By Beverley Morris of the Bank’s Conjunctural Assessment and Projections Division.
During the early to mid-1990s, the pace of economic growth in the South was broadly comparable with that in the rest of the United Kingdom. During 1996–98, however, the pace of activity in the South strengthened considerably relative to the rest of the country. This article investigates one possible explanation for divergences in growth between the two regions—namely differences in the relative importance of the manufacturing and service sectors. The results suggest that such differences in industrial structure do not account for the majority of the regional divergences in growth. Rather, it appears that they are explained mostly by a pick-up in population growth and stronger service sector activity in the South relative to that in the rest of the country over the period.
Can differences in industrial structure explain divergences in regional economic growth?