International Research on Regional Economies

Richard Holt, Oxford Economics

With Regional Economic Partnerships across Scotland, Scottish Futures Trust recently commissioned Oxford Economics to examine the extent to which regional economic arrangements are used alongside local and national interventions to deliver inclusive growth. Our conclusion from the several case studies that we undertook is that there is no “off-the-shelf” inclusive growth model anywhere that can be simply applied to Scotland. Nevertheless, we think there are lessons to be learnt.

Among the regions we considered, the San Francisco Bay Area is surely the most successful regional economy in the world in terms of wealth creation. But it is poor at transport infrastructure, partly because an absence of regional governance means that local special interests are able to block transport improvement – and also housing – developments. The consequence is an economy that grows rapidly, but with big problems of transport and housing related social exclusion, despite a highly engaged political culture.

Solent in southern England provides a very different example where a regional economic partnership, the Solent Local Enterprise Partnership, is very well established, but struggles in the face of limited resources and a high degree of central government control. Its ability to meet the region’s particular needs is consequently constrained. This impacts on Solent’s overall growth rate, and also on the ability to reduce inequalities between the different local areas within the region.

In Denmark the situation is very different. The concept of inclusive growth is deeply embedded. Denmark is divided into five regions, but the differences between then in economic and social conditions are not great. In part, this reflects the country’s strong commitment to using infrastructure to (literally) unite the nation, and is a deeply rooted part of a national “business model” that tends to reduce inequalities. Denmark has regional councils that bring together local authorities to address economic issues jointly, an arrangement helped by high degrees of consensus within the nation.

Our work also looked at the academic concept of a ‘Functional’ economic region, to see if that provides guidance. The reality is that local and regional economies are far more complex, overlapping, and ever-changing than the academic idea allow for. Our conclusion is therefore, that a degree of pragmatism in selecting regional partners is justified. That seems to accord with the way in which the process is proceeding in Scotland.