Regional growth dynamics in the service sector: The determinants of employment change in UK regions 1971-2005

There is a need to better understand the dynamics relating to the evolving economic structure of regions, in particular factors concerning deindustrialisation and the growth of service sector activities. In order to unpick the dynamics relating to contemporary regional evolution, this paper examines regional employment in the UK's service sector from 1971-2005. The analysis utilises the statistical technique of multi-factor partitioning to examine the evolutionary dynamics of employment change in the UK service sector. Overall, differing growth trajectories in service sector employment across regions appear to be the result of the different underlying industrial structure observed within the regions themselves. The findings indicate that the industrial structure of a region has a significant influence on employment change in the service sector, with related variety being of greater consequence than specialisation. This suggests that diversity, or urbanisation, effects have a greater influence than specialisation effects on 'lighter' industries than 'heavier' industries. Spatio-temporal variations within the development of the service sector are evident in the analysis and there is evidence of convergence across the regions for all sub-sectors examined. It is concluded that in an increasingly service dominated economy, diversity and related variety have some weight in explaining regional development paths.