Our Economy 2023: Basque Country, Spain


From 7 May 2024, The North East Evidence Hub is a project of the North East Combined Authority. Find out more at northeast-ca.gov.uk/north-east-lep Search Search Home Spotlight Analysis Evidence by Theme News & Commentary Basque Country, Spain The Basque Country is one of our inclusive productivity case studies for Our Economy 2023. The Basque Country was chosen as a North East comparator due to its similar productivity trend, despite the poorer performance of the Spanish economy overall. Home Our Economy 2023Our Economy 2023: Basque Country, Spain Overview The Basque Country in the north of Spain is home to approximately 2 million people. The largest cities are Bilbao, Vitoria-Gasteiz and San Sebastián with populations of 347,000, 253,500 and 188,000 respectively. The region has a mix of rural and urban areas because of rapid industrialisation. The Basque Country has been chosen as a North East comparator due to its similar productivity trend, despite the poorer performance of the Spanish economy overall. It has industrial similarities to the North East with key sectors including energy, mobility (including automotive, aeronautics, maritime and railroad), advanced machinery, electronics/ICTs and biohealth^[1]. The region is home to the University of the Basque Country which accounts for 90% of research carried out in the region. ^{^}ICEX, Invest in Spain (2023) Key industries - the Basque Country. Available here {{element.textContent}} Page Menu {{element.textContent}} Performance on key indicators The North East has seen similar performance to the Basque region across our three key indicators since 2008, performing about the same across GDP per head and economic activity and better on Gross household disposable income. This meant that in 2018 the North East was still in roughly the same position to the Basque region as previously, with much lower GDP per head and household disposable income and slightly better economic activity. The Basque region's performance economically in our period was less strong than our other case studies, but we have included due to its similar performance to the North East and strong performance relative to the overall Spanish economy. 17% increase While disposable household income per head rose by 17% in North East England between 2008 and 2018, it fell by 6% in the Basque Country over this period. Gross Domestic Product per head, 2008 to 2018 ($s) Last updated {{:: '2023-11-02T14:18:23.000Z' \| date: 'dd/MM/yyyy' }} Published by OECD Download image Download CSV Save Clipping Read More Economic activity rate, 15 to 64 year olds, 2008 to 2018 (%) Last updated {{:: '2023-11-02T13:43:11.000Z' \| date: 'dd/MM/yyyy' }} Published by OECD Download image Download CSV Save Clipping Read More Disposable household income per head, 2008 to 2018 ($s) Last updated {{:: '2023-11-02T13:32:55.000Z' \| date: 'dd/MM/yyyy' }} Published by OECD Download image Download CSV Save Clipping Disposable household income per head was in North East England in 2008 was 68% of the level in the Basque Country. While disposable household income per head rose by 17% in North East England between 2008 and 2018, it fell by 6% in the Basque Country over this period. Despite this, disposable household income per head in North East England continued to lag behind in 2018, at 79% of the level in the Basque Country. Read More Policy priorities With extensive devolved powers since 1979 the Basque Country has its own parliament and government with a high level of autonomy regarding education, industry, culture, health, law enforcement and social services, and its own tax system. This autonomy provides the region with key levers to address the social and economic challenges it encounters. During the end of the 20th century the region experienced industrial decline and high unemployment, and more recently GDP fell in the wake of the global financial crash in 2008. Policy responses are centred on an industry-focused territorial strategy. In terms of inclusive productivity, policy priorities were building sustained resilience and combatting social exclusion, addressing health inequalities, and developing specialisation through science and technology. This was in the context of decarbonisation and addressing climate change. Policy interventions and aims Following several decades of industry-focused territorial strategy the focus of the Basque regional strategy between 2008 and 2018 “…had evolved to competitiveness in solidarity through innovation, leveraging public-private collaboration spaces to facilitate a systemic and participative strategy”^[1]. The strategy aimed to further develop specialisation which was informed by two science, technology, and innovation plans. The 2015 Science, Technology and Innovation Plan (2011) focused on key markets and transversal capabilities to develop existing strengths and complementary capacities. The 2020 Science, Technology and Innovation Plan (2014) outlined a framework for a smart specialisation strategy with three strategic priorities complemented by four niche opportunities, and four transversal areas: internationalisation, skills, new business models, entrepreneurship. Key aspects of the Basque region's approach: Investment in digital and HLT infrastructure. Compared to the rest of Spain, the Basque region invested less in physical infrastructure and focused its efforts on digital and industry 4.0 such as two cyber security centres, a digital innovation hub, and several sector specific research centres. Improvement of skills and a better alignment between the skills system and the smart specialisation strategy. There has been an increased recognition by Basque universities of their role within local economic development, for example the 4GuneCluster. The vocational training system has continued to develop with a focus on addressing small business needs and challenge-based learning through collaborations between educators and business. Rising consciousness of weaknesses in non-technological innovation alongside a reorganisation of the Basque Science, Technology, and Innovation Network. The Basque government recognised a need to develop non-technological innovations to increase productivity and piloted programmes such as one to increase advanced management skills. Maturing the public sector alongside local institutionalisation. The public sector in the Basque region was consolidated during this time and a series of public/private collaborations processes were successfully developedxi. Creative and cultural sectoral development. Following the European Commission’s 2010 Green Paper: Unlocking the potential of cultural and creative industries the Basque Government set about doing that. In