How Regions React to Recessions: Resilience, Recovery, and Long-Run Impacts

Lead Research Organisation: University of Cambridge
Department Name: Geography

Abstract

Abstracts are not currently available in GtR for all funded research. This is normally because the abstract was not required at the time of proposal submission, but may be because it included sensitive information such as personal details.

Publications

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Clarke G (2016) Divergent cities? Unequal urban growth and development in Cambridge Journal of Regions, Economy and Society

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Fingleton B (2015) Shocking aspects of monetary union: the vulnerability of regions in Euroland in Journal of Economic Geography

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Gardiner B (2013) Spatially unbalanced growth in the British economy in Journal of Economic Geography

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Martin, R.L. (2013) The Planning Imagination

 
Description (a) Understanding local economic resilience
The project has examined the conceptual debates surrounding economic resilience. Existing approaches to economic resilience have been found wanting in the sense that they tend to assume stability and a return to a pre-shock growth trend or a full capacity growth ceiling. There are two related problems with these views. The first is the neglect that responses to recession often involve significant changes in the structure, functions and identity of regional and local economies. The second is that they overlook the possibility of hysteretic outcomes in which the underlying rate of growth is itself may be permanently altered by a recession. Part of the research aims to investigate the extent of these hysteretic shifts using growth models that estimate counterfactual trends.

In response to these limitations, the project has developed an approach that decomposes the analysis of economic resilience into three main elements: resistance, robustness and recovery. Resistance refers to the vulnerability or sensitivity of a particular spatial economy to a recessionary shock. Robustness describes the ability of an economy to maintain specific functions and operations in the face of perturbations. Importantly, it often involves changes in the structure, components and modes of operation of an economic system. Recovery highlights the rate and degree of an economy's return to growth based either on the pre-existing developmental trajectory or a renewed path. The project has approached economic robustness in terms of four key determinants: the diversity or variety of a particular economy; its degree of redundancy, that is the substitutability of components and functions; its modularity, or the degree to which parts of the economy are separable, and the nature of their connections; and its regulatory governance and institutional mechanisms that help to buffer shocks and aid adaptation. The project is using this broad conceptual framework to examine the different dynamics and causes of resilience in different regional and local economies across the UK.

(b) Spatially unbalanced growth and regional dynamics

The project's empirical analysis began with a comprehensive analysis of regional growth in output and employment from the early 1970s and the degree of cumulative divergence between regional economies. This documented the increasing spatial imbalance between Southern and Northern regions, and its reinforcement by London's transformation in the 1990s from a relative low growth city to a high performing one. This analysis also examined the causes of this growth performance and found that regional specific factors have been more important than the broad industry mix.

On this basis, the project has examined resistance to, and recovery from, the last three major recessions in the UK for the standard regions, in terms of both employment and output. It has found that both resistance to and recovery from recessions vary across different cycles and recessions, depending on the origin and nature of the recessionary shock. However, there are also patterns and consistent differences that run across the three most recent recessions which show that economic resilience varies significantly across space. The South East and Eastern regions have shown both higher resistance than the national average to two recessions, and faster than average recoveries. Other regions including the East Midlands, North West and Scotland have tended to show higher than national average resistance but relatively slow recoveries. Wales, Yorkshire Humberside, and the South West have shown lower rates of resistance but higher than average rates of recovery. The North East, on the other hand, has shown both low resistance and low recovery. The duration of shocks and speed or recovery are strongly varied, for example, in employment terms the South East had returned to the level of its 1990 peak by 1997, whereas the West Midlands did not regain its 1990 employment total until 2006. Recoveries in business stock are similar although less attenuated. The project is examining the key causes of these differences and the reasons why relationships between resistance and recovery are varied. It is also exploring how these past performances compare to rates of recovery from the 2008-2012 recession.

(c) Regional industrial diversity and economic resilience

The project is exploring two contrasting perspectives on the relationship between economic specialisation and regional economic resilience. The first is the widely-held view that structural or industrial diversity increases resilience to a shock. The second is the view that the specialisation of local and regional economies in particular tradable and export sectors determines their resilience. This is the economic equivalent of an ecological 'rivet' hypothesis.

