Merseyside

10,0%

8,0%

Outer London

6,0%

East Wales North Eastern Scotland West Wales and the Valleys

Inner London 4,0%

Eastern Scotland

Highland and Islands R² = 0,4739 2,0%

0,0% 30

35

40

45

50

% voting to leave the EU

55

60

12

65

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Tomorrow’s Challenges for UK’s Cities and Regions: Change narrative • Need to shift over time from an urban and local policy narrative to include regional-urban-local narrative • Why? The UK economic geography problem is fundamentally a regional problem, with embedded urban and local problems • Over-centralised UK is neither close to being an optimal size (of a nation) nor is it close to being an optimal currency area • Top-down, centralised and space-blind governance is: – Effective where internal variations are small (high homogeneity), and – Largely ineffective where there is high internal (and interregional) heterogeneity 14

Tommorrow’s challenge for UK’s Cities and Regions: Governance coordination • The city-region devolution agenda along with the devolved administrations, needs to be the first part of the long-run place-based agenda for addressing the UK’s top-down governance failure • There are clear objectives of devolution: – To facilitate local institutional alignment – To improve local governance coordination – To enhance local innovation and entrepreneurship – To foster social capital, trust and accountability; by mobilising local stakeholder engagement and building on local knowledge 15

Tomorrow's challenge for UK’s Cities and Regions: Core-periphery-problem • Devolving a highly unbalanced urban system → …. risks the danger of …. ← governance fragmentation …. …leading to opposing incentives …. and interests → • … and national governance problems ↓

• …unless there is a workable equalisation/stabilisation formula • The UK economic geography problem is likely to be exacerbated by Brexit

Tommorrow’s challenge for UK’s Cities and Regions: Rethink and learning lessons • Institutional restructuring and spatial rebalancing MUST go hand-in-hand • Need to move away from an overly ‘space blind’ and topdown/centralised policy logic and also away from an overly monocentric spatial and institutional system • The city-governance/mayor ‘lessons’ from the USA, Canada, Australia etc. are of limited relevance for the UK. Why? Because of the federal structure and different geographical scales • London-New York comparisons not helpful or meaningful either because of their relative sizes • Need to learn many more lessons from other EU countries, which are much more comparable on many dimensions

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What is new about my policy prescription? • There needs to be a wholesale restructuring of the relationship between local, regional and national policy • We need to move towards much more of bottom-up and place-based policy logic and away from top-down processes in many arenas of national policy-making • Devolution should result in more tailoring, engagement and coordination between places rather than more fragmentation • Need to aim for…. so as to achieve…. and to avoid at all costs ↓ ↓ ↓

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What is new about my policy prescription? • UK needs a fundamental constitutional rethink: including the four nations and the regional and urban dimension • The economic geography of the UK means that present devolution agenda to devolved nations and city-regions needs to be the first stage of a much more fundamental reconfiguration of the whole UK state • A wholesale re-think, re-design and re-introduction of UK regional policy systems and interregional fiscal equalisation formulas – post Brexit and post-Barnett – due to loss of EU Structural Funds and Scottish devolution/independence • There needs to be a long-term move towards something more like a genuinely federal structure, but at the level of the 12 large UK regions, not just at the level of the four constituent nations or the city-regions 19

To Find Out More….

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