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8/14/2019 The Impact of Recession on Northern City Regions
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WWW.IPPR.ORG/NORTH
TheImpactoftheRecessiononNorthern
City-RegionsByTonyDolphin
October2009
ippr2009
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions2
ipprnorth,theNewcastle-basedofficeoftheInstituteforPublicPolicyResearch,produces
far-reachingpolicyideas,stimulatingsolutionsthatworknationallyaswellaslocally.These
areshapedfromourresearch,whichspanseconomicdevelopment,regeneration,publicservicesanddevolutionaswellasastrongdemocraticengagementstrandwhichinvolvesa
widerangeofaudiencesinpoliticaldebates.
ipprnorth,2ndFloor,20CollingwoodStreet,NewcastleUponTyneNE11JF
Tel+44(0)1912339050|www.ippr.org/north
RegisteredCharityNo.800065
ThispaperwasfirstpublishedinOctober2009.ipprnorth2009
Aboutipprnorth
ThispaperwasoriginallypreparedaspartoftheevidencebasefortheMakingCityRegions
WorkforDeprivedCommunitiesproject,amajorprogrammeofworkbeingundertakenby
ipprnorth,withtheJosephRowntreeFoundationandtheNorthernWay.Itaimsto
understandwhy,earlierinthisdecade,someareaswithincity-regionsintheNorthof
Englandremaineddeprivedevenwhenthesurroundingeconomywasperformingstrongly;to
explorehowdeprivedareascanbebetterlinkedtoareasofeconomicopportunity;to
considertherolesoflocal,city-regional,regionalandnationalbodiesandtoinformthenext
generationofpoliciestargetedatdeprivedcommunities.
Theviewsexpressedinthispaperarethoseoftheauthorandnotnecessarilythoseofippr
north,theJosephRowntreeFoundationortheNorthernWay.
Abouttheproject
8/14/2019 The Impact of Recession on Northern City Regions
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions3
ThispaperlooksatthegeographicaleffectoftherecessionacrosstheUnitedKingdomand,
inparticular,athowithasaffecteddeprivedcommunitiesinthecity-regionsintheNorthof
Englandandthepeoplewholiveinthem.Italsoofferssomethoughtsaboutthechallengesthesecommunitieswillfaceinthenextfewyears.
Unemploymentdatagivethemostup-to-datepictureoftheeffectoftherecessionandalso
representareasonableshorthandmeasureofdeprivation.Analysisofthesedatasuggests
thatasageneralruleunemploymenthasincreasedmostsinceMarch2008inthoseareas
whereitwasalreadythehighest.ThisistrueforlocalauthoritiesacrosstheUKandalsofor
wardswithintheeightnortherncity-regions.
Althoughtherearespecialfactorsatplayinsomecases,itappearsthatthoseareaswhere
therehasbeenthelargestincreaseinunemploymenthaveabove-averagerelianceon
employmentinmanufacturing,inparticularinthoselowvalue-addedmanufacturing
industriesthataremostvulnerabletocompetitionfromlow-costcompaniesinemergingeconomieselsewhereintheworld.Unemploymentwasalreadyhighintheseareasbecause
companieswereclosingandcuttingcostsasaresultofthiscompetition.Therecessionhas
acceleratedtheprocess.
Otheranalysisshowsthathousing-ledregenerationeffortsinnortherncity-regionshave
beenadverselyaffectedbytherecessionandthatsomecity-regionsarelikelytobebadlyhit
whentheGovernmentstartstocutpublicspending.
Fordeprivedcommunitiesinthenortherncity-regions,thiscould,therefore,representa
triplewhammy.Itisimperativethateffortsaremadetoexplorehowdeprivedareascanbe
betterlinkedtoareasofeconomicopportunity,toconsidertherolesoflocal,city-regional,
regionalandnationalbodiesandtostarttodevelopthenextgenerationofpoliciestargeted
atdeprivedcommunities.