To date, our analysis has focused on the first hypothesis concerning industrial diversity. Using standard measures of diversity we have found that there are no straightforward and consistent relationships between the degree of diversity of a regional or local economy and its response to recessions. The project has also used a dynamic shift-share type of analysis, known as multi-factor partitioning, in order to decompose changes in regional employment in three recessions and two recoveries into a national effect, a region-specific effect (regional 'competitiveness'), a structural effect (the mix of industries in a region), and a region-industry interaction effect. Using a 33 economic sector disaggregation, the results indicate that while many Northern and Midlands regions have suffered from a negative industrial structure these effects are, in fact, smaller than the regional competitiveness effects, and indeed the structural effects are decreasing in importance through time. There are two main reasons for this. First, with the notable exception of London's specialisation in financial services, most of the British regions have converged in terms of their industrial structures as they have moved towards service dominated economies. Wales and the North East are somewhat slower in the rate of shift. Second, the broad industry categories contain within them industries and sub-sectors that are actually performing differently in different places. Part of this appears to be the result of a finer spatial division within industries so that different types of activity may be allocated to different areas, and partly it stems from regional and local externalities that affect productivity trends.

The next stages of the project aim to explore the causes and determinants of these regional competitiveness effects that strongly influence resilience. They will be approached via the three other determinants of robustness outlined above; namely the extent of modularity and connectedness in a regional economy; the degree of redundancy and substitutability; and finally regulatory effects and institutional resources.

(d) The uneven growth and recovery of Local Economic Partnerships (LEPs)

The project has collated and calculated data on employment, output and productivity for the LEP areas in England and NUTS3 local areas in Scotland and Wales between 1981 and 2010. Analysis is underway on the relationships between local term growth and the impacts of recessions on these local areas, focusing on how changes in firm populations are related to the duration of shock and speed of recovery. At this smaller scale variations in growth and resilience are, of course, much more pronounced than they are at a regional scale. There are also significant variations in economic trajectories within the five types of areas used to categorise the LEPs (Coastal and Countryside, Industrial Hinterlands, Regional Centres, Prospering Smaller Towns, and Prospering Southern England). This indicates that the causes or resilience cannot be explained in terms of the basic economic characteristics of the LEPs, and these causes will be the focus of the project's case study research.
Exploitation Route The project is engaging with colleagues from academia, business, local and central government. A key feature of the engagement with academics is to develop theoretical and empirical work on regional economic resilience. Engagement with local, central government and Local enterprise Partnerships (LEPs) is helping to develop policies to increase the long-term growth potential of sub-regional economies. Guidance to business is designed to help them understand more about how the economy at national and local scales responds to shocks and to appreciate the implications for firm-based resilience strategies.



A project initiation group meeting was held on the 2nd April 2012 and the first Steering Group meeting on the 2nd July 2012 which was attended by representatives from the Greater Cambridge Greater Peterborough Enterprise Partnership, BIS, the GLA, Birmingham City Council, the CBI, the Local Government Association and academics from the Cardiff, Glasgow and Groningen universities. We are currently organizing a conference in Cambridge on the 10-12th July that is focusing on Local economic growth: recession, resilience and recovery and we are seeking to attract delegates from LEPs, LA, business and academia.



A project website has been established at

http://www.geog.cam.ac.uk/research/projects/cger/
(e) Exploitation and Use of Results

A major conference has been organized for early July (in Cambridge) at which the results of the research will be [resented and publicized. The conference will be attended by both other academics, and by interested relevant policy-makers, from BIS and DCL, the LEPs, and Local Authorities. It is hoped that representatives from the European Commission (DGRegio) and the OECD will be present. In order to compare our research and findings with those of other academics, both in the UK and elsewhere, academics from mainland Europe and the USA have also been invited to attend the conference. Similar concerns over how local econimies react to and recover
Sectors Communities and Social Services/Policy,Education,Government, Democracy and Justice

