Dr Marianne Sensier and Dr Elvira Uyarra have conducted research comparing the economic resilience, community wellbeing, sustainability and governance of Greater Manchester and Preston in recovery from the 2008 financial crisis. The financial crisis provided a window of opportunity for some places to develop new arrangements to adapt and diversify regional economies. In this blog, they explore the lessons learnt from the financial crisis that could help in recovery from the COVID-19 crisis.
- Resilience needs to be considered alongside wellbeing and inclusive growth measures to understand how the proceeds of growth are being shared to all citizens.
- Meaningful levelling up requires local industrial strategies to incentivise green innovation, particularly in those businesses rooted within communities.
- More collaborative and co-operative approaches are needed to share the proceeds of growth more equitably and build sustainable social value in economic recovery.
- Local government has faced ten years of austerity and has adapted to new ways of working, but little redundancy has been left in the system to deal with the current crisis and many councils are facing a financial crisis of their own.
- Greater support for local public services, key workers and more flexible employment schemes are required to help the economic recovery from the COVID-19 pandemic.
Regional economic resilience is the capacity of a place’s economy to withstand, recover from and reorganise in the face of market, competitive and environmental shocks. Shocks might be global (the 2008 financial crisis and the 2020 coronavirus pandemic), national (1990s house price crash) or local (closing of a factory) in origin. But what makes a region more resilient? Academics point to factors such as the concentration of related industries in a local economy, access to knowledge networks and good quality and adaptable institutional and governance structures. In a study on the effect of the 2008 financial crisis on UK regions, we found that those areas with greater shares of: knowledge-intensive and high-tech services, higher-level qualifications, and managers and professionals had higher output, jobs and productivity growth rates in recovery from the financial crisis. We found that the South East of England was the most resilient region to the crisis, while the North East and Yorkshire and Humberside regions were the least resilient along with Northern Ireland.
Regional differences in wellbeing
It is important to understand resilience in not just economic terms but also in terms of wellbeing of citizens and the sustainability of places. In another study, we compared measures of resilience and wellbeing and found that while the City of Manchester scores highly for economic resilience, it ranks the lowest of all the districts of Greater Manchester for inclusive growth in local conditions, with lower rates of healthy life expectancy pulling down this measure. Peripheral districts, like Bolton and Wigan, have been the least resilient, suggesting that policies targeted at dense agglomerations have not benefitted surrounding areas. Preston, in following community wealth-building policies, has had a more equitable recovery and is improving wellbeing for its citizens.
The UK has large regional economic and social disparities and these have widened since the financial crisis. The current government has stressed the need to level up across different regions, which reflects the failure of an overly centralised style of governance and a decade of austerity, which has exacerbated rather than ameliorated inter-regional differences.
Regional resilience to the COVID-19 pandemic
It is fair to assume that those places least economically resilient in the recovery from the 2008 financial crisis will also be least resilient to this current crisis. The uneven economic impact of the pandemic has been analysed by the Centre for Towns and City REDI. Data on consumer spending during lockdown show that rural places that rely heavily on tourism have so far been hardest hit. We assume that as countries gradually emerge from lockdown an adjustment process will ensue to a ‘new normal’ until a vaccine is available. Social distancing measures are likely to continue in some form and this could inflict lasting economic damage. In cities, agglomeration advantages may turn into disadvantages, requiring significant investment to adapt the transport and urban infrastructure (on which agglomeration advantages depend). In this crisis, the consequences of inequality have been laid bare. The COVID-19 pandemic has already been shown to hit poorer areas more. High-density urban areas with high incidence of health inequalities and deprivation such as inner London, Birmingham and Manchester have suffered outbreaks and death rates significantly worse compared to rural areas in England and Wales.
The role of local government
The pandemic has also underlined the importance of local decision-making in times of crisis. In England, government action to respond to the pandemic has been highly centralised, with some resources redistributed by local authorities (grants and business rate relief). Local authorities have been at the forefront of fighting the pandemic, in critical areas such as health, social services and economic development. However, their capacity to react is depleted after years of austerity; and the higher costs of fighting the pandemic and the loss of commercial income is threatening the delivery of essential local services. The limitations of England’s centralised system of governance and lack of a coordinated strategy across levels of government has been evidenced by the UK’s slow testing response compared to other countries such as Germany.
In recovery from the current crisis, the levelling up talk must become a reality. The fact that recently announced central government bailout allocations to local councils in England appears to take no account of deprivation levels is not a good sign. To be meaningful, local and national policy should be directed at regenerating sustainable and equitable regional economies. Resilience is not the same as rebounding – it does not mean returning to the pre-shock state of affairs. As many have argued, the crisis presents a window of opportunity to embrace changes towards a more sustainable and fairer economy. This includes revaluing ‘key workers’ and the foundational economy in which they work. Unlike in the 2008 crisis, government bailouts to rescue specific sectors of the economy such as retail, property or aviation, should come with strong strings attached in terms of environmental, tax and civic responsibility. More collaborative and co-operative approaches are also needed to share the proceeds of growth more equitably.
Having seen the benefits of clearer skies and streets emptied of cars, political leaders in the north of England have suggested lasting improvements such as building cycling and walking networks, boosting internet connections and retrofitting of houses to improve energy efficiency and create jobs. Local industrial strategies should include measures to incentivise green innovation in areas that contribute to sustainable social value in economic recovery. The pledge for increased and geographically better-balanced R&D expenditure is more important than ever, and so is a reversal of years of centralisation and austerity cuts so that councils have greater capacity and revenue funding to plan and react faster and respond to future crisis. We now need bold economic policies to transform how our economy provides for citizens and the planet before this window of opportunity closes.
Take a look at our other blogs exploring issues relating to the coronavirus outbreak.
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