Regional aid policies after Brexit

Abstract

This paper examines possible outcomes for regional policy in the UK following its withdrawal from the European Union (EU). It argues that the existing Structural Funds are relatively small, but remain important for some locations. The evidence of their past effectiveness in reducing spatial inequalities or contributing to increased national growth is mixed. Any replacement for the Structural Funds should be aligned with current spatial interventions such as the ‘City Deals’ and ‘Northern Powerhouse’. The evidence for the existence of agglomeration economies suggests that a growth maximizing policy should focus on the development of cities. On the other hand, political economy considerations suggest that reducing regional disparities may trump efficiency, particularly where many of the regions gaining most from European support were also strong supporters of leaving the EU.