the coming years, a concerted effort was made to understand the size of the sector and how institutions could help it develop, with the Basque Culture Observatory leading the analysis. In 2014 the Basque Country began leading the Regional Initiative for Culture and Creativity (an informal network of 25 countries) and was one of 6 EU regions to be part of the EU Smart Specialisation Creative Districts/CREADIS3 project. In 2016 San Sebastian, in the Basque Country, was European Capital of Culture, 19 years after the Guggenheim Museum opened in Bilbao. Tackling health ineqaulites. Health reforms in the Basque Country health “are credited with development of one of the most successful integrated care strategies in Europe”. A key driver of this success is the focus of the Health Policy in the Basque Country 2013–2020 (HPBC) on health, social determinants, and implementation. This places tackling health inequalities at its core, with accompanying quantitative outcome targets. ^{^}Orkestra (2021) Long-Term Regional Strategy For Inclusive Competitiveness: The Basque Country Case, 2008–2020. Available here What has changed since 2008 The focus of the Basque Country’s regional policy has been on developing clusters of higher-tech and higher-GVA sectors. Between 2008 and 2018, the proportion of people in employment who worked in knowledge intensive service in the Basque Country rose by 5.6 percentage points, from 31.6% to 37.2%. By comparison, the proportion of people in employment who worked in knowledge intensive services in North East England rose by 0.9 percentage points over the same period (from 45.7% to 46.6%). Knowledge intensive services include research and development, information and communication services, human resource management, tax services and other services related to legal compliance, accounting and marketing. 0.6% of people in employment in the Basque Country worked in high technology manufacturing in 2008, and this proportion was unchanged in 2018. Between 2008 and 2018, the proportion of people in employment who worked in high technology manufacturing in North East England fell from 0.9% to 0.6%. Strong employment in knowledge intensive services and high tech manufacturing has been supported through up skilling the population. There was a recognition of the importance of upskilling and reskilling current and future workers and ensuring that the skills system can provide the talent pipeline the labour market requires, particularly in niche areas. Between 2008 and 2018, the proportion of 25 to 64 year olds in the Basque Country with qualifications from higher education rose from 42% to 50%. The proportion of 25 to 64 year olds with higher education qualifications in North East England rose from 25% to 34%. Between 2008 and 2018, the proportion of people in employment who worked in knowledge intensive service in the Basque Country rose by 5.6 percentage points. Proportion of employment in knowledge intensive services, 2008 to 2018 (%) Last updated {{:: '2023-11-02T14:35:30.000Z' \| date: 'dd/MM/yyyy' }} Published by OECD Download image Download CSV Save Clipping Read More Proportion of employment in high technology manufacturing, 2008 to 2018 (%) Last updated {{:: '2023-11-02T14:24:47.000Z' \| date: 'dd/MM/yyyy' }} Published by OECD Download image Download CSV Save Clipping Read More Proportion of 25 to 64 year olds with qualifications from higher education, 2008 to 2018 (%) Last updated {{:: '2023-11-02T14:28:44.000Z' \| date: 'dd/MM/yyyy' }} Published by OECD Download image Download CSV Save Clipping Read More Caveats and Conclusions The Basque Country has some key differences with the North East. It is also known as the Basque autonomous community, reflecting the breadth of devolved powers and resources available. In particular, the Basque has extensive fiscal autonomy and the regional government is responsible for collecting taxes. Overall, following a period of economic decline the Basque Country witnessed a period of remarkable economic growth post millennium which led to it becoming an internationally competitive, innovation-oriented, and economically successful region^[1]. The strategy implemented in the period of 2008 to 2020 has generated continued socioeconomic development and has allowed for progressively resilient competitiveness. GDP bounced back by 2019, while inequality reduced and R&D investment increased. Success in the Basque Country shows that clear innovation policy which speaks to all actors (public sector, business, universities/R&D, and those who work in between) is key to a successful regional. The Basque Country’s innovation strategies built on existing strengths whilst looking forward in complementary areas to diversify the region’s economy and create resilience. The 2004 Basque Competitiveness Forum, combining public and private actors and organisations to help inform policy, is regarded as an important milestone.^[2] The long-term strategy that has been in place has generated five main lessons: Orientation and inclusive competitiveness – ensuring that economic development aims have not been pursued at the expense of social aims, thus maintaining social cohesion. Proactiveness – investing in assets that would build from existing strengths. Focus – focus on industry to further strengthen activities; both in terms of technological innovation and non-technological innovation to boost productivity in unproductive firms. Policy capabilities – the construction of broad-based policy capabilities for strategic thinking and implementation has various dimensions. Openness – through inside openness by involving the population with development, and outside openness, through building internationalism. ^{^}Orkestra (2021) Long-Term Regional Strategy For Inclusive Competitiveness: The Basque Country Case, 2008–2020. Available here. ^{^}Caroline Gray (2023) What can the Basque Country Teach the UK About Levelling up? Available here Explore other case studies West Midlands, UK Despite a shared industrial history, the West Midlands has outperformed the North East on economic activity and GDP per head. Read more Saxony, Germany Saxony, a region formerly part of East Germany, increased its jobs density and employment despite a challenging period of population decline. Read more New Zealand Reducing the rate of NEETs, a focus on inclusion, and export-led growth, has helped New Zealand significantly improve its economic output. Read more Wisconsin, USA Wisconsin has turned increases in GDP per head into greater disposable income while supporting SMEs and priority sectors. Read more International health inequalities data Life expectancy and age-adjusted mortality is lower in the North East than our international comparators. Read more