Executivesummary
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions4
Introduction
ThispaperlooksatthegeographicaleffectoftherecessionacrosstheUnitedKingdomand,in
particular,athowithasaffecteddeprivedcommunitiesintheeightnortherncity-regions 1 and
thepeoplewholiveinthem.Italsoofferssomethoughtsaboutchallengesthesecommunities
willfaceinthenextfewyears.Muchoftheanalysisisbasedonunemploymentdatabecause
theyofferthemostup-to-datepictureoftheeffectsoftherecession.Worklessnessis,inany
case,areasonableshort-handproxyforanareaslevelofeconomicdeprivation.
ThepaperwaswrittentoinformipprnorthsMakingCityRegionsWorkforDeprived
Communitiesproject,whichisexaminingwhy,earlierinthisdecade,someareaswithin
northerncity-regionsremaineddeprivedevenwhenthesurroundingeconomywasperforming
strongly.Theaimistodevelopthenextgenerationofpoliciestargetedatdeprived
communities2.Itshould,however,beofinteresttoanyoneconcernedwithhowtherecessionis
affectingdeprivedcommunitiesinthecitiesofnorthernEngland.
Thepaperlooksathowthecurrentrecessionhasdevelopedandatearlyindicationsofits
effectonthenortherncity-regions.Itshowsthat,asageneralrule,thegreatertheeconomic
problemswereinanareawhentherecessioncommenced,thebiggertheeffectofthe
recessionhasbeen.Thisisgoingtomakethetaskofthosechargedwithrevivingdeprived
communitiesintheseregionsevenharderthanitalreadywas.
Backgroundtothecurrentrecession
Thecurrentrecessionwascaused,primarily,byaglobalcreditcrunch.Bankswereforcedto
cutbacktheirlendingaftermakinghugelossesbettingonfinancialinstrumentsbackedby
theUSmortgagemarket.Asaresult,credit-worthycompanieswereunabletoborrowthefundstheyneededtomakeinvestmentsorremainsolvent;workerswerelaidoff;business
andconsumerconfidencefell;spendingwascutbackandtheglobaleconomyplungedinto
recession.3
IntheUK,outputbegantocontractinthesecondquarterof2008.Sofartherecessionhas
lastedfivequartersandoutput(realGDP)isdown5.6percentfromitspeak.Thisisthe
fastestfallinoutputintheUKsincethe1930s.
1.TheseareCentralLancashire,HullandHumberPorts,Leeds,Liverpool,GreaterManchester,Sheffield,
TeesValleyandTyneandWear.ForthefullstructureofthecityregionsseeAppendix1,p19.
2.FormoredetailsonMakingCity-RegionsWorkforDeprivedCommunities,visitipprnorthswebsite:
www.ippr.org/ipprnorth3.Appendix2containsamoredetaileddiscussionofthenatureofthisrecessionandhowtheeconomy
mightrecover(p21).
TheImpactoftheRecessiononNorthernCity-Regions
-6
-4
-2
0
2
4
6
1984 1987 1990 1993 1996 1999 2002 2005 2008
%
Year
Figure1.UKreal
GDPgrowth(%
changeonyear)
Source:Officefor
NationalStatistics,
www.statistics.gov.
uk/instantfigures.
asp
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions5
Becausetherecessionwascausedbyacreditcrunch,ratherthanbyageneraltighteningof
economicpolicyinordertoreduceinflation,manycommentatorssuggestedthatitwouldbe
differentfromotherrecessionsexperiencedintheUKsincetheSecondWorldWar.In
particular,theoriginsoftherecessioninthefinancialsector,andespeciallyintheCityof
London,ledmanytopredictthatitwouldbeawhitecollarrecessionandthatitsbiggesteffectwouldbeintheSouthofthecountry.
Thisisnotturningouttobethecase.Allpartsoftheeconomyhavebeenaffectedbythe
downturn,withtheconstructionandmanufacturingsectorsexperiencingthebiggestfallsin
output(14percent,comparedwithanalmost6percentdropinaggregateoutput).
Recentdatareleasesshowsomesignsofstabilisationinconsumerandbusinessconfidence
andthevastmajorityofforecastersthinkthattheworstoftherecessionisbehindus.
