Regional Economic Development:Recession & Recovery

Institute of Economic DevelopmentBournemouth, 7th October 2009

Nigel F JumpChief EconomistSouth West of England Regional Development Agency

UK economy : growth & inflation

-6.00

-5.00

-4.00

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UK real GDP % ch qoq

UK real GDP % ch yoy

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

2001Q1

2001Q3

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-15.00

-10.00

-5.00

0.00

5.00

10.00

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35.00

Consumer prices LHS

Producer prices LHS

Input prices RHS

SW economy : worst over?

PMI Output Index - Latest Month

35404550556065

Nov

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n

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2006 2007 2008 2009

SW UK

PMI Employment Index - Latest Month

354045505560

Nov

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n

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2006 2007 2008 2009

SW UK

SW economy : or is it?

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SW unemployment rate

Claimant Count Rate, Aug 08- 09

0.0

1.0

2.0

3.0

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6.0

Aug 2008 Aug 2009

SW economy : story board - cycle

Severe contraction in manufacturing, construction & related services (Nov ‘08 – Apr ‘09)

hence, first, Swindon, Bournemouth-Poolethen Bristol, Plymouth & spread across SW peninsula

Some recovery (May-August ‘09) “restocking” and tourism “blip”? fear of new wave of closures/lay offs in autumn

SW unemployment rise commensurate with UK trend again, widely spread but most urban north/eastmay be “hidden” elsewhere … e.g. rural communities?

Business: “cash & credit” paramount. focus shifting from recession-fighting to strategies for

recovery- get plant & workforce right for “new” market

conditions

SW economy : story board - structure

Region of regions – north/south & east/westProgress on relatives – tyranny of averages

Low wage, high employmentpart-time and self-employedinward migration … ageingskilled population … yet

Some great clusters … but not manyloads of SMEs - good & not so…aspirations - lifestyle … non-global

Innovation – skills – access : Environment

Recession & recovery: development issues 1Timing is everything

most interventions take time toformulate, instigate, monitor & evaluate

real success or failure unknown for yearsbut we bring things on … & 4.5:1

Conflicting priorities economic cycles - subjective counterfactualsbudget cycles - get it out v get it rightpolitical cycles - policy shifts & raidsevent cycles - what are you doing about swine flu?

Recession & recovery: development issues 2Efficiency & effectivenesslegacy -> hunter/gathering -> auditors – farming?

optimisation vs satisficing specialisation vs diversification

intervention vs laissez faireagglomeration, spill overs & trickles

Equityspatial strains: national vs regional vs local

“buggins” turn & “nimbyism”rural & urbanbest & worst

Applied regional economics see-saw of purism & pragmatism

Recession & recovery: development issues 3Impact: people –> business <– place

static measures vs dynamic links

VfM £ for £ - multipliersSAV & externalities

Additionality one person’s net benefit is another person’s leakage or displacement

Borders – competition v co-operation

Conclusion

Recession & recoverystructural & chronic vs cyclical & acutenecessary & healthy vs collateral damage

Regional Economic Development is: market & institutional failurecomparative advantage

- pick themes not winnersco-operate in order to compete

Productivity still the holy grail