Structural Resilience and Institutional Response: An Empirical Study of Economic Recovery Pathways in UK Cities Following the COVID-19 Pandemic

Abstract

The study empirically examines city-level data in the UK for 2019-2023, systematically accounting for the spatial divergence and the drivers of it along three main lines of inquiry: the recovery of incomes, the recovery of welfare spending, and the recovery of regional inequality following the COVID-19 pandemic, using a fixed-effects panel model approach. The results show a strong “Matthew Effect” in the recovery after the pandemic. Higher-skilled, industrial and institutional cities like metros and tech cities like Cambridge had a stronger performance regarding income and welfare security, even having net positive growth. Concurrently, this agglomerative effect deepened regional disparities and intra-metropolitan inequities. Correspondingly, this agglomeration effect resulted in growing inequities both between regions and within large cities. The study suggests that the pandemic was far from a uniform shock but reinforced the spatial disparity of the UK economy as a result of a myriad of structural and institutional changes. Policies need to transcend the limiting growth paradigm focused on maximizing efficiency and implement a competitiveness-oriented development pathway that includes regional equity. This can be done by focusing investments in education, digital infrastructure and industrial policies to stem further geographical inequality.