URL http://www.geog.cam.ac.uk/research/projects/cger/howregionsreact.html
 
Description This project aimed to have a conceptual impact that influenced policy priorities, frames and thinking rather than a direct instrumental impact on specific policies. The main thrust of the research was primarily an investigative academic one, to identify and help explain differences between regions and localities in their reactions to recessionary shocks and the role of such shocks in shaping the relative long-run growth paths of those regions and localities. Its impact has developed around three continuing and significant contributions. The first has been to raise policy awareness and appreciation of the importance, scale and tenacity of regional and local economic resilience and to reveal some of the strong differences between regions and cities in the UK in their forms of economic response to major shocks. The project has shown how variations in economic resilience contribute to problems of spatial imbalance. The second has been to advance the understanding of the measurement of regional economic resilience and explain the merits and problems of the datasets and techniques that can be used to assess and examine regional economic resilience. The third has been to understand the key determinants and causes of regional and local differences in response to economic shocks, with the goal of drawing out the policy implications of these causes. Policy discussions on economic resilience have typically been hamstrung by a structural determinism which assumes that differences between local economies in terms of their industrial composition are by far the most important determinant of their resilience. However, our research revealed that differences in economic structure have played a secondary - and declining - role in influencing spatial differences in the impact of and recovery from recessionary shocks over the past four decades. This has important policy implications as it directs attention at other determinants of resilience and adaptability such as the nature of firms, externalities, local skills and institutions. Our research is continuing to explore these determinants and to evaluate how they may be supported and encouraged by policy intervention. However, the third and most challenging contribution of our impact plan, will certainly take time to develop and strengthen. In addition to a wide range of academic activities and outputs - which have been especially well-received - several potential beneficiaries of the research from the project and have been explicitly targeted in terms of our strategy to achieve impact. And the research has led to some important offshoot involvements with policy-orientated bodies. (a) National and Local Government policy makers. Given the focus of the research on how the regions and sub-regions of the UK react and recover from recessions, and how the latter influence long-run patterns of regional and local growth, we were keen to convey our findings on the geographical dimensions of resilience, and their measurement and causes, to both national and local government, especially in the light of the national government's 'Local Growth Agenda' and its concern over securing a more spatially 'balanced' economy. To that end, our engagement with national and local government policy makers has taken three main forms: • The inclusion of representatives from the Department of Business, Innovation and Skills (Mr. Tom Griffiths, Acting Deputy Director), the Local Government Association (Mr. David Pye), the Greater London Authority (Professor Mark Kleinman, Assistant Director of Economic and Business Policy) and Birmingham City Council (Mr. Richard Kenny, Head of Strategic Development) on the project's Steering Group. This allowed policy-makers from these bodies to help shape the research agenda itself, as well as to relay the findings of the research back to central and local government. • A two-day conference ('Local Economic Growth: Recession, Resilience and Recovery', in Cambridge, July 2013) with representatives from national government, local government and Local Enterprise Partnerships, LEPS (see http://www.geog.cam.ac.ukresearch/projects/ cger/conference.html. For attendees, see: http://www.geog.cam.ac.uk/ research/projects/cger/conference/Attendees.pdf). This enabled the project team to present and discuss interim findings from the research, including not only empirical results and their possible policy implications, but also discussions over alternative ways of thinking about spatial economic development and the economic geography of the UK. • A one-day Workshop ('Trends and Cycles in Regional and City Growth', in Cambridge, July 2014) that included representatives from the Department for Communities and Local Government, Department for Business, Innovation and skills, as well as the Local Government Association, the Greater London Authority, Birmingham City Council, the Government Office for Science, and Greater Cambridge LEP (see http://www.geog.cam.ac.uk/research/projects/ cger/workshop10jul.html. For attendees see http://www.geog.cam.ac.uk/ research/projects/cger/esrcdelegates.pdf). This workshop allowed the project team to present further results from the research. This event led in turn to an initiative from policy analysts in the Department of Business, Innovation and Skills (DBIS), to hold a one day Workshop (in Cambridge, October 2014), where the issue of resilience and its relevance for local economic growth was discussed and debated in much greater detail. The aim of this workshop was expressly for the staff from DBIS to marshal the ideas formed during the day and relate them directly to policy analysis and development back in BIS. Feedback on this dialogue was highly positive with the BIS team leader indicating that he had received excellent feedback from his colleagues and that they had learned a lot from the different perspectives and presentations given as part of the workshop. He has subsequently written to say that they will use the research going forward to help build their strategic capability and advice for present and future