Home Our Economy 2023Our Economy 2023: Basque Country, Spain

Overview

The Basque Country in the north of Spain is home to approximately 2 million people. The largest cities are Bilbao, Vitoria-Gasteiz and San Sebastián with populations of 347,000, 253,500 and 188,000 respectively. The region has a mix of rural and urban areas because of rapid industrialisation.

The Basque Country has been chosen as a North East comparator due to its similar productivity trend, despite the poorer performance of the Spanish economy overall. It has industrial similarities to the North East with key sectors including energy, mobility (including automotive, aeronautics, maritime and railroad), advanced machinery, electronics/ICTs and biohealth^[1].

The region is home to the University of the Basque Country which accounts for 90% of research carried out in the region.

^{^}ICEX, Invest in Spain (2023) Key industries - the Basque Country. Available here

Performance on key indicators

The North East has seen similar performance to the Basque region across our three key indicators since 2008, performing about the same across GDP per head and economic activity and better on Gross household disposable income.

This meant that in 2018 the North East was still in roughly the same position to the Basque region as previously, with much lower GDP per head and household disposable income and slightly better economic activity.

The Basque region's performance economically in our period was less strong than our other case studies, but we have included due to its similar performance to the North East and strong performance relative to the overall Spanish economy.

17% increase

Policy priorities

With extensive devolved powers since 1979 the Basque Country has its own parliament and government with a high level of autonomy regarding education, industry, culture, health, law enforcement and social services, and its own tax system.

This autonomy provides the region with key levers to address the social and economic challenges it encounters. During the end of the 20th century the region experienced industrial decline and high unemployment, and more recently GDP fell in the wake of the global financial crash in 2008.

Policy responses are centred on an industry-focused territorial strategy. In terms of inclusive productivity, policy priorities were building sustained resilience and combatting social exclusion, addressing health inequalities, and developing specialisation through science and technology. This was in the context of decarbonisation and addressing climate change.

Policy interventions and aims

Following several decades of industry-focused territorial strategy the focus of the Basque regional strategy between 2008 and 2018 “…had evolved to competitiveness in solidarity through innovation, leveraging public-private collaboration spaces to facilitate a systemic and participative strategy”^[1].

The strategy aimed to further develop specialisation which was informed by two science, technology, and innovation plans. The 2015 Science, Technology and Innovation Plan (2011) focused on key markets and transversal capabilities to develop existing strengths and complementary capacities. The 2020 Science, Technology and Innovation Plan (2014) outlined a framework for a smart specialisation strategy with three strategic priorities complemented by four niche opportunities, and four transversal areas: internationalisation, skills, new business models, entrepreneurship.

Key aspects of the Basque region's approach:

Investment in digital and HLT infrastructure. Compared to the rest of Spain, the Basque region invested less in physical infrastructure and focused its efforts on digital and industry 4.0 such as two cyber security centres, a digital innovation hub, and several sector specific research centres.

Improvement of skills and a better alignment between the skills system and the smart specialisation strategy. There has been an increased recognition by Basque universities of their role within local economic development, for example the 4GuneCluster. The vocational training system has continued to develop with a focus on addressing small business needs and challenge-based learning through collaborations between educators and business.

