Rationale for Local and Regional Economic Development
Access this course module's slides and a briefing document via the links below:
What is Local and Regional Economic Development?
Local and Regional Economic Development (LRED) is a collaborative, bottom-up process involving local councils, community organisations, and the private sector to create jobs, generate wealth, and improve quality of life within specific geographical areas. It recognises and leverages each locality's unique assets, challenges, and opportunities, distinguishing it from top-down national or regional strategies.
Key Characteristics:
Geographically Specific: Strategies are tailored to particular towns, cities, districts, or neighbourhoods.
Collaborative and Participatory: Involves diverse stakeholders including local authorities, businesses, education, and community groups.
Goal-Oriented: Aims to create jobs, increase local income, diversify economies, improve productivity, enhance quality of life, and address specific challenges.
Asset-Based: Identifies and leverages human capital, infrastructure, financial resources, natural assets, cultural heritage, and institutional strengths.
Strategic and Action-Oriented: Involves data analysis, planning, implementation, and continuous monitoring.
Why Local and Regional Economic Development Matters
Place-based policies are gaining renewed interest due to persistent underperformance in some areas and the risks associated with asymmetric transitions and shocks. The OECD's 2025 guidance emphasises that while macrostructural policies are important, complementary place-based policies are essential to enhance development quality, mobilise assets efficiently, and prevent regions from being left behind. These policies address spatially differentiated market failures and improve local public good provision, with objectives tied to productivity, sustainability, and inclusion.
Core Benefits:
Job Creation and Employment: Stimulates business growth and attracts investment.
Improved Quality of Life: Enhances infrastructure, public amenities, housing, and social inclusion.
Economic Resilience: Diversifies industrial bases, reducing vulnerability to downturns.
Increased Tax Revenue: Thriving economies generate funding for public services.
Addressing Market Failures: Bridges information gaps and aligns skills with employer demand.
Key Principles for Economic Development Professionals:
Major Reasons Drive Local Involvement: Historical events like de-industrialisation and economic shocks have necessitated intervention in many localities.
Continuous Justification Required: Professionals must repeatedly justify activities and expenditures to new leaders and stakeholders.
Dynamic Economy Requires Adaptation: Economies are constantly evolving, requiring new responses and the ability to pivot priorities.
Robust Evidence is Foundation: Evidence-based strategies and action plans are crucial for overcoming scepticism and building support.
Communication and Visibility are Critical: Communities need to understand plans, actions, and rationales, with delivery and results providing the best communication.
Evidence of Effectiveness:
Large-scale studies demonstrate LRED's effectiveness:
European Structural Funds (Scotland, 2014-2020): Generated significant turnover and net job-years, with substantial projected future GVA and job creation.
Neighbourhood Regeneration (England, 2009-2011): Showed an overall Benefit Cost Ratio (BCR) of 2.3, with higher ratios for specific interventions like business support and property development.
Regional Development Agencies (England, 1999-2010): Achieved a BCR of 4.5, rising to £6.40 with future returns, demonstrating effective strategies and skilled staff.
British Library Business & IP Centres: Generated £6.95 public value per £1 invested, with high rates of female and BAME-led start-ups and impressive business survival rates.
Canada's SuperClusters (2018-2023): Created thousands of short-term jobs with potential for significant medium-term job growth, along with increased revenue, IP assets, and productivity gains.
Practical Examples:
Leeds City, England: Focuses on inclusive growth, ensuring economic benefits are widely shared.
Reading, England: Leverages its successful economy while addressing challenges of shared prosperity and future shifts.
Waterloo, Ontario: Builds on its identity as a global tech hub through strong university partnerships.
Detroit, Michigan: Driven by a history of decline, focuses on rebuilding a robust and equitable economy.
Lyon, France: Prioritises sustainable economic transformation, ecological transition, and social cohesion.
Context Matters: Tailoring Your Approach:
Local context is critical. Economies face different challenges, such as industry loss, lack of notable strengths, or booming economies with congestion issues. Effective LRED requires prioritisation and focus based on these specific conditions.
Common Challenges and Counter-Arguments:
Sceptics often question the need for local economic development, arguing that the market will self-correct or that the public sector has no role. The main counter-argument is "do the same, get the same"—without intervention, the local economy is unlikely to change on its own. Demonstrating what competitor localities are doing also provides compelling justification.
Key Success Factors:
Evidence-Based Strategies: Rely on robust data and transparent monitoring.
Collaborative Approaches: Require effective partnerships across diverse stakeholders.
Clear Communication: Builds support and manages expectations.
Strategic Prioritisation: Focuses efforts on carefully selected priorities.
Continuous Adaptation: Requires ongoing reassessment and adjustment to changing conditions.
Conclusion:
LRED is a proven, essential, and highly collaborative bottom-up approach to economic and social well-being. It demands continuous justification and adaptation but demonstrates significant positive returns on investment. It goes beyond simple economic growth metrics to improve overall quality of life and addresses unique local assets and challenges with tailored solutions. Success hinges on robust evidence-based strategies, broad stakeholder collaboration, clear communication, strategic prioritisation, and continuous adaptation.