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Second tier cities in Europe: why invest beyond the capital cities in an age of austerity?

An international study led by the European Institute for Urban Affairs at Liverpool John Moores University and funded by the European Commission and ESPON provides new evidence about the economic performance of 124 second tier and 31 capital cities across Europe. Second tiers are the non-capitals whose performance matters most to the national economy. Capital and second tier cities combined constitute 56% of Europe’s total GDP. Second tiers contribute 33% and capitals 23 % of the total.

Why does it matter - recession makes decisions about investment in cities critical

The global recession and Eurozone crisis have already had a huge impact upon the European economy and present even greater future threats. They have encouraged a debate about the economic contribution of capital and non capital cities and whether countries perform better if they concentrate their investment in their capitals or spread investment across a wider set of cities.

 

What are the main findings of the ESPON report?

  • Continuing over-investment in capital cities and under-investment in second tier cities in the long run will be unsustainable and lead to economic under-performance.
  • Countries which de-concentrate investment and resources and decentralise powers and responsibilities have more high performing cities and better national economic performance. 
  • Capital city dominance increases regional inequality within countries.  When growth in GDP is higher in the capital than in the nation, there is growing regional inequality. 

 

What does the ESPON report propose? 

  • Greater transparency about territorial investment strategies. Greater focus on second tier cities. Capital cities matter - but not at the expense of everywhere else. The relationship should be win- win not zero-sum. We should increase the national economic pie and encourage second tiers rather than kill the golden goose of the capital.
  • Is the market the answer? No. The logic of over investment in the capitals and under investment in second tier cities is simply too strong in too many countries. Governments need to act. Governments at all levels should help second tier cities so they can emerge from the current recession with more ‘investment ready’ places to maximise future national economic performance.
  • So when should government invest beyond the capital? When: (i) the gap with capitals is large and growing (ii) the business infrastructure of second tier cities is weak because of national underinvestment and (iii) there is clear evidence about the damaging effects of capital city growth. 

 

Article sent in by Mr. Parkinson (ESPON). For more information, please send him an e-mail directly. 



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