8 Components of regional planning
8.2 Drivers and issues
Regional economies are not vacuum-sealed; they are set in national and inter- national economic contexts and are influenced by those contexts. We live in a global economy and the forces of globalisation of trade are major drivers of change in regional economies. The Organisation for Economic Co-operation and Development (OECD) encompasses many of the world’s most developed economies, though membership has broadened since the mid 1990s. Trends in OECD economies provide a window on the structural changes in the predomi- nantly developed world (Simmieet al. 2006). Although there have been some cyclical swings, value added has grown consistently in the OECD since 1971, and real GDP has grown by approximately 2–3 per cent per annum. Associated with this growth has been a major shift in the industrial mix of the industri- alised economies. Non-manufacturing increasingly dominates economic activity in the OECD, accounting for 80 per cent of total value added by 2001. Con- versely manufacturing has fallen significantly, and this fall would have been even greater but for the good performance of electronics. The three key service sectors, which each account for almost 20 per cent of total activity, include business services, banking and finance; other services (mainly public), including education, health and public administration; and distribution, hotels and restaurants. In general, the trends in the UK economy as a whole have been similar to those in the OECD. The country has performed particularly well in exporting services – an area of clear comparative advantage. Thus while the UK accounts for just less than 5 per cent of total world trade in goods, it has 8 per cent of trade in services.
Other notable characteristics of contemporary advance include the import- ance of the knowledge economy, of high-tech activities, and of outsourcing. A knowledge economy is one where knowledge is the key resource, and:
in which the generation and exploitation of knowledge has come to play the predominant part in the creation of wealth. It is not simply about pushing back the frontiers of knowledge; it is also about the more effective use and exploitation of all types of knowledge in all manner of economic activity.
(DTI 1998) The pursuit of the knowledge economy, and of innovation, has focused atten- tion on the role of universities in economic development, and especially in Components of regional planning: economy 155
regional economic development (Glasson 2003). There has also been a focus on high-tech activity. There is a wide variety of definitions of high-tech, but there is some agreement on the general characteristics (Glasson et al. 2006). These relate to the twin themes of innovation (the introduction of new products, processes or services) and technology intensity (of resource inputs and/or outputs). Most definitions make use of quantitative data to identify a list of industries meeting specified criteria which are indicative of high-tech activity, such as a high level of research and development (R&D) intensity or the employment of a high-proportion of technology-oriented workers. High-tech
(a)
industries are both manufacturing (e.g. biotechnology, electronic equipment) and service (e.g. software development, consultancy). In contrast to these characteristics, another rapidly growing feature of economies, such as the UK, has been the phenomenon ofoutsourcing where services are transferred in sub- stantial numbers to lower labour cost economies. These have normally, but not always, been in lower level service jobs, such as call-centre employment.
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Figure 8.1 Some indicators of relative regional/sub-regional prosperity. (a) GVA per capita. (b) Average weekly household incomes (adjusted for housing costs). (Source:
ODPM (2005d).) (b)
Regional economic issues relate to performance in the evolving ‘modern’
economy of advanced countries. Determinants of performance of a particular region are likely to include some or all the competitive factors noted in Chapter 4 (section 4.2). The UK State of the Cities report (ODPM 2005d), illustrated rel- ative factor performance with reference to data on criteria such as patent appli- cations, and change in percentage of working age with degree level qualifications. The resultant indicators of relative prosperity include measures such as: weekly earnings, gross disposable household income, visible exports per capita, GVA per capita, rate of change in productivity (GVA per employee) and change in employment rate. Figure 8.1 provides some examples of these indicators by TTWAs within regions. There are considerable inter- and intra- regional variations. Some regions and sub-regions, especially in the GSE, have a good mix of the growth sectors, represented in positive economic indicators.
However, they may still have economic issues, for example, skill capacity con- straints, high costs, congestion and imbalance in prosperity within a region. For other regions the indicators may also show regional imbalances, perhaps reflect- ing pockets of decline in primary and manufacturing activity, but also higher rates of unemployment, inactivity and outmigration, and lower levels of produc- tivity growth and labour skills.
Figure 8.2 from the Wales Spatial Plan (WSP) illustrates some of the spatial variations of economic characteristics within that country – including some of the determinants and indicators of economic prosperity.