Growth across regions

It covers two main areas:

• the Commission’s interpretation of its objective to ‘support sustainable economic growth across all regions of the UK’ and the evidence supporting this
• the Commission’s framework for considering how infrastructure can help to improve economic outcomes in different areas.

Over the past two centuries, regional inequality in economic outcomes in the UK has been persistent. Differences in productivity across UK regions are large, in absolute terms and when compared internationally. Regional variations in economic outcomes are driven by a range of factors. Infrastructure can play an important role.
The UK government has set itself the ambition of ‘levelling up’ economic outcomes between regions, emphasising the role of infrastructure in regional rebalancing. This is part of a series of government policies on regional rebalancing. While infrastructure is necessary to support growth, it is rarely sufficient to fundamentally alter the economic geography of a country. Infrastructure policy must be combined with other measures such as improving skills and innovation.

The Commission’s interpretation of the objective

The Commission recognises that addressing regional disparities is part of its objective to ‘support sustainable economic growth across all regions of the UK’. It will interpret its objective as being to support faster growth in low productivity regions and balancing this with maintaining the economic performance of high productivity regions.

The Commission has identified the following measures to assess progress against the objective:

• gross value added (GVA) measures of overall economic activity and labour productivity, and data on median incomes before and after housing costs as relevant indicators of regional economic performance
• three definitions of regions which capture clusters of cities, towns and other settlements at a large scale to measure progress against the objective, and several alternative definitions to enable the analysis of productivity disparities within and between regions at different spatial scales. This reflects the fact that intra-regional or local growth disparities are often as pronounced as inter-regional ones
• measures of dispersion, which can help the Commission understand the level of regional and sub regional disparities, and identify which areas may require intervention.

The Commission’s framework for infrastructure and economic outcomes

The Commission has developed a framework that identifies three pathways through which infrastructure investment can help to achieve economic outcomes in different regional areas. These are: addressing constraints to growth; contributing to transformation; and universal provision.
Meeting the objective will require a balanced portfolio of interventions across the three pathways. The most appropriate pathways and type of infrastructure measures will vary according to the characteristics and strategic needs of different places. This aligns with the recommendations of the Commission’s Cities Programme, which identifies the importance of local decision making in capturing and acting upon local preferences and needs, thereby building consensus toward local infrastructure strategies.
This framework, alongside the interpretation of the objective, will shape the Commission’s approach to current and future work, most notably the Rail Needs Assessment for the Midlands and the North and policy recommendations in the second National Infrastructure Assessment.

Future work

The Commission will also develop discussion papers on the remaining aspects of its objectives including quality of life and sustainability. This will complete the series of discussion papers on the Commission’s objectives.

The National Infrastructure Commission has three objectives, which are specified in its charter:

• support sustainable economic growth across all regions of the UK
• improve competitiveness
• improve quality of life.

The Commission is publishing a series of discussion papers reviewing each of the objectives. These will clarify the Commission’s interpretation of its objectives and explain how the Commission could measure the contribution its recommendations make towards its objectives. The first discussion paper on the Commission’s ‘improving competitiveness’ objective was published in April 2020.¹
This discussion paper is the second in the series, focusing on the Commission’s sustainable economic growth across all regions of the UK objective. It sets out the Commission’s interpretation, the evidence supporting this and how it relates to infrastructure. This paper focusses on economic growth across regions. The Commission intends to return to the ‘sustainable’ aspect of the objective once work underway on natural capital has progressed.
The paper also considers the role of infrastructure in the context of the government’s ‘levelling up’ agenda.
The Commission would prefer its objectives to be measurable, allowing the Commission to assess progress. The limitations of infrastructure evidence and data may restrict the degree to which this is possible at present. Nevertheless, the Commission’s choice of definition will take potential measurability into account, in the expectation that evidence and data will continue to improve.
There will be overlapping and complementary areas across the Commission’s objectives. In general, overlaps are not problematic, and the discussion papers will highlight the most relevant ones for each objective. However, for the purposes of monitoring, it will be useful for the Commission to maintain some distinction between its objectives.
There is a key overlap between the economic growth and quality of life objectives, given the role of infrastructure in providing a range of economic and wider societal outcomes. This overlap is discussed later in the discussion paper when setting out the Commission’s framework on how infrastructure investment can help to achieve economic outcomes in different regional areas.
The Commission welcomes comments on this discussion paper, including evidence on how infrastructure affects economic growth and ways that the Commission could monitor and measure its impact. Please send any comments to NICdiscussionpapers@nic.gov.uk by 31 March 2021.

