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BoE's Andrew Haldane warns of regional growth inequality

Bank of England chief economist Andrew Haldane (left( Image copyright Bank of England
Image caption Bank of England chief economist Andrew Haldane (left)

Regional inequality in the UK is becoming more pronounced, Bank of England chief economist Andrew Haldane has warned.

London and the South East are the only places in the UK where income per head is back above pre-financial crisis levels, he said.

Net wealth has also fallen in places such as the North East of England.

But without action by the Bank, the regions could have faced economic contraction, he added.

"The UK, I think, is towards the bottom of the league table within Europe in terms of its degree of difference across regions," Mr Haldane told the BBC economics editor Kamal Ahmed.

Britain's inequality map - stark and growing

He said that wage differences between regions of the UK could differ by as much as 50% and that the productivity gap between regions could be as much as 60%.

Mr Haldane also said there had not been much evidence of those gaps shrinking over the past few years.

"If anything these gaps, which are of long standing have nudged a little wider over the course of the UK's recovery," he said.

Blunt tools

There was no single reason why there were such big and persistent differences between regions, he said.

But he thinks differing levels of skills and research and development could be partly to blame.

"Very much more of the research and development occurs, as you might expect, in those high productivity, high income regions of the country," he added.

Mr Haldane said regional inequality was among the most important issues facing the UK.

Reducing the gap could open up considerable opportunities, he said.

For example, he said that if the productivity levels of all companies could be brought up to the levels of those in the most productive parts of the UK it would boost productivity "by fully 20%".

"It would take the UK right up there to rival the Germanies of this world when it came to efficiency and performance," he added.

"That in turn I think would lift wages, it would lift incomes and would lead to a bigger pie as well as more equally redistributed one."

However, the Bank of England lacks the tools to tackle the problem, according to Mr Haldane.

"The tools we have at our disposal are, truth be told... few in number and rather blunt in impact. They tend to work by lifting all boats across the whole of the UK," he said.

Mr Haldane was giving a speech at an iron and steel research centre in Redcar, North Yorkshire.

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