However,thepathofanyrecoveryisextremelydifficulttopredict.Historicalanalysis
suggeststhatrecessionscausedbycreditcrunchestendtobefollowedbyrelativelyweak
recoveriesandthiscouldwellturnouttobethecase.Householdbalancesheetshavebeen
weakenedbyfallinghouseprices,sopeoplearesavingmoreandspendingless.Bank
balancesheetsareinneedoffurtherrepair,solendingwillbeslowtoreturntoformerlevels.
And,after2010,departmentalpublicspendingislikelytobecutinrealtermsasthe
Governmentlookstoreduceitshugefiscaldeficit.Themostlikelyoutcomeforthenextfew
years,therefore,appearstobeareturntoeconomicgrowth,butatadisappointingrate.
Theimpactoftherecessiononthelabourmarket
Atthisstage,thedatathatprovidethebestinformationabouttheimpactoftherecession
arelabourmarketdata.Theseofferevidenceoftherecessionsscaleandeffect
geographicallyandondifferentgroups,forexampleaccordingtooccupationorskilllevel.
Andformostpeople,employmentiswhatreallymatters.
Sofar,thefallinoutputseenoverthelastyearhasnotledtoasbigafallinemploymentas
mighthavebeenfeared.TotalemploymentintheUKpeakedat29,541,000inthethree
monthsMarchtoMay20084.Fifteenmonthslater,inJunetoAugust2009,ithaddropped
4.TheOfficeforNationalStatisticsreportsemploymentdatasourcedfromtheLabourForceSurveyas
threemonthaveragesbecauseofvolatilityinthemonthlynumbers.
-16 -12 -8 -4 0 4
Gross domestic product
Government & other services
Business services & finance
Transport storage & communication
Distribution, hotels & catering
Construction
Electricity, gas & water supply
Manufacturing
Mining & quarrying
Agriculture, forestry & fishing
%
Figure2.Change
inoutputby
sector,2008Q1
to2009Q2(%)
Source:OfficeforNationalStatistics
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions6
by589,000,or2percent,to28,952,000.Whilethisisabigfall,outputcontractedbymore
than5.5percentoverthesameperiod,soitcouldhavebeenmuchworse.
Therearetwopossibleexplanationsfortherelativelymodestdeclineinemploymentoverthe
lastyearorso:
1.TheoptimisticviewisthattheUKslabourmarketisnowmoreflexiblethanitwas,
enablingcompaniestocopewiththedownturninwaysthatdonotinvolvemaking
redundancies.Thereisplentyofanecdotalevidencetosupportthisview.Accordingtoa
surveyofover1,600workersfortheindependentKeepBritainWorkingcampaign,more
thanhalfofallUKworkershaveexperiencedacutinpay,areductioninhoursoraloss
ofbenefitssincetherecessionbegan(KeepBritainWorking2009).2.Thepessimisticviewisthatthedownturnhasbeensoquickandsoseverethatithas
takencompaniesbysurprise.Theyhavebeenslowtoreactsofarbutemploymentwill
becutfurtherintherestof2009andin2010,evenifoutputbeginstostabilise.Thisis
whathappenedduringtherecessionoftheearly1980stheonlyoneexperiencedby
theUKinthelast70yearsthatwasonacomparablescaletothecurrentrecession.
Meanwhile,withinthelabourmarket,anumberoftrendsareapparent:
Therecessionishittingmenharderthanwomen.Maleemploymentwasdownby2.5percentovertheyeartoJuneAugust2009,comparedwithadropof0.5percentinfemale
employment.
Therecessionishittingtheyounghardest.Overthelastyear,thenumberof16to24yearoldsinemploymenthasfallenby7.6percentandyouthunemploymentisatits
highestlevelfor15years.
Joblosseshavebeenconcentratedinthreebroadsectorsoftheeconomy:manufacturing(269,000jobslostsinceMarch2008,representingadeclineof8.5per
cent),financeandbusinessservices(260,000,3.9percent)anddistribution,hotelsand
restaurants(237,000,3.4percent).Meanwhile,thenumberofjobsineducation,health
andpublicadministration(whichcoversboththepublicandprivatesectors)has
increasedby216,000(2.7percent).
