Dr Marianne Sensier, Professor Fiona Devine and Dr Elvira Uyarra have conducted research comparing the economic resilience of UK sub-regions in recovery from the 2008 financial crisis. In this blog, they map the resilience across the UK in recovery from the financial crisis and suggest policies for increasing resilience for recovery from the COVID-19 crisis.

• The most resilient UK sub-regions were in the South East of England and the least resilient was Yorkshire and The Humber.
• England’s local industrial strategies should include measures to enhance firms’ capacity, particularly those rooted within communities, to strengthen resilience.
• Green infrastructure investments should be linked up with work retention and training schemes.
• Green innovation vouchers should be offered to firms so they can adapt their products and processes in response to the climate crisis and create jobs.
• Government should increase the wages of the lowest paid key workers to at least the real living wage to help rebalance inequalities.

The resilience of the economy over the business cycle is of great interest to central and local government policymakers in helping them understand how an economy can recover from an economic crisis. At the regional level, local authorities and devolved administrations need to understand the effect of the recession on their local area so they know what economic policies to apply to mitigate the impact of the economic downturn and aid in recovery. The current economic crisis is due to a health crisis – the 2020 global coronavirus pandemic – which led to the UK Government locking down the country on 23 March 2020. This crisis has been accompanied by a range of mitigation measures including the Job Retention Scheme, business rate relief, local grants and business loan schemes, and support for the self-employed and the charitable sector.

Resilience scorecard

To analyse resilience across regions in the UK, we have developed a resilience scorecard. There are four components of the resilience scorecard. The first compares the resistance of a region to the nation over a recession. Second, the duration of recession is noted and compared to the length of the national recession. Third is how quickly the region recovers its pre-crisis peak compared to the nation. Fourth, renewal, compares the region’s growth paths before and after the crisis. A greater rate of increase after the recession indicates that the region is accelerating to a higher growth path. The resilience scorecard compiles the statistics for each region over the recession and up to 2018.

Source: Authors’ own analysis (via Tableau)

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. Within regions, sub-regions show different levels of resilience. When analysing the sub-regions at the NUTS 2 level it emerges that sub-regions within the South East were the most resilient, along with Bristol, Cumbria and Aberdeen. Other sub-regions within the South West (Cornwall, Devon, Somerset and Dorset) perform poorly on output and productivity indicators, so they are lower down in the scorecard. The least resilient regions are Hull and Scunthorpe (East Yorkshire and North Lincolnshire), Lancashire and Northumberland and Tyne and Wear.

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.

Policies to strengthen resilience

Local industrial strategies are an opportunity to build back from this crisis not just better, but also greener. Local strategies could enhance the capacity of firms to adjust their products and processes and adapt in response to the climate crisis. For instance, they could offer green innovation vouchers to firms following the pandemic to incentivise investment into green activity to strengthen resilience. One example is the innovation voucher scheme introduced in Stuttgart during the 2008 financial crisis, which offered grants to firms in the automotive sector to diversify into electric vehicle development. Environmental policies and green infrastructure investments should be linked up with work retention, training schemes and finance provision to shore up existing employers and provide new employment opportunities to enhance regional economies.

A large number of companies have furloughed staff and even closed down. This has particularly affected those in low paid sectors, such as hospitality, which led the way in employment growth out of the last recession. As many firms have suspended operations they may find if demand does not pick up in their sector they may be forced to go out of business. The Government could incentivise SMEs to work with universities and take on graduate apprentices; mothballed firms could be offered cash lifelines where equity is bought by the state for them to offer goods and services that are needed locally; and firms could be pivoted into socially responsible and sustainable business activity. Boosting university-industry partnership schemes such as the Knowledge Transfer Partnerships – including the management KTPs – could help companies to innovate and position themselves in the market in order to adapt to the new normal.

We have previously made recommendations to strengthen local economies to better recover from the crisis, and suggested that greater devolution of powers to local authorities is pivotal to be able to deal with any future crisis. Specific recommendations include:

• setting up a co-operative development network to encourage co-operative company development (as they are found to be more productive and resilient);
• encouraging demand-side policies and joining this up with business support services, education and skills opportunities (work retention and training programmes) to improve local supply chains;
• and increasing the pay for key workers in the foundational economy, as these are generally in lower paid sectors that predominate in lagging regions, but have become the vital front line services in the coronavirus pandemic.

Relocation of public sector jobs

The sub-regions that were least resilient to the financial crisis will now have even less capacity to recover after ten years of austerity has reduced resources. These regions should be targeted with more funding and efforts should be made to increase human resource capacity within regions, locating innovation centres, skilled jobs, and management positions, particularly in the more knowledge intensive digital services.

Our resilience scorecard could be useful for national and local policymakers and the Industrial Strategy Council to help identify the UK regions that have lacked economic resilience during and since the 2008 recession downturn. The factors we have identified as affecting resilience could be explored further and could help direct future funding streams (like the Shared Prosperity Fund) towards the regions lacking economic resilience to help reduce regional disparities.

Take a look at our other blogs exploring issues relating to the coronavirus outbreak.

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