This paper examines the role played by financial markets, and in particular, changes in the price and access to capital, in shaping UK regional growth fortunes. We use uniquely detailed real estate investment data to generate risk-pricing indices for all UK regions and cities over a twenty-one-year period. This demonstrates that, since the 2008 global financial crisis, global financial markets underwent a profound regime shift which partitioned the UK into fundamentally different capital market pricing regimes.
City centres in second-tier and third-tier cities have borne the brunt of adverse capital shocks, and this partitioning provides a demand-side explanation as to why economic growth in the UK’s non-core regions outside of London and its immediate hinterland has so seriously struggled in recent years. Rejuvenating the growth trajectories of these cities therefore also requires fundamental reforms to the UK banking and financial system towards a more decentralised system.
A more decentralised and localised UK banking and financial system is essential for regenerating city business ecosystems. However, the modern history of the UK banking system has been dominated by movements away from primarily local financial ecosystems, to a highly centralised, top-down and London-centric system. Therefore, finding ways to reverse these trends is essential in order to foster the rejuvenation of the commercial centres of second-tier and third-tier cities.
Authors Michiel Daams, Colin Mayer, Philip McCann
