All UK regions lagging behind London productivity
New research shows that productivity in London is more than 50% higher than in any other region of the UK and that rectifying the inequality poses a major challenge to the government's 'levelling up' agenda.
Why is London so much more productive?
Conducted by Prof Richard Harris and Prof John Moffatt - professors of economics at the business school - the research looked at factors such as the larger levels of multinational ownership, higher engagement in R&D, the size of firms, and engagement in exporting, in a bid to discover why London-based industries were so much more productive.Read more from David Sapsted:
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Based on 20 years of data on total-factor productivity (TFP), the study showed that the capital was up to 54% more productive than even the second most productive region: SE England.
The difficulties of levelling up: location matters
The researchers concluded that considerations such as plant size or multinational ownership had little effect but that London companies mainly benefited because of their location - factors such as governance, infrastructure, physical geography and agglomeration (clustering) economies.Prof Harris said: “The task of levelling up the UK from the Conservative government is both an ambition but a difficult one. When it comes to the manufacturing sector, the difference in the levels of productivity is evident between London and elsewhere, whilst in terms of the services industry, this different is even higher."As plant characteristics cannot explain this difference, an obvious way for government to help boost productivity across the board – such as increasing the proportion of plants engaged in exporting, R&D or foreign-owned – will not have the desired effect of ensuring elsewhere is working as efficiently and effectively as London."The researchers believe the findings can help identify the size of the task faced in ‘levelling up’ and could avoid policy initiatives that might have only a limited impact on productivity in the regions."The researchers agree levelling up is an important policy, though difficult to implement when the reasons behind London’s superior productivity are largely unexplained," said the university.* The research paper can be seen at https://www.tandfonline.com/doi/full/10.1080/00343404.2021.2004308Read more news and views from David Sapsted.
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