Background to the objective

Economic growth is a complex process. Most long term growth comes from productivity growth, driven by technological progress: new innovations, improving access to physical and human capital, and incorporating best practice. The Commission has previously identified three main ways in which infrastructure contributes to economic growth:

• improving the quantity and quality of infrastructure services: This can lower costs for firms – for example, a more efficient transport network will reduce the cost of distribution, increasing the amount of output that firms can produce for a given level of inputs (fuel, lorry driver time etc)
• directly enabling productivity enhancing technological change: For example, broadband enables customers and suppliers to find one another and interact at very low cost, improving the efficiency of a wide range of services, such as travel agencies, retail and banking. It also enables the creation of entirely new services, such as social media
• supporting the efficient working of the housing and labour markets: Without infrastructure, housing cannot be built where people want to live, and people cannot move between where they want to live and where jobs are located. Businesses tend to locate in the most productive areas, influenced by the quantity and quality of infrastructure services provided. In addition, infrastructure enables cities and other population centres to form. People are more productive when they work in these dense concentrations, especially in high skilled services. Water and wastewater, waste removal, flood risk management, energy and transport have always been essential for cities to function.²

Regional inequality in economic performance in the UK has been persistent over the past two centuries.³ London was richer and more productive than the North of England even in 1900, despite the industrial revolution beginning in the North.⁴ Differences in productivity across UK regions are large, in absolute terms and by international standards.⁵ Figure 1 presents long-run trends in regional productivity during the twentieth Century.

Figure 1: Trends in regional disparities in Great Britain during the twentieth Century (GDP per worker)⁶

Note: Data for 1941 is missing in the source data, so a dummy value is created such that there is a constant linear change between 1931 and 1951.

Regional variations in economic outcomes are driven by a range of interacting factors. Highly skilled people and businesses tend to cluster together as they are more productive, and earn higher wages, when they do – an effect known as ‘agglomeration’. Amenities, such as hospitality, entertainment and other services, also tend to concentrate in areas of highly paid people. This in turn attracts further highly skilled and paid workers, which raises property prices, and pushes out lower paid workers, who then seek places with lower rents or property prices, and cheaper shops and services, creating self-reinforcing cycles of success and deprivation. As the UK’s economy has shifted towards business services, cities have tended to benefit from these factors, leaving some smaller towns and rural areas behind.
However, recent trends in the past few decades suggest some improvements. Productivity differences between regions have decreased slightly,⁷ and incomes have been growing faster outside cities in places such as the North and Midlands.⁸ However, this has not been enough to reverse the significant increases in regional inequalities that occurred in the last quarter of the 20th Century. The legacy of deindustrialisation means former industrial towns suffer from persistently low productivity and incomes, even if they are not falling further behind.⁹ There are also growing concerns of increasing inequality in productivity and income within regions.¹⁰,¹¹

Other countries also face persistent regional economic variation. However, the extent of regional variation within England appears to be unusually high compared to other countries,^{12 13} although regional boundaries are drawn inconsistently across countries, which can limit international comparisons.¹⁴ England is also unusual in that few of its major cities, apart from London, have productivity above the national average, leading to a high productivity gap between the North and the South.¹⁵ This disparity is presented in Figure 2.
Infrastructure is far from the only factor explaining these trends. Geography, history, local culture and governance are important factors determining the economic activities of a region, while clusters of highly skilled workers and high productivity activity can become self-sustaining over time.¹⁶
Another part of the explanation relates to regional differences in resilience to economic shocks.¹⁷ Recent analysis of 85 UK cities’ economic resilience from the past three recessions show that southern cities have tended to be more resilient in terms of the speed, extent and nature of recovery from shocks compared to their northern counterparts. For example, following the 2008 recession a high proportion of northern cities emerged on a lower growth path, while a high proportion of southern cities settled on a growth path equal to or more than the pre-recession growth rate.^{18 19}
Provision of infrastructure is an important part of the picture. There is evidence suggesting that variations in public and private ‘capital stocks’ (e.g. productive assets, such as the road and rail network, that support and complement workforce activities) mirror productivity differences.²⁰ A recent study finds that regional variations in capital stocks per worker make a significant contribution to regional variations in labour productivity, but the geography of human capital is also highly relevant.²¹
In this context, the UK government has set the ambition of ‘levelling up’ between regions, emphasising the role of infrastructure in regional rebalancing.²² This is part of a succession of government policies on regional rebalancing.²³ However, while infrastructure is necessary, it is rarely sufficient to fundamentally alter the economic geography of a country.

