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The Knowledge Economy

September 25 2007 - A report by Neil Lee at The Work Foundation uses data from the UK Competitiveness Index to examine job distribution from 1995-2005 in the "knowledge economy" - industries such as financial services, research and development, IT, communications and advertising. The report concludes that perpetuation of the north-south divide is demonstrated by limited job creation in this sector outside London and the south east where "the numbers of high-skill, high-pay, high-productivity jobs have made the region the powerhouse of national economic performance". The report warns that other urban areas risk being left behind.

Neil Lee said:

"The future of the UK economy is in knowledge based industries. These sectors are reliant on highly technical and often specialized knowledge, their products less influenced by price competition but marketed on a high value-added basis. Areas with high levels of employment in knowledge industries are more productive than those without, and while the so-called 'knowledge economy' is growing nationally, local areas are experiencing this trend in very different ways."

Other key findings include:

  • The knowledge economy is growing steadily but with regional variations maintained.
  • London and the south east continue to dominate.
  • Wales has moved from seventh to fourth place in the sector.
  • Yorkshire and the east Midlands still offer the lowest number of jobs.

Neil Lee continued:

"When you apply the knowledge economy lens to Britain the two-speed, divided nation shows up in vivid contrast. The vital economic role of London and the south east is unquestionable. What is striking about our data is how little has changed: the south has the same proportion of knowledge jobs today as it did in 1995. Unless the north can make further efforts to close the gap by encouraging knowledge industries to invest there, this economic rift may endure."

The report describes Wales as "a notable success story". Growth in knowledge-based employment has been driven by expansion of the public sector with devolution creating new opportunities in education and health. The private sector remains relatively weak.

The report concludes that while regional growth in employment in knowledge industries is consistent, some areas may be losing out. Even parts of London have seen a fall (for example Dartford, where jobs in this sector fell from 57 per cent of the workforce in 1995 to 45 per cent in 2005).

Neil Lee commented:

"The knowledge economy is not exclusively owned by London or the south east; we are seeing steady and continued growth across the UK. But, while the north is not falling further behind, London and the south east are maintaining their lead."

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