Post-pandemic economic growth: Levelling up Contents

2Why Levelling up?

16.By failing to clearly define levelling up, the Government has also failed to identify the exact problem that requires solving by levelling up. There is an assumption that the Government is seeking to address regional inequality and level up the rest of the country to the perceived successes and attainments of London and the South East.26 However, it is not clear what it is the Government feels the need to level up and where; for example, is it productivity, GDP, health, educational attainment, life expectancy or all of the above? Is it to concentrate funding in northern constituencies or will it also consider poorer neighbourhoods within the South East?

17.Successive post-war governments have all grappled with the problem of regional inequality in the UK.27 The 2019 Conservative Party Manifesto stated:

Prime Minister, Boris Johnson has set out an agenda for levelling up every part of the UK—not just investing in our great towns and cities, as well as rural and coastal areas, but giving them far more control of how that investment is made. In the 21st century, we need to get away from the idea that ‘Whitehall knows best’ and that all growth must inevitably start in London. Because we as Conservatives believe you can and must trust people and communities to make the decisions that are right for them.28

The Government provided the following facts to demonstrate the regional inequalities and the need for levelling up in its briefing for the Queen’s Speech (see Box 2).

Box 2: ‘Key facts’ accompanying the Queen’s Speech

  • The UK’s highest productivity region (London) is nearly 60 per cent more productive than its lowest (Wales).
  • 50 per cent of the population in London have graduate-level qualifications, compared to 33 per cent of the population in the North East of England.
  • Healthy life expectancy in Glasgow, Dundee, Blackpool and Middlesbrough is ten years shorter than affluent local authorities in the South East.
  • People in the most deprived fifth of neighbourhoods in England are about 50 per cent more likely to experience crime and antisocial behaviour than those in the richest fifth.
  • Between 2007–08 and 2018–19 capital spending on transport in London was around £6,600 per head, more than twice the average in the rest of England (£2,400).
  • Close to half of core research funding in England was spent in just three UK regions and sub-regions containing Oxford, Cambridge, and London.

Source: The Queen’s Speech 2021 Background Briefing Notes29

18.The Organisation for Economic Cooperation and Development (OECD) reported in 2016 that the UK had the sixth highest regional economic disparities among 30 OECD countries with comparable data and recorded the fourth largest increase in disparities between 2000 and 2016. The figures for 2019 (latest available) showed that these disparities have continued, with London accounting for 22.7% of UK GDP, and with the South East adding another 14.8%. Therefore, the two areas combined make up 37.5% of UK GDP although they contain only 26.8% of the UK population.30 John Harris, co-creator of the Anywhere but Westminster video series told the Lords Public Services Committee on Levelling up and Public Services:

The divide between the north, however it is defined, and London and the south-east is wider and bigger than the divide between the old East Germany and the old West Germany.31

19.However, this analysis masks differences within regions, from local area to local area and neighbourhood to neighbourhood, for example, of the 100 most deprived boroughs in the country, 12 are in London.32 A House of Commons Library Paper, How big are regional economic inequalities in the UK?, found that, when looking at productivity, although many of the most productive local areas in the UK were in London and the M4 corridor, there were also pockets of high productivity areas in other regions, such as the North West. The paper also examined the Department of Work and Pensions detailed survey of household disposable income, and found that before housing costs were factored in, London had the highest median disposable income, however, after housing costs, London dropped to equal fourth highest reflecting the sharply higher housing costs in the capital.33

Percentage of people in relative low income, 2017/18 to 2019/20

Source: DWP, Households Below Average Income, 2019/20

The UK2070 report identified that although growth had been concentrated in London and the wider South East, this was now creating major pressure on the region impacting on the quality of life with increasing social and environmental costs.34

20.Minister Hall acknowledged past failures and said that while it was clear that “investment and life chances in London and the south-east [ … ] continue to improve” he noted that other parts of the country had not seen those opportunities.35

21.There is no doubt that geographical inequality is a structural problem in the UK and attempting to address these inequalities should be at the heart of the UK’s plans for economic recovery post-pandemic. These plans should be focused on longer-term goals, rather than just the life span of political cycles, requiring a deeper level of consensus. Whilst we recognise that there are inequalities between regions in the UK, there are also inequalities within regions, with pockets of wealth and pockets of severe deprivation. The levelling up agenda must also seek to tackle inequality within regions, not least in cities that are seen to be well performing.