Ministers. Further feedback on how this workshop has been used by HM Government is available from the Head of Strategy and Intelligence in the Local Growth Analysis Team at the Department of Business, Innovation and Skills (Andrew.Paterson@bis.gsi.gov.uk). The feedback we have received provided us with direct evidence that the project was beginning to achieve its intended impact. The event was used to establish and consolidate relationships with government researchers and we will use these relationships to continue to build the project's impact. (b) Local policy makers, LEPs and the Confederation of British Industry. With the government's move to an explicit local dimension to national growth, especially as articulated via the new system of Local Enterprise Partnerships (LEPs), our research on local economic resilience and adaptation was also deemed to be relevant to the design of policies and initiatives by these bodies, as well as to the local business community. To that end, representatives from a number of LEPS, including Greater London (Professor Mark Kleinman) and Birmingham (Mr. Richard Kenny), and from the Confederation of British Industry (Mr. Richard Woodhouse (Head of Tax and Fiscal Policy) were involved in the research project in the following ways: • their inclusion on the project's Advisory Group. This allowed them to help shape the research agenda itself, as well as to relate the findings of the research back to their own local development strategies and plans. • their involvement in the same two-day conference (in Cambridge, July 2013) and a one-day Workshop to which representatives from national government departments were explicitly invited, as summarised above. A key part of that conference was a Special Panel Session of LEP representatives and officials who discussed and debated the research and its possible implications for local economic development. • Some of our findings were incorporated into the 2014 Local Enterprise Partnership Network Review of LEP Area Economies. This report has been distributed to all 39 LEPs, and has been an excellent opportunity to bring our work to the attention of the LEP policy community. • As a consequence of this interaction with the LEP community, the project PI (Prof Martin) was invited (in June 2014) onto the Advisory Committee of the Mayor of London's Enterprise Panel, to advise and assist in the preparation of its plan for the London economy. The strengthening of London's economic resilience is a key aim of that plan. (c) UK Government Office for Science: Foresight - The Future of Cities In June 2013, the UK Government's Chief Scientific Advisor, Sir Mark Walport, announced a new Foresight initiative, on the Future of Cities. Part of that project is concerned with the economic performance of Britain's cities (see: https://www.gov.uk/government/collections/future-of-cities) The PI (Prof Martin) was invited onto the Lead Expert Group for this Foresight programme, to lead on the analysis of the economy of cities, both their long-run paths and their resilience to shocks. Prof Martin's appointment to the Lead Expert Group was in part on the basis of the work undertaken for the ESRC project. In addition, Prof Martin, with project Co-Investigator Prof Tyler and Research Associate Mr. Gardiner were commissioned to draft one of the Working Papers (WP 5: 'The Evolving Economic Performance of British Cities') used to inform the work of the Foresight programme. The resilience of British cities to shocks, economic and otherwise, has been a recurring feature of the several user engagement and dissemination activities of the Foresight programme, to which activities Prof Martin has been a key contributor. (d) London School of Economics Blog Our work has come to the attention of the London School of Economics British Politics and Policy Website, which invited us to submit a blog on certain of our research work and findings (see http://blogs.lse.ac.uk/ politicsandpolicy/britains-spatially-unbalanced-economy/ (e) Royal Town Planning Institute At the invitation of the Royal Town Planning Institute, some of the findings were included in a publication entitled Planning for an Urban Revival of the North, in a volume published to celebrate the Institute's Centenary: 1914-2014 One Hundred Years of Professional Planning in the United Kingdom. This publication was launched at an event attended by practicing professional town, city and urban planners. (f) Impact on Collaborating Economic Consultancies The Research Associate, Mr. B Gardiner, was on leave from Cambridge Econometrics (CE) whilst employed on the project (he also facilitated the purchase of our basic data sets from them). On his return to CE he has been working with colleagues there on a new consultancy service aimed at providing a local economic analysis product that will include measuring and indexing local resilience. The inclusion of this feature was prompted by the findings of the project, and the PI (Prof Martin) has been actively involved with this CE initiative. (g) Further Development of Impact One area of developing further impact is via Prof Martin's involvement with the Foresight Future of Cities Programme. The second phase of this programme, from February-December 2015, will be primarily focused on disseminating results to user groups and engaging with the latter to develop tools for city analysis and scoping studies. It will be possible to include resilience analysis in this 'tool-kit'. In October 2019 Bury City Authority commissioned a study of the economic resilience of that city, and both a report and presentation were delivered in December 2019.
Sector Communities and Social Services/Policy,Government, Democracy and Justice
Impact Types Economic,Policy & public services

 
Description Invitation to European Commission Joint Research Centre Ispra Italy 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Invitation to give specialist presentation on Resilience to JRC staff, followed by request for academic and scientific advice in the JRC's preparation of policy document on Resilience and Regional Policy for European Commission
Year(s) Of Engagement Activity 2016