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  • Writer's pictureSteffan Willis

Econ Insights: Economic Divergence in SE England

In this series, we look at interesting data sets to uncover hidden insights.

The Greater South-East is often heralded as the economic powerhouse driving the British economy, and whilst that may be true it masks significant variation within the region.

Chart: GVA per head by local authority (2000 - 2015)

Source: ONS, GVA per head in current prices (£)

High productivity areas such as the M3/M4 corridor stretching out to the west of London and the high-tech clusters around Oxford and Cambridge have seen significant increases in productivity and are now amongst the most productive in Europe driven by high-levels of human capital, good infrastructure and investment.

These sit in sharp contrast to the towns along the Thames Estuary and the coast which, despite proximity to the capital and good quality transport infrastructure, have seen little or no improvement in productivity. The chronic under-performance of these areas is perhaps best described by the idea of a low skill, low wage, low productivity equilibrium in which there is limited supply of, and demand for, higher level skills. The business that do locate in the area tend to be of low value generating large amounts of low paid work in transportation and logistics. The lack of local wealth limits the attractiveness of the area to commuters which in turn limits demand for local services.

To escape from the a low skill-low productivity equilibrium is extremely difficult. Local authorities need to adopt the mindset of a business looking to invest and be realistic about what they have to offer. This would include an assessment of the markets that are accessible, the quality and proximity of infrastructure such as ports, the stock of skilled labour and existing industrial clusters. Having determined potential target industries local authorities need to become champions of their communities, actively promoting their areas and seeking investment.

The area around Ebbsfleet and Gravesend (the consistently dark red area to the west of London) provides a good example of how this approach could be put into practice. The area has a number of natural endowments namely, relatively low cost industrial land with access to wharves on the River Thames, good quality road and rail links into central London and a high concentration of skilled tradespeople.

In 2018, Berkley Modular, a housing firm, announced plans to open a factory producing modular housing highlighting the areas natural endowments. With support from the local authority and the Ebbsfleet Development Corporation the area has significant potential to become a hub for offsite construction utilising the available skills and exploiting its proximity to construction sites in East London significantly reducing transportation costs. Perhaps its greatest strength is the existing investment in the area which enables subsequent firms to reduce their set-up costs.

Without active investment promotion by local authorities in low skill-low productivity equilibrium areas they will continue to diverge from the rest of the Greater South-East.

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