In recent weeks, the state of the British economy has received considerable attention, particularly within the United Kingdom. Figures for the last three months have reported either negative growth or, in the case of the most recent data, very limited positive growth. Combined with significant ongoing challenges to UK government revenue and serious doubts about previous privatization schemes, the debate on how to revitalize the UK economy has only grown louder since the elections on July 4 of last year. As I wrote for CNBC this past September, many of the most significant issues predate Brexit and date back to the Great Recession of 2008–2009, along with its resulting austerity measures on the UK budget. The key for the British government, British business, and the regions of the country is to not only find ways to restart and reinvigorate investment but also to do so without straining the UK fiscal position.

This past December, my colleague Andrew Kourti and I published a report, Restoring UK Regional Economic Mobility, which examined both the postwar economic history of UK regional investment and growth, as well as the numerous challenges that have developed over the years to inhibit the strengthening of regional economies. The issue has been widely recognized by British politicians for years, particularly in the wake of the tremendous divergence in the economic fortunes of Greater London from the rest of the country, following Thatcher’s economic policies and the shift from manufacturing exports to service exports that occurred throughout the 1980s and 1990s. Each subsequent government has recognized the need to increase investment and economic mobility in other parts of the UK, whether Scotland, Northern Ireland, Wales, or other regions of England outside the London-Oxford-Cambridge triangle. Whether her efforts were called Devolution or Leveling Up, attempts have been made to stimulate these regional economies, but largely with limited effect.

In order to make true progress in addressing regional economic opportunities, multiple key challenges in funding, human capital retention, and spurring innovation need to be addressed. The situation is further complicated by the revenue challenges resulting from both austerity and Brexit. During the development of this report, I had the opportunity to talk to public officials, business leaders, bankers, investors, and academics at both the national and regional levels. All agreed that Britain retains both the potential and the talented people for the economy to thrive. Yet, all also recognize that London and its environs cannot lift the economy of the country as a whole. The UK boasts one of the greatest collections of research universities in the world, some of the most robust sources of private capital in Europe, and a history of entrepreneurship that outshines virtually all other European countries. However, rebuilding the strength of the private sector requires a number of different actions. We include the following actionable items:

• Develop clear and direct guidelines for project execution at the regional level. It is essential to avoid the mistakes of HS2 and other projects bogged down by cost overruns and issues of competing authorities and directives.
• Establish reliable pools of capital at the local and regional levels to partner with private capital. Institutions such as the British Business Bank are helpful nationally but lack the funds needed to meet even a fraction of local needs. The continued lack of local development funds to match private funds—especially in stagnant regions of England—is a significant barrier to attracting private investment.
• Work with national agencies to promote the comparative advantages of investing in UK regions. Several UK regions have tremendous advantages over London, and even other parts of Europe, in terms of cost, access to local talent, and innovative ideas and people. However, without effective marketing, the global recognition of these regions and the opportunities they offer remain low.
• Develop strategies to retain skilled graduates and technology spin-offs locally. The loss of talent to Greater London (or Dublin in some cases) is a significant barrier to local success. Graduates need to know they have local opportunities, and businesses need to know they have access to these graduates.

Some of these key issues, such as local funding and infrastructure, do not have simple solutions. Addressing systemic underinvestment in transport infrastructure, utilities, and health care by both the public and private sectors does not make the situation easier. However, the promise of changing the status quo, whether through Brexit, Devolution, Leveling Up, or significant budgetary reform, cannot be fulfilled unless the mechanisms to do so are in place. Britain has amazing potential, even now, and its populace is eager for the chance to shine. Ensuring it has the tools to do so is vital.