Regions, cities and finance: the role of capital shocks and banking reforms in shaping the UK geography of prosperity

Abstract

This paper examines the role played by financial markets and, in particular, changes in the price of and access to capital, along with institutional changes in the financial system, in shaping UK regional growth fortunes. This issue has been largely overlooked in debates on UK regional productivity disparities, but new data are now shedding powerful light on it. Using uniquely detailed real-estate investment data in order to calculate city and regional risk premiums, the demand side re-emerges as an important part of the story, and this raises profound questions regarding the institutional logic and structure of the UK banking and financial system.