Published on 24 March 2022
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The productivity puzzle

Even within regions such as East Anglia, there are big disparities in economic performance. Owen Garling examines the root causes and possible solutions.

Even within the region, there are big disparities in economic performance. Owen Garling, of the Regional Productivity Forum for East Anglia, examines the root causes and possible solutions.

The UK government, like that of many other Western countries, is concerned about the country’s productivity. In recent decades, productivity performance has become a major drag on our economy, threatening future economic growth and the potential for shared prosperity across the country. Historically, UK labour productivity has grown by around two per cent per year. But since the 2008-09 recession it has stagnated. The productivity gap between the UK and the other G7 countries of the United States, France and Germany stands at 14 per cent; the largest gap since the Office for National Statistics data series began in 1995.

Against this backdrop, the Prime Minister has pledged to restructure the UK economy and create a “high-wage, high-skill, high productivity” society. But how?

Regional differences

The productivity picture is not the same across the UK. One of the most striking features of the puzzle is the variability by international standards of productivity between regions. The UK has regions that are amongst the most productive in the developed world and others that are now less prosperous than regions in the former East Germany.

If the picture is different in different places, then a logical conclusion may be that differing conditions in different places require different types of policy response rather than assuming that ‘one size fits all.’

2020 saw the launch of the ESRC-funded Productivity Institute with the aim of advancing the understanding of UK productivity performance. A central aim of the Institute is to examine these regional disparities in productivity, understand their root causes, and identify how policy makers, businesses, and individuals can make changes that improve productivity performance in all parts of the country.

Our Forum

To drive this element of the agenda, eight Productivity Forums have been established across the UK with five in England and one in each of the three devolved nations.

One of these Forums is based at the Bennett Institute for Public Policy at the University of Cambridge and covers East Anglia. The ‘goldilocks principle’ of ‘not too big and not too small’ came into play when deciding on geography for the forum. On the one hand, focusing purely on Cambridge and its hinterland – the footprint of Greater Cambridge – felt too small; and on the other, taking a step up to the scale of the East of England felt too big. We therefore settled on the footprint of East Anglia as being ‘just right’ – a region that covers the counties of Cambridgeshire (including Peterborough), Norfolk and Suffolk, and which makes sense to people as more than just an administrative unit.

To support the work of the East Anglia Productivity Forum, an Insights Paper setting out the productivity performance of East Anglia has recently been published by the Productivity Institute.

How is the region faring?

Productivity is as much of a puzzle in East Anglia as it is across the UK. At an aggregate level, measured in terms of output per hour worked, productivity in East Anglia in 2019 ranked 19th of the 41 similar-sized regions (ITL2) that make up the UK. Output per hour in East Anglia was about eight percent below the UK average. But productivity hardly increased over the past decade, with productivity in East Anglia increasing at only two percent – half of the UK’s growth rate – over the entire period. Within the area, there are places and people that are doing well and experiencing high living standards. Elsewhere there are places where people struggle. And even within those places seen to be achieving, there are large disparities.

As productivity is such a fundamental part of how society and the economy function, we need to find ways to engage with it that enable us to consider the bigger questions around it, as well as identify ways in which issues particular to East Anglia are affecting productivity in the area. The forum has therefore identified a number of themes that link to the wider productivity challenge. Together, these will act as the core of the Forum’s regional research base.

The Fens sit as a bowl in the middle of East Anglia surrounded by the cities of Cambridge, Peterborough and Norwich; places that have historically benefitted from the resources that the fens produce. The very land of the Fens is the result of many generations of innovation and ingenuity, with much of it having been drained centuries ago to create some of the best agricultural land in the country. And yet the Fens are home to some of the poorest communities in the region. A focus on the Fens will enable us to consider issues relating to agricultural productivity, the tensions between different land uses, the management of water, the importance of biodiversity, and the role that the people, communities and businesses of the Fens can take in tackling climate change.

Resilience is key

Climate change is also an issue for the Coast: East Anglia’s coastline is eroding at the fastest rate in the country. It is also at the forefront of tackling climate change through its role as the ‘Energy Coast’, home to huge fields of wind turbines and other sources of renewable energy. Understanding the role that the Energy Coast can play in the generation of renewable energy and related innovations is another area of interest. The connectivity of the Coast to the rest of the region and beyond is also of interest. Home to a number of ports, including Felixstowe – responsible for 40 per cent of the UK’s container traffic – the area is of national importance to the UK economy. The pre-Christmas backlog of containers at Felixstowe demonstrated the impact that disruptions can have across the country. We need to ensure that economies locally and nationally are taking the full advantage of these assets and that they remain resilient in the face of future economic shocks.

The Cambridge connection

The western edge of East Anglia is also of particular interest. For the last 50 years, we have seen the emergence of the ‘Cambridge Phenomenon’ and the development of the area as a source of comparative advantage in relation to the knowledge economy. Cambridge is often seen as a city of international importance and a success story for the UK. But how do Greater Cambridge’s successes contribute to the wider East Anglian economy? Are Greater Cambridge’s successes spread as far and effectively as possible? Coupled to this, what changes does the greater Cambridge area need to see to ensure that its successes can continue and are not constrained by insufficient infrastructure, housing and access to labour markets? Given the ongoing uncertainty about the future of the OxCam Arc a question also remains about how Cambridge connects more effectively with the surrounding area; should it face west or east, south or north?

Sharing knowledge and learning

The final two themes focus on two specific issues in relation to productivity and the economies of East Anglia. A focus on leading-edge activities and the foundational economy is an opportunity to consider both the cutting-edge businesses in East Anglia alongside the importance of supporting sectors of the economy, such as health and care. As the Coronavirus pandemic has shown, these different areas are significant in their own ways and a likely source of future employment growth, so it is important to consider how productivity issues should be addressed. A question we are particularly interested in is whether we are providing enough opportunities to share knowledge and learning across sectors.

The public sector

Finally, we are interested in how the structure of the public sector in East Anglia affects productivity. East Anglia’s current governance arrangements – like those of many places – have emerged in a piecemeal fashion over time and may face further changes following the publication of the government’s Levelling Up White Paper. Across the region there are questions as to whether these arrangements have an impact on private sector decision-making and investment planning. Equally, there are further questions to be asked around public sector productivity and how this could be improved across the region.

We believe our work is essential in drawing together expertise from across the region’s private, public and third sector organisations to map out the opportunities, risks, and linkages between the different functional economies in the region. East Anglia is at the forefront of both the challenges and opportunities of climate change and, as we move into the next phase of work, we are keen that our work can bring forward proposals that allow us to address the former and maximise the latter, driving up both productivity performance and quality of life for all who live and work here.

Original source: East Anglia in Business

The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.


Owen Garling

Knowledge Transfer Facilitator

Owen Garling is the Bennett Institute’s Knowledge Transfer Facilitator and he provides an important conduit between our own researchers and policymakers in the UK and internationally. His work helps to...

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