Rising consciousness of weaknesses in non-technological innovation alongside a reorganisation of the Basque Science, Technology, and Innovation Network. The Basque government recognised a need to develop non-technological innovations to increase productivity and piloted programmes such as one to increase advanced management skills.

Maturing the public sector alongside local institutionalisation. The public sector in the Basque region was consolidated during this time and a series of public/private collaborations processes were successfully developedxi.

Creative and cultural sectoral development. Following the European Commission’s 2010 Green Paper: Unlocking the potential of cultural and creative industries the Basque Government set about doing that. In the coming years, a concerted effort was made to understand the size of the sector and how institutions could help it develop, with the Basque Culture Observatory leading the analysis. In 2014 the Basque Country began leading the Regional Initiative for Culture and Creativity (an informal network of 25 countries) and was one of 6 EU regions to be part of the EU Smart Specialisation Creative Districts/CREADIS3 project. In 2016 San Sebastian, in the Basque Country, was European Capital of Culture, 19 years after the Guggenheim Museum opened in Bilbao.

Tackling health ineqaulites. Health reforms in the Basque Country health “are credited with development of one of the most successful integrated care strategies in Europe”. A key driver of this success is the focus of the Health Policy in the Basque Country 2013–2020 (HPBC) on health, social determinants, and implementation. This places tackling health inequalities at its core, with accompanying quantitative outcome targets.

^{^}Orkestra (2021) Long-Term Regional Strategy For Inclusive Competitiveness: The Basque Country Case, 2008–2020. Available here

What has changed since 2008

The focus of the Basque Country’s regional policy has been on developing clusters of higher-tech and higher-GVA sectors. Between 2008 and 2018, the proportion of people in employment who worked in knowledge intensive service in the Basque Country rose by 5.6 percentage points, from 31.6% to 37.2%. By comparison, the proportion of people in employment who worked in knowledge intensive services in North East England rose by 0.9 percentage points over the same period (from 45.7% to 46.6%).

Knowledge intensive services include research and development, information and communication services, human resource management, tax services and other services related to legal compliance, accounting and marketing.

0.6% of people in employment in the Basque Country worked in high technology manufacturing in 2008, and this proportion was unchanged in 2018. Between 2008 and 2018, the proportion of people in employment who worked in high technology manufacturing in North East England fell from 0.9% to 0.6%.

Strong employment in knowledge intensive services and high tech manufacturing has been supported through up skilling the population. There was a recognition of the importance of upskilling and reskilling current and future workers and ensuring that the skills system can provide the talent pipeline the labour market requires, particularly in niche areas.

Between 2008 and 2018, the proportion of 25 to 64 year olds in the Basque Country with qualifications from higher education rose from 42% to 50%. The proportion of 25 to 64 year olds with higher education qualifications in North East England rose from 25% to 34%.

Caveats and Conclusions

The Basque Country has some key differences with the North East. It is also known as the Basque autonomous community, reflecting the breadth of devolved powers and resources available. In particular, the Basque has extensive fiscal autonomy and the regional government is responsible for collecting taxes.

Overall, following a period of economic decline the Basque Country witnessed a period of remarkable economic growth post millennium which led to it becoming an internationally competitive, innovation-oriented, and economically successful region^[1]. The strategy implemented in the period of 2008 to 2020 has generated continued socioeconomic development and has allowed for progressively resilient competitiveness. GDP bounced back by 2019, while inequality reduced and R&D investment increased.

Success in the Basque Country shows that clear innovation policy which speaks to all actors (public sector, business, universities/R&D, and those who work in between) is key to a successful regional. The Basque Country’s innovation strategies built on existing strengths whilst looking forward in complementary areas to diversify the region’s economy and create resilience. The 2004 Basque Competitiveness Forum, combining public and private actors and organisations to help inform policy, is regarded as an important milestone.^[2]

The long-term strategy that has been in place has generated five main lessons:

Orientation and inclusive competitiveness – ensuring that economic development aims have not been pursued at the expense of social aims, thus maintaining social cohesion.
Proactiveness – investing in assets that would build from existing strengths.
Focus – focus on industry to further strengthen activities; both in terms of technological innovation and non-technological innovation to boost productivity in unproductive firms.
Policy capabilities – the construction of broad-based policy capabilities for strategic thinking and implementation has various dimensions.
Openness – through inside openness by involving the population with development, and outside openness, through building internationalism.
1. ^{^}Orkestra (2021) Long-Term Regional Strategy For Inclusive Competitiveness: The Basque Country Case, 2008–2020. Available here.
2. ^{^}Caroline Gray (2023) What can the Basque Country Teach the UK About Levelling up? Available here