Effects of Covid-19 on regional inequality

22.There is no doubt that the economic impact of Covid-19 has had an impact on existing regional inequalities within the UK. In its October 2020 “Levelling up: where and how?” report, the Institute for Fiscal Studies found that the traditionally ‘left-behind’ areas were not those most exposed to the short-term economic impact of Covid-19. There were, however, important exceptions: a number of hospitality and tourism-dependent coastal communities and the centres of some Northern and Scottish cities (such as Liverpool, Glasgow and Dundee) faced the ‘double whammy’ of being both ‘left behind’ and vulnerable to the immediate economic fallout from the pandemic.36 Lord Kerslake, Chair of UK2070, said:

There is no doubt that Covid has not been a leveller. It has impacted on those who are most vulnerable and, therefore, on places where there are large numbers of vulnerable people. We know that we have a very unequal economy in this country.37

Areas economically impacted by the COVID-19 crisis and considered ‘left behind’

CH7-IFS-Green-Budget-2020-Levelling-up

23.Steve Rotheram, Mayor of the Liverpool City Region Combined Authority, agreed that Covid-19 had “exposed a number of fault-lines that were already there in the system”.38 Rachael Greenwood of the Midlands Engine also said that Covid-19 had “exacerbated some of the challenges that we know we already face as a region” and she gave the example of the “digital divide” being a “structural barrier to growth within our economy”.39 Marvin Rees, Mayor of Bristol, identified a need to rebuild an economy that was “more resilient to future shocks” but that reduced the likelihood of future shocks, be they climate, health, economic or social shocks. He recalled:

A friend of mine, a businessman in Bristol, said, “Riots are not good for inward investment.” We have to build our economy back in the right way or it will be a patch-and-mend approach, which will be vulnerable to shocks that inevitably come along in the coming years. That will cost us all lots of time and money.40

24.Minister Scully disputed the argument that the pandemic had created new problems. Instead, he argued, it has “put a spotlight on some of them and maybe caused some older problems to come to the forefront”.41 He suggested that the long-term impact of Covid-19 on those areas would “depend on how persistent the recent changes in business and consumer behaviour turn out to be”.42

25.The impact of Covid-19 has not been uniform, and the extent of these differences may not be known for some time. The Government should factor detailed analysis of the impact of Covid-19 into its planning for, and delivery of, the levelling up agenda.

27 For example: Royal Commission on the Distribution of the Industrial Population, 1937–1940; Urban Development Corporations 1983; Regional Development Agencies 1998; National Strategy for Neighbourhood Renewal 2001; Local Enterprise Partnerships 2011; Northern Powerhouse 2014

28 Conservative and Unionist Party Manifesto, “Get Brexit Done Unleash Britain’s Potential” 2019,

29 10 Downing Street: Queen’s Speech Background Briefing Notes, 11 May 2021

31 House of Lords Public Services Committee, “Levelling up” and public services, 17 March 2021, Q30

32 Flourish, 100 most deprived local authorities in Great Britain, 14 May 2021, “London is being scapegoated” The Guardian, 30 May 2021

33 How big are regional economic inequalities in the UK? House of Commons Library, March 2020 updated to include the latest year data (three-year average 2017/18–2019/20) from DWP, Households below average income, March 2021, table 2.5ts

35 Q31

36 The IFS have used three measures to assess regional economic impacts of Covid-19 on a local area:

  • Proportion of workers who work in sectors that were forced to close during lockdown.
  • Proportion of eligible employees ever furloughed.
  • Fall in job vacancies

37 Q91

38 Q57

39 Q115

40 Q144

41 Q40

42 Q40




Published: 22 July 2021 Site information    Accessibility statement