Inalltheserespects,thisrecessionisturningouttobesimilartopreviousones,eventhoughithasadifferentcause.
-6
-4
-2
0
2
4
6
197 8 198 0 198 2 198 4 198 6 198 8 199 0 199 2 199 4 199 6 199 8 2000 2002 200 4 200 6 200 8
Real GDP
Employment
%
Year
Figure3.UKreal
GDPand
employment
growth(%
changeonyear)Source:Officefor
NationalStatistics
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions7
Theregionalandlocalimpactoftherecession
Atthisstage,themostcomprehensiveandup-to-datedataontheeffectoftherecessionat
aregionalandlocallevelrelatetothelabourmarket.TheseshowthatsinceMarch2008(the
mostrecentlowpointforunemploymentintheUK)theunemploymentratebasedon
numbersclaimingJobseekersAllowance(JSA)hasincreasedmostinNorthernIreland,theNorthEast,theWestMidlandsandYorkshireandtheHumber.5
Atalocallevel,therehasbeensubstantialvariationindevelopmentsinthelabourmarket.In
22localauthoritydistrictsunemploymenthasincreasedby3percentagepointsormore,
whilein21othersithasincreasedbylessthan1percentagepoint,andinoneinstanceithas
fallen.(SeeTable2,nextpage.)DataatNUTS6 Level2showthatthebiggestincreasesinunemploymentrateshavebeenin
theWestMidlands,NorthernIreland,SouthandWestYorkshire,theEastRidingandNorth
Lincolnshire,GreaterManchester,theTeesValleyandMerseyside.Thesmallestincreasesin
unemploymentrateshavebeeninruralareas,particularlyinCumbria,NorthYorkshire,East
AngliaandtheWestCountry.
5.Mostoftheanalysisinthispaperisbasedonunemploymentasmeasuredbytheclaimantcountbecauseitprovidesthemostup-to-dateanddetailedinformationonthegeographicaleffectofthe
recession.However,thisdoesmeanthattheanalysisisonlypartial,inthesensethatitexcludesthoseon
otherout-of-workbenefits,orwhoarelookingforajobbutnotclaimingbenefit.Morecomprehensive
figuresoneconomicinactivity,whentheyareavailable,maytellaslightlydifferentstory.
6.NUTSistheacronymforNomenclatureofTerritorialUnitsforStatisticsthestandardgeographicalunits
intowhichtheUKisdividedforstatisticalanalysis.Thereare37countiesorgroupsofcountiesatNUTSLevel2and133upper-tierauthoritiesandgroupsoflower-tierauthoritiesatNUTSLevel3intheUK.
Table1:Regionalunemploymentrates(basedonJSAclaimants)
Region Unemploymentrate(%) Change(pp*)
March2008 Sept2009
NorthernIreland 2.7 6.2 3.5
NorthEast 3.9 7.3 3.4
WestMidlands 3.4 6.7 3.3
Yorkshire&Humber 2.9 6.0 3.1
Wales 2.8 5.8 3.0
NorthWest 3.0 5.8 2.8
EastMidlands 2.4 5.1 2.7
East 1.9 4.3 2.4
Scotland 2.5 4.7 2.2
SouthWest 1.3 3.5 2.2
SouthEast 1.4 3.5 2.1
London 2.6 4.7 2.1
Source:OfficeforNationalStatistics
*pp=percentagepoint
Note:TheratesarebasedonthenumberofJSAclaimantsasaproportionoftheworkforcethestandardway
ofpresentingunemploymentrates.DatabylocalauthorityandatNUTSLevel2and3arederivedfromthe
OfficeforNationalStatisticsnomisdatabase,whichcalculatesunemploymentratesusingthepopulationof
workingageasthedenominator(sogivinglowerunemploymentrates).
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions8
AtNUTSLevel3therearesomeareasoutsidetheworstaffectedregionswheretherehave
beenbigincreasesinunemployment.Indeed,oneofthelargestincreasesinunemploymentsinceMarch2008isinSwindon,whereitisupfrom1.7to5.1percent.Thisreflectsthe
importanceