A discussion of 'the regions' was absent from the Mark Carney's upbeat speech last week. Not everywhere booms like London
Mark Carney used the word "recovery" 23 times when he presented the Bank of England's latest outlook for the economy last week. But does it feel like a recovery where you live?
Readers in the north-east, where the unemployment rate is 10.3%, may be baffled by the Bank's assertion that jobs are being created at the quickest pace since records began. The whole starting point for the governor overhauling his forward guidance policy last Wednesday was that the 7% unemployment threshold – the point at which the Bank might consider raising interest rates – would be breached within weeks.
Not in the north-east it won't. In the south-east, however, the jobless rate is already down to 5.3%.
Carney also noted that the recovery has been underpinned by a revival in confidence. But a small-business owner battered by floods in Somerset may question what shreds of already fragile confidence will be left when the water finally recedes.
As for the "strengthening" housing market Carney cited, again there are stark regional disparities. A homeowner in the north-west looking to cash in on the much-discussed boom will have no doubt already learned with disappointment that prices in the region are up just 0.6% in annual terms – a fraction of the 5.4% UK average and dwarfed by London's 11.6%.
One word that neither Carney, nor his team's weighty inflation report, mentioned once was "regional". He said the recovery was "neither balanced nor sustainable". But there was no reference to the widening gap between the south-east and elsewhere.
Perhaps he has learned from his predecessor Eddie George's experience in the early days of the monetary policy committee. George faced calls to step down after his remarks at a lunch with regional reporters were taken to suggest he thought unemployment in the north-east was a price worth paying to curb inflation nationally.
The point George tried to make is the Bank's policy levers operate at a national level. The best that businesses and households can hope for is that the policymakers are listening to the Bank's regional agents – their eyes and ears in 12 offices around the UK. On that front, Carney's assertion that rate rises are far off and will be only gradual is reassuring; less so his statement that policymakers are "serene but not complacent".
This regional challenge is by no means unique to the Bank, of course. On a larger and more complex scale, the European Central Bank must try to set policy for a wildly divergent eurozone. But while the currency bloc still faces significant hurdles before it can clamber out of crisis, in the UK there are reasons to be more cheerful.
Richard Holt, who, as regional economist for thinktank Capital Economics, watches data from all parts of the UK, says there is now recovery across the whole country, albeit at differing rates. There are promising signs around the country that Carney's "escape velocity" will eventually be achieved beyond the south-east.
The city of Nottingham, reaping rewards from its own locally tailored jobs and growth plan, has reported record rates of new business creation, and the wider East Midlands region has been enjoying some of the fastest employment growth in the UK.
While by many measures Wales is underperforming the UK, Holt points to promising news in the north, where Toyota engines are built, after the carmaker enjoyed a jump in sales.
In Birmingham, demand for business and holiday flights has seen the airport report its first double-digit growth in passengers for eight years.
But while all parts may now be recovering, those that started from a lower base are not growing as fast as the south-east. The south now takes a bigger share of GDP than in 2010.
The news on jobs creation is equally stark. London alone was responsible for four out of every five jobs created in the private sector between 2010 and 2012, according to the thinktank Centre for Cities. In short, while George Osborne came to the Treasury with a promise to create an economy that was balanced both by sectors and by regions, the old divides have simply been entrenched. To be fair, the south's share of the economy had already been rising under Labour since 1997.
Carney cannot narrow those gaps with monetary policy. That challenge has to be taken up by industrial strategy, infrastructure plans and devolution of spending power to regions and cities.
The coalition was given plenty of food for thought in Michael Heseltine's "No Stone Unturned" plan for widespread growth. But it has only timidly adopted some of his recommendations.
If the next election is to be fought on living standards, then voters will be looking for plans that reboot regional economies. They will want to see strategies that offer some hope that pay and prospects can close in on the levels in London and the south-east.
That means helping regional leaders attract the kind of industries that will provide the productivity boost that, to the Bank's surprise, has eluded the UK. It means delivering the transport links and skilled workers to make UK cities attractive to foreign companies.
As Osborne drafts next month's budget, he faces the challenge of explaining how he will shore up the recovery beyond the south-east – but not to the cost of the south-east, now clearly the UK's engine of growth and the key source of tax revenues.
And, just maybe, the chancellor could seize the opportunity to prove he is serious about his vow to turn the tide on the centralisation that "shackles local ambition and creativity". But perhaps I am just being serene and complacent.
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