The gap between the UK’s rich and poor cities is set to widen with spending cuts. Public sector job losses won’t help
So the UK’s worst recession since the Second World War is finally over. This is good news, but we shouldn’t get too excited. Centre for Cities research suggests that the recovery will be highly uneven. Many of the UK’s city economies, particularly those that have become dependent on public sector jobs, should brace themselves for a difficult few years.
Our annual report, Cities Outlook 2010, analysed the change in Jobseekers’ Allowance claimants in 64 UK cities over the course of the recession. We found that the difference between the top and bottom ten performers has widened by 70% since employment peaked in February 2008, suggesting the recession is reinforcing disparities between UK cities.
The two extreme ends of the spectrum illustrate the point. Hull has been the worst affected city in the UK, with a 3.5% increase in JSA claimants – an extra 6,164 people. Cambridge has experienced the lowest rise at 0.8%, about 700 people.
In reality, places such as Hull, Birmingham and Doncaster have been struggling for some time. One of the indicators that shows this is their failure to generate private sector jobs. Between 1998 and 2008, Birmingham suffered a net loss of around 60,000 private sector jobs, Hull lost 4,000 and Doncaster 5,000.
So why haven’t there been big increases in unemployment in these places over the past ten years? The short answer is that public sector jobs have been plugging the gap. Birmingham actually experienced a small increase in its total number of jobs thanks to 90,000 new public sector jobs created in education, health and public administration. It’s not alone – almost 70% of the 1.2 million net additional jobs created in cities between 1998 and 2007 came from the public sector.
The problem now, of course, is that big public spending cuts are inevitable and that means that recruitment freezes and job losses won’t be far behind. We’ve estimated that between 240,000 and 290,000 jobs could go from the public sector by 2014. We also think that cities with a large public service workforce, coupled with a high number of medium- to low-skilled positions, – such as Ipswich, Barnsley and Newport – could be hit harder than others. Clearly, there are no easy answers. Billions of pounds have been invested in trying to improve growth rates in the North over the past ten years and the results have been patchy. Despite the government’s best efforts, private sector growth has been much stronger in London and the Southeast.
Two of the top priorities should be skills and housing. Hull and Cambridge are at opposite ends of the spectrum on how well they’ve fared during the recession, and their skills profiles reflect this. Cambridge has the lowest share of working-age people without any formal qualifications of any UK city (5.4%), while Hull (with 18.2%) comes 56th out of 63. Despite significant investment, efforts to tackle skills disparities haven’t closed the gap.
Another part of the puzzle is housing supply. We need enough housing in high-demand areas where people want to live and where jobs are plentiful. That should make it more affordable for people to move to economically buoyant areas that need workers and reduce the oversupply of labour in areas with less dynamic economies.
Improving skills and increasing the housing supply will help to strengthen the competitiveness of under-performing cities and unlock further growth in economically buoyant areas. They should therefore be two of the top priorities for whichever party wins the election.
The future health of our economy will depend on it.
Chris Webber is a senior analyst at the Centre for Cities. Cities Outlook 2010 is available at www.centreforcities.org/outlook10
