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The writer is Labour MP for Newcastle upon Tyne Central and West and chair of parliament’s science, innovation and technology select committee
As we are told on a daily, if not hourly, basis, the source of all our political, public service and economic woes is the lack of economic growth. What we are not told is that the solution to this problem is staring us in the face — the economic potential of the majority of the British people who don’t live in Greater London.
The 2008 financial crisis hit the UK particularly hard because our economy was so centred on finance. The Conservatives responded with the economic equivalent of leeches — sustained austerity. The result has been the slow strangulation of the economy.
Under these profound policy mistakes lies a multi-decade failure to foster geographically even economic growth. From a productivity and GDP per head perspective we are two nations: Greater London and the South East, and everywhere else. This means that there is a huge opportunity to improve productivity and output. Even small increases in productivity beyond London and the Southeast would break the stranglehold of stagnation.
GDP per head in the UK averages just over £39,000. Every region in the country is below that except the Southeast at £41,000 and London at a whopping £69,000. My region, the Northeast, is the lowest at £28,000, despite having world-leading companies and research institutions.
We see the same disparities when we look at labour productivity, which is also indirectly a measure of capital investment both physical and human. At 86 per cent of the national average per head, the Northeast’s has barely changed in two decades. If we could just lift that and the resulting regional per capita GDP to the national average it would increase UK GDP by 1.14 per cent — almost the same GDP growth for the entire country in 2024. If we could do the same for the next lowest region — Wales — that would add a further 1.2 per cent.
That picture is reflected across the country. If the Tories had matched their talk of levelling up with action on regional productivity and per capita GDP we could have had healthy economic growth for every year but the Covid year of 2020 and 2023, which followed Liz Truss’s economic disruption.
There are some hard truths embedded in this data. First, a London-centred approach to economic policy cannot bring back healthy growth for the nation. Second, the gross inequality in economic output is a consequence of decades of under-investment elsewhere and can only be addressed by smart strategic investment and effective public-private co-operation.
Today, investment has to mean science and technology. In our enquiry into regional innovation and growth, the select committee has taken wide-ranging evidence. From the education and skilling of the workforce, to technology and capital deployment in businesses, start ups and spin outs, to lab facilities and “catapult” tech centres, to internet and transport connectivity, disparities need to be addressed. That means building on the existing business and technology strengths of the diverse regions, working with regional governments and, in particular, mayors.
To escape economic stagnation we must take up this agenda. And it must begin with the Department for Science, Innovation and Technology — but not end there. Lifting productivity must be a co-ordinated project across government.
Labour has inherited a destructive legacy of stagnation and regional underdevelopment. It has made some, limited, progress, increasing investment in science and transport and extending devolution. Unfortunately, my committee’s work has also revealed an enduring complacency and lack of regional lens in many Whitehall departments.
If that parochialism is left undisturbed we will remain two countries when it comes to productivity and output — suffering economic stagnation while staring at the solution.
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