Local institutions key to economic recovery

Professor David Bailey

16 April 2014

Regional level bodies can be crucial in building economic resilience, an Aston Professor argues in new research.   

A report just published by Aston Business School Professor David Bailey suggests that regions and regional institutions can have a key role building economic resilience. 

Bailey’s work, undertaken with Professor Nigel Berkeley at Coventry University, examined the role of Regional Taskforces – particularly those in the West Midlands - in responding to the last recession. Bailey and Berkeley examine the Taskforce’s work in relation to four dimensions of resilience: 

In terms of ‘resistance’, the research notes that the West Midlands region took one of the biggest ‘hits’ of any UK region, being especially exposed to both the manufacturing and trade downturn. In this sense, given both the scale of the downturn and limited resources available, the Taskforce could do little to cushion a region exposed to a major downturn. However the authors stress that “the Taskforce did, via the Regional Minister, provide significant input into the development of national level policy, hence could be seen as playing a useful, supporting role within a (limited) multi-level governance framework”. 

On the dimension of ‘recovery’, the region has witnessed a more rapid ‘bounce back’ in terms of forward looking confidence measures such as the Purchasing Managers’ Index (PMI), GDP growth and a fall in unemployment. While wider factors have been at work - notably the depreciation of sterling which has assisted the region’s manufacturers in terms of exports - Bailey and Berkeley note that certain Taskforce interventions could be seen as critical, “for example in enabling key suppliers in the auto and other industries to survive and be able to respond more quickly when the upswing came, in a form of localised industrial policy that aimed to keep ‘strategic’ supply chain capacity in place. 

On the renewal and reorientation dimension of resilience, Taskforce interventions assisted strategic firms – especially in the auto industry - reorientate towards higher value activities and to diversify into related markets such as aerospace. “This meant that firms attempted to move into markets where the region was better placed to compete (high value, niche and low carbon automotive being examples). The latter has assisted with ‘renewal’ in that this has enabled something of a shift to a new growth path for some industries focused on low carbon and higher value activities” the authors found. 

The researchers found that the Taskforce attempted to build on the earlier efforts of the Rover Taskforces and Regional Economic Strategy to attempt to promote greater adaptability where the regional response was part of broader effort to break free of a long-standing ‘path dependency’ or ‘lock in.’ 

The authors note that there is a parallel with city and regional responses across OECD countries, where local leaders used the crisis to think differently, accelerate new ways of working, and escape from old paths. The authors see such responses as part of a broader context where ‘resilient regions’ can be viewed as those which try to develop ‘transformative strategies’ that anticipate and prepare for the effects of adverse changes. 

However, the authors caution that such ‘lessons’ for developing regional capacity to anticipate and respond to crises need to be set in the context of a rapidly changing and evolving policy landscape. They argue that the formation of a coalition government in 2010 marked an abrupt change in English regional development policy. The key feature of this policy shift they argue was the decision to abolish English Regional Development Agencies (with the exception of that in London). In their place ‘Local Enterprise Partnerships’ (LEPs) have emerged operating at the sub-regional scale. In the West Midlands, for example, the RDA has been replaced with six LEPs. 

Despite this language of ‘localism’, Bailey and Berkeley stress that many of the powers held by English RDAs, for example, on industrial policy, inward investment, business support and other policy areas have been recentralised to London. Moreover, unlike RDAs, LEPs have to operate without significant dedicated budgets. 

A second issue the authors raise is how better cooperation between smaller LEPs will actually be enforced, and how stronger LEPs will be incentivised to cooperate with weaker LEPs. The need for joint LEP working can also be evidenced, they argue, in the regional data and intelligence legacy of the Taskforce: “Overall, Regional Development Agencies were often better positioned to make judgements about how best to offer support and to which clusters (and/or sectors) as they had a superior information base than central governments, as has been highlighted in the case of the West Midlands Regional Taskforce”. 

They add that “A key lesson of the Taskforce response, therefore, is that despite the retrenchment of national-level industrial policy and the shift to the national scale, there remains a role for regional level coordination of local (LEP) economic and cluster strategies, most obviously via some sort of intermediate tier infrastructure”. 

Professor Bailey and Professor Berkeley’s research is published in open-access form in the flagship journal Regional Studies and can be found here.


Notes for Editors

Professor David Bailey can be contacted on 07981 925713

For further media information, please contact Alex Earnshaw, University Communications on 0121 204 4549 or [email protected]