Figure 2: Regional productivity variation in the UK (NUTS2 Regions, GVA per hour worked)²⁴

The rest of this paper breaks down the Commission’s objective into three components, with a dedicated section on each one:

• what is meant by growth?
• what is meant by regions?
• what is meant by ‘across all’?

Each section demonstrates how the Commission has assessed the evidence, focusing on the extent to which progress in meeting the objective could be measured by the Commission.
This is followed by a section that sets out the Commission’s framework for infrastructure and economic outcomes. The framework presents ‘three pathways’ in which infrastructure investment can contribute to reducing regional disparities and help to achieve wider societal outcomes (e.g. quality of life). The section also identifies some of the challenges posed in measuring progress against the objective, and how the framework helps to address these.

What is meant by economic growth?

Gross domestic product (GDP) is the primary indicator of economic activity within the UK.²⁵ There are three main ways of estimating this, two of which use gross value added (GVA) approaches which capture the value of goods and services produced at a number of different sectoral and geographic scales.²⁶ Most long term economic growth comes from productivity growth, which in turns drives higher living standards.²⁷
GVA on a ‘per hour’ basis is a measure of labour productivity – the quantity of goods and services produced per hour of labour input. For a given region or subregion, this is calculated by dividing GVA by the total hours worked by the workforce. It is considered to be a comprehensive indicator of labour productivity and is the preferred measure at subnational level. This is because it takes into consideration regional labour market structures, different working patterns (such as the mix of part-time and full-time workers), industry structure and job shares.²⁸ Figure 2 provides an illustration of how GVA per hour data can be used to show the spread of high productivity and low productivity places across the UK.
Overall economic output can only be improved by either increasing the amount of inputs or by raising productivity. In other words, ‘productivity growth’ and ‘economic growth’ are not interchangeable terms, rather changes in productivity contribute to longer term economic growth.^{29 30} Therefore, for the purposes of measuring ‘growth’ as part of this objective, the Commission will primarily use GVA measures of overall economic activity and labour productivity on a ‘per hour’ basis.

Challenges in measuring economic activity

In doing so, the Commission acknowledges that measuring economic activity is complicated by the fact that people don’t live where they work, and because costs of living vary in different regions.
Firstly, economic geography is influenced by the location decisions of households and businesses. For example, city centres, with their clusters of highly skilled people and businesses, are significantly influenced by commuter inflows of workers who live in the surrounding towns and other settlements (i.e. the ‘commuter belt’). This can create differences in where people earn and spend their income, with knock on effects to local economic geography.
Data on incomes,^{31 32} which are associated with productivity performance, can be used to further understand how differences in where people live and work influence regional economic outcomes. The differences between workplace productivity and residents’ earnings may not be substantial at large regional scales, as there are limits to how far people commute. Localised effects however may be more variable. The granularity of income data means differences in where people work and live can be accounted for.
However, income measures can be distorted by very high earners. For example, average (i.e. mean) incomes are significantly influenced by the higher proportion of workers at the top of the income distribution in places such as London. This can be addressed by considering median incomes instead.³³
Secondly, variation in regional living costs also play an important part in determining how the effects of economic growth on living standards are experienced. A lack of robust regional price indices³⁴ poses challenges to adjusting sub national GVA data, however when looking at incomes it is possible to take into account regional data on living costs, particularly housing.³⁵
Considering variation in living costs can provide a more nuanced view of regional disparities. For example, the Institute for Fiscal Studies show that when average incomes are adjusted for housing costs, London and the South East are close to the national average.³⁶ The desire of workers to live near (or have access to) high productivity and high wage jobs, is ‘capitalised’ into higher property prices and rents, so living standards are not necessarily higher even if wages are. This contrasts with the significantly larger variation in productivity between London and the South East, and the rest of the UK demonstrated in their analysis and in Figure 2. However, higher rents may also reflect higher amenity values, such as access to services, which do contribute to living standards.
For these reasons, the Commission will in addition to GVA measures consider median incomes measured before and after housing costs as a relevant indicator of regional economic performance, illustrating the economic experience of people who live and work in different regions.

What is meant by regions?

In the broadest sense, ‘regions’ refers to a geographic typology which sub divides the UK into 12 areas. At its core it refers to the four nations of the UK (England, Scotland, Wales, Northern Ireland), with England being split into nine regions (e.g. London, North West, South West). This typology is the basis of the Office for National Statistics’ (ONS) ‘Nomenclature of Territorial Units for Statistics’ NUTS1 classification,³⁷ one of many statistical and administrative definitions used to aggregate economic and non-economic data at different spatial scales.
A key feature of UK regional disparities is that they are as much within these broad regions as between them. However, as outlined in the previous section, one of main challenges of regional data is capturing economic activity in a consistent way, especially given the variation in where people live, work and commute, and the administration of public services. For example, the NUTS1 typology refers to regions that have very different populations and population densities (see Table 1) partly because all regions and nations outside of London combine urban and rural populations. The population density of London is more than ten times greater than the next highest (North West).

Table 1: UK population data by NUTS1 typology (mid-2019 estimates)³⁸

Table 2 presents three key definitions of regions. For the purposes of the ‘regions’ part of the objective, the Commission will use the definitions of regions set out here. ONS NUTS1 and 2 are recognised definitions that provide total coverage across the UK, which capture clusters of cities, towns, and other settlements based on administrative boundaries (e.g. local authorities, combined authorities, city regions).
‘City Regions’ and NUTS2 provide greater granularity compared to NUTS1, and in doing so partly address the urban and rural issues highlighted previously. City Regions are of particular policy interest to the Commission, given that they represent the UK’s largest urban centres such as Greater London, West Midlands, Greater Manchester, Glasgow and Cardiff.

Table 2: Key definitions of regions

However, there are several alternative spatial definitions which provide different degrees of granularity and coverage across the UK. These definitions typically refer to specific places and areas (e.g. a city, a local authority), rather than a ‘region’ which is a usually a cluster of these.
These are more appropriate for carrying out different types of spatial analysis than as a way for the Commission to measure progress against the objective. One example is examining disparities in economic performance within city regions – for example within Greater Manchester, productivity in Trafford is over a third higher than in Oldham.³⁹ Table 3 presents a non-exhaustive list of these alternative geographies.

Table 3: Alternative spatial definitions

In summary, the Commission’s approach to regions is as follows:

• to measure progress against the objective, the Commission will use the regional geographies set out in Table 2, which provide total coverage across the UK, capturing clusters of cities, towns, and other settlements based on recognised boundaries (e.g. administrative)
• for other types of analysis, the Commission has identified alternative definitions that may be appropriate depending on the line of inquiry and data available. Some of these are set out in Table 3.

Table 4 brings together the Commission’s approach to ‘regions’ by presenting some example lines of inquiry and links these to the appropriate regional and spatial definitions identified in Tables 2 and 3.

Table 4: Examples of lines of inquiry and suitable regional and spatial definitions

Note: the above is merely illustrative and is non-exhaustive.

What is meant by ‘across all’?

The Commission recognises that addressing disparities between regional areas is part of its objective to ‘support sustainable economic growth across all regions of the UK’. This means supporting faster growth in low productivity regions and maintaining the economic performance of high productivity regions. All regions should be supported to achieve economic growth, but faster rates in lower productivity regions will reduce the gap between regions over time.
It should be emphasised that reducing disparities does not mean eliminating them entirely. The main reason for this is due to inherent differences in UK geography which mean businesses have to decide between having access to the things that they want – e.g. knowledge (for high-skilled businesses) and workers – against the cost of locating in places where these are available. This creates fundamental differences between types of places, particularly urban and rural areas.⁴⁰ Another factor to consider is industry mix, particularly areas that have concentrations of certain sectors (e.g. financial services, manufacturing). This can play a role in determining the productivity potential and future growth opportunities of a place.^{41 42}
The Commission will assess progress in reducing regional disparities using absolute and relative measures of dispersion. Dispersion captures how spread out a set of observations are, usually relative to a benchmark such as the average (e.g. mean, median). This may include the spread of labour productivity, or other measures, across regions compared to the UK average. Figure 2 provides a graphical example of this.
Absolute measures express dispersion in terms of the original units of the data. This could include measures such as the range, standard deviation, and interquartile range. By comparison, relative measures express dispersion as a percentage or ratio of a common denominator such as the average of the data. This allows for meaningful comparison of dispersion over time and between different datasets (e.g. income, labour productivity).
Table 5 provides a description of measures, while Table 6 applies these to trends in labour productivity for NUTS2 regions for the years 2004, 2011 and 2018.

Table 5: Description of absolute and relative measures of dispersion

Table 6: GVA per hour worked (£, 2016 prices) – analysis of dispersion between UK NUTS2 regions⁴³

Table 5 demonstrates that the usefulness of dispersion measures depends on the context. For example, in tracking progress against the objective over time (i.e. reducing regional disparities), the coefficient of variation can simultaneously account for national changes in labour productivity (i.e. the mean), and whether or not disparities between regions are improving (i.e. regional productivity levels are closer to the UK average), or deteriorating (i.e. regional productivity levels are moving further apart).
As an example, Figure 3 presents spatial inequality in the UK during the twentieth Century, using a coefficient of variation approach. While it demonstrates the entrenchment and persistence of regional inequality, it also shows there have been periods of disparities improving and deteriorating.

Figure 3: Trends in spatial inequality in Great Britain during the twentieth Century (coefficient of variation, GDP per worker)⁴⁴

Note: CV1 is coefficient of variation for all regions treating London and South East as separate regions. CV2 combines London and the South East as one region. Data for 1941 is missing in the source data, so a dummy value is created such that there is a constant linear change between 1931 and 1951.
Other measures by comparison do not account for average UK productivity in the same way as the standard deviation or coefficient of variation, but still provide useful insights. For example, the range would help explain the extent of disparities between the lowest and highest productivity places. The interquartile range would measure disparities for the 50 per cent of places clustered around average productivity, and excludes outliers which may be atypical places (i.e. those with very low or very high productivity).
Table 6 demonstrates that labour productivity dispersion has increased across all measures between 2004 and 2018, although there are a significant range of estimates. The 20-30 per cent increases in relative dispersion as measured by the range and quartile deviation coefficients indicates growing disparities between the lowest and highest productivity regions, and between regions clustered around UK average productivity.
However, the change measured by the coefficient of variation estimate of dispersion is noticeably smaller compared to the other relative measures. As previously described, it is the only measure that simultaneously accounts for changes in national (i.e. UK average) and regional productivity in estimating dispersion. The small change is likely explained by the percentage changes across all regions between 2004 and 2018 falling within a narrow range (6-17 per cent), as reflected by the summary statistics.
In summary, the Commission has identified a number of measures of dispersion to help understand changes in regional and sub regional disparities in labour productivity over time. The Commission’s analysis shows that no one measure is superior or all encompassing but used together the measures can help the Commission understand the level and direction of travel for regional disparities, as well as which areas may be a particular focus for intervention.
However, these do not give the Commission a direct measure for the impact that infrastructure has on varying regional productivity. As outlined in the introduction, a wide range of factors beyond infrastructure are responsible for determining these outcomes. Because of this the Commission will, in interpreting its objective to support economic growth across all regions, pay particular attention to the ways in which infrastructure can contribute to regional productivity in different places – as set out in the following section.

Framework for infrastructure and economic outcomes

The UK government’s ‘levelling up’ agenda⁴⁵ is part of a succession of government policies on regional rebalancing.⁴⁶ While the UK’s poor productivity performance and regional disparities are sometimes blamed on the country’s infrastructure,⁴⁷ investing in new infrastructure on its own is unlikely to be enough to transform the economic outcomes of a place – be that a region, city or a town. These issues are explored in further detail in the Commission’s discussion paper on infrastructure and economic growth.⁴⁸
Any successful strategy for economic transformation will therefore need to be comprehensive and will need to recognise the scale of the regional variation challenge and its self-reinforcing nature. There are many interrelated issues, including skills, that would need to be addressed to break the cycle. Other factors, such as the availability of good housing, schools, local transport and amenities, low crime rates and good governance will also affect outcomes, such as where people choose to live. Local decision making, and knowledge about specific circumstances, will also be important in aligning complementary policies with infrastructure investments.
However, a basic level of infrastructure underpins economic life in all places regardless of relative performance. The ability of people to access work and business to reach customers depends on a reasonable level of infrastructure provision everywhere. This economic need also relates to the importance of infrastructure in supporting other forms of capital (e.g. human, social), and quality of life. The latter is another of the Commission’s objectives, which the Commission will be looking at in a future discussion paper.
Infrastructure interventions must also consider the needs and desired outcomes for people and places. The Commission’s advice to cities developing local infrastructure strategies emphasises the need to capture local needs and preferences by engaging with a wide range of stakeholders, including across political parties and professions.⁴⁹ Unintended consequences can arise if there is too much focus on reducing inequalities between places, as this may overlook the impacts on the people living there. For example, transport investment in an area may raise local incomes but only by displacing existing residents who are pushed out by high land prices and replaced by people on higher incomes – a process known as gentrification. It is a common critique of the regional rebalancing agenda and highlights one of the key trade-offs when reducing regional disparities.⁵⁰
On the same note, interventions that simply relocate activity from one town to another are unlikely to improve prospects in the region overall, since one town’s gain would then be another’s loss.⁵¹ However, interventions that increase productivity for a region as a whole can improve prospects for some towns without others losing out.

Three infrastructure pathways

The Commission have developed a framework that identifies three pathways through which infrastructure investment can help to achieve economic outcomes in different regional areas, supporting the objective of growth across all regions and the reduction of disparities between them. These are:

• addressing constraints to growth
• contributing to transformation
• universal provision.

Table 7 sets out a summary of the pathways. The framework reflects how the Commission will structure its thinking, and could be used to assess the contribution of the Commission’s recommendations to achieving regional rebalancing.

Table 7: Infrastructure and regional rebalancing pathways

The pathways outlined in Table 7 are not mutually exclusive. The Commission acknowledges that a balanced portfolio of interventions across all three pathways is required to help reduce regional disparities.
A key reason for a balanced portfolio approach is to manage risk. Interventions that fall under ‘addressing constraints to growth’ or ‘universal provision’ pathways have a higher chance of success and therefore lower risk. The latter can produce tangible outcomes beyond economic growth (e.g. quality of life), while the former could involve well-targeted capacity upgrades to alleviate congestion on public transport.
By comparison, transformation is a higher risk intervention due to the number of pre-conditions required to be in place for it to be successful, and the likelihood of unintended consequences such as gentrification. Transformation projects are also long-term ‘bets’ compared to the other two pathways, but with potentially higher returns if they succeed. Examples of transformation include the regeneration of Salford Quays, which began in the 1980s, with the extension of the Manchester Metrolink in the 1990s and continued with the development of Media City from the mid-2000s.⁵² The regeneration of London Docklands also took place over a similar timeline, starting with the establishment of a development corporation in 1981, and the development of Canary Wharf in the late 1980s.^{53 54}
The Commission expects a range of interventions to support economic growth would need to be deployed differently depending on the context, infrastructure sectors considered, and the desired outcomes to be achieved. A balanced portfolio of actions would include interventions that support the Commission’s economic growth (addressing constraints to growth, regeneration) and quality of life (universal provision) objectives. The Commission’s Cities Programme identifies the importance of local decision making in capturing and acting upon local preferences and needs, thereby building consensus toward local infrastructure strategies.⁵⁵
Reducing disparities in productivity is unlikely to happen quickly given the persistence and entrenchment of inequality – it is clearly a long-term goal. However, adopting the right balance of investment in different pathways, in the appropriate areas, will offer the highest potential to make a nationally significant difference over time.

In interpreting the objective, the Commission recognises that addressing regional disparities is part of its objective to ‘support sustainable economic growth across all regions of the UK’. This involves supporting faster growth in low productivity regions and balancing this with the needs of high productivity regions to maintain their economic performance.
However, measuring infrastructure’s contribution to future productivity improvements and therefore progress in reducing regional disparities is very difficult. This is because future changes in productivity will reflect wider causes beyond infrastructure, which poses a challenge in measuring the impact of the Commission’s recommendations.
To address this, the Commission has developed a framework which sets out the main pathways by which infrastructure investment can support economic and wider societal outcomes. The framework reflects how the Commission will structure its thinking going forward. It could also be used to directly assess the contribution of the Commission’s recommendations in each pathway, and how this would support the long-term goal of reducing regional disparities. The Commission acknowledges that a balanced portfolio of interventions across all three pathways is required to help achieve this goal and reflect differing priorities in different places.
In conclusion the Commission has identified:

• gross value added (GVA) measures of overall economic activity and labour productivity, and data on median incomes before and after housing costs as relevant indicators of regional economic performance
• three definitions of regions which capture clusters of cities, towns and other settlements at a large scale to measure progress against the objective, and several alternative definitions to enable the analysis of productivity disparities within and between regions at different spatial scales. This reflects the fact that intra-regional or local growth disparities are often as pronounced as inter-regional ones
• measures of dispersion, which when used together can help the Commission understand the level and direction of travel for regional and sub regional disparities, as well as which areas may be a particular focus for intervention
• three ways infrastructure can help to reduce regional disparities and achieve wider societal outcomes, thereby supporting UK government’s objectives on ‘levelling up’: addressing constraints to growth, contributing to transformation, and universal provision. A balanced portfolio of interventions across all three pathways is required to help reduce regional disparities.

Next steps

This analysis will shape the Commission’s approach to current and future work, most notably the Rail Needs Assessment for the Midlands and the North,⁵⁶ and the second National Infrastructure Assessment. The Commission will also develop discussion papers on the remaining aspects of its objectives including quality of life and sustainability. This will complete the series of discussion papers on the Commission’s objectives.

The Commission is grateful to everyone who engaged with the development of this discussion paper.
The Commission would also like to acknowledge the contribution which external experts (including those on the Commission’s expert advisory groups) have made to the report, and would like to thank Diane Coyle, Henry Overman, David Waite, Iain Docherty, Simon Jeffrey, James Laird and Shane Greenstein for their support.
The Commission is grateful to officials from across government and other individuals who have engaged with the development of this report.
The Commission would like to acknowledge the members of the Secretariat who worked on the report: Katie Black, Maisie Darby, James Heath, Catherine Jones, Greg McClymont, James Richardson, Chris Wanzala-Ryan, Tom Wickersham and Olivia Winduss.

1. National Infrastructure Commission (2020), Improving competitiveness: a discussion paper on the Commission’s objectives
2. National Infrastructure Commission (2017), Economic Growth and Demand for Infrastructure Services
3. Geary, F, Stark, T (2016), What happened to regional inequality in Britain in the twentieth century? The Economic History Review
4. Geary, F, Stark, T (2016), What happened to regional inequality in Britain in the twentieth century? The Economic History Review
5. Industrial Strategy Council (2020), UK Regional Productivity Differences: An Evidence Review
6. Geary, F, Stark, T (2016), What happened to regional inequality in Britain in the twentieth century? The Economic History Review
7. Industrial Strategy Council (2020), UK Regional Productivity Differences: An Evidence Review
8. Institute for Fiscal Studies (2020), Catching up or falling behind? Geographical inequalities in the UK and how they have changed in recent years
9. Institute for Fiscal Studies (2020), Catching up or falling behind? Geographical inequalities in the UK and how they have changed in recent years
10. Institute for Fiscal Studies (2020), Catching up or falling behind? Geographical inequalities in the UK and how they have changed in recent years
11. Industrial Strategy Council (2020), UK Regional Productivity Differences: An Evidence Review
12. International Monetary Fund (2018), IMF staff country reports – United Kingdom
13. National Institute of Economic and Social Research (2020), UK interregional inequality in a historical and international comparative context
14. For example, the Eurostat principles on NUTS regions states that “despite the aim of ensuring that regions of comparable size all appear at the same NUTS level, each level still contains regions which differ greatly in terms of population”
15. Commission calculations using Office for National Statistics (2020), Subregional productivity: labour indices by UK NUTS 2 and NUTS3 subregions. Nominal (unsmoothed) GVA (B) per hour worked (£) NUTS 2 in 2018. Productivity has been calculated as a percentage of the UK average. NUTS 2 regions divide the UK into areas with populations between 800,000 and 3 million on average
16. Industrial Strategy Council (2020), UK Regional Productivity Differences: An Evidence Review
17. Sensier, M, Devine, F (2020), Understanding regional economic performance and resilience in the UK: trends since the global financial crisis, National Institute Economic Review
18. Gardiner, B, Martin R (2019), The resilience of cities to economic shocks: A tale of four recessions (and the challenge of Brexit), Papers in Regional Science
19. Martin R, et al (2019), The Economic Performance of Britain’s Cities: Patterns, Processes and Policy Implications
20. Industrial Strategy Council (2020), UK Regional Productivity Differences: An Evidence Review
21. Gardiner, B et al (2020), Regional disparities in labour productivity and the role of capital stock, National Institute Economic Review
22. HM Government (2020), PM Economy Speech: 30 June 2020
23. National Audit Office (2013), Funding and structures for local economic growth. See figure 3 (page 17)
24. Commission calculations using Office for National Statistics (2020), Subregional productivity: labour indices by UK NUTS 2 and NUTS3 subregions. Nominal (unsmoothed) GVA (B) per hour worked (£) NUTS 2 in 2018. Productivity has been calculated as a percentage of the UK average
25. ONS (2020), A guide to the UK National Accounts: March 2020
26. ONS (2018), Regional economic activity by gross value added (balanced), UK: 1998 to 2017
27. ONS (2019), Understanding spatial labour productivity in the UK
28. ONS (2020), Subregional productivity in the UK: February 2020
29. ONS (2020), Subregional productivity in the UK: February 2020
30. ONS (2019), Understanding spatial labour productivity in the UK
31. ONS (2020), Annual Survey of Hours and Earnings (ASHE)
32. Department for Work and Pensions (2020), Family Resources Survey
33. Institute for Fiscal Studies (2020), Catching up or falling behind? Geographical inequalities in the UK and how they have changed in recent years
34. ONS (2018), Relative regional consumer price levels of goods and services, UK: 2016; example data only provides relative regional price levels for goods and services. Wales, Northern Ireland, Scotland, London and regions of England compared with the UK average.
35. Department for Work and Pensions (2020), Family Resources Survey; there are various datasets on housing costs – this survey for example captures weekly housing costs for different types of tenure
36. Institute for Fiscal Studies (2020), Catching up or falling behind? Geographical inequalities in the UK and how they have changed in recent years
37. ONS (2016), Eurostat: An overview of the 3 NUTS and 2 LAU layers in the UK
38. ONS (2020), Office for National Statistics, National Records of Scotland, Northern Ireland Statistics and Research Agency – Population Estimates
39. Commission calculations using ONS (2020), Subregional productivity: labour productivity indices by local authority district. Nominal (smoothed) GVA (B) per hour worked in 2018, difference between most and least productive local authorities in the Greater Manchester Combined Authority area
40. Centre for Cities (2017), Why don’t we see growth up and down the country?
41. Mealy, P and Coyle, D (2019), To Them That Hath: Economic Complexity and Local Industrial Strategy in the UK
42. The implications of industry mix and economic performance are discussed in detail as part of the ONS Statistical Digest of Rural England
43. Commission calculations using Office for National Statistics (2020), Subregional productivity: labour indices by UK NUTS 2 subregions. Converts nominal (unsmoothed) GVA (B) per hour worked (£) NUTS into real terms by using real (unsmoothed) GVA (B) per hour worked indices which is in 2016 prices
44. Geary, F, Stark, T (2016), What happened to regional inequality in Britain in the twentieth century? The Economic History Review
45. HM Government (2020), PM Economy Speech: 30 June 2020
46. National Audit Office (2013), Funding and structures for local economic growth, see figure 3 (page 17)
47. For example: Pisu et al for the OECD (2015), Improving infrastructure in the United Kingdom and World Economic Forum Global Competitiveness Report (2002)
48. National Infrastructure Commission (2017), Economic Growth and Demand for Infrastructure Services
49. National Infrastructure Commission (2020), Principles for effective urban infrastructure: Lessons learned from the Next Steps for Cities programme
50. Overman, H (2015), The Economic Performance of UK Cities: Can Urban and Regional Policy Make a Difference to the North-South Divide?
51. Redding, SJ, Turner, MA (2014) Transportation Costs and the Spatial Organization of Economic Activity. NBER Working Paper. Accessed at: https://www.nber.org/papers/w20235. This provides an overview of the literature on the extent to which the observed effects of infrastructure reflect changes in the level of economic activity versus a reorganisation of existing activity
52. Salford City Council (2008), The story of Salford Quays
53. The London Docklands Development Corporation website, History Pages
54. The Guardian (2009), Legacy of the docks
55. National Infrastructure Commission (2020), Principles for effective urban infrastructure: Lessons learned from the Next Steps for Cities programme
56. National Infrastructure Commission (2020), Rail Needs Assessment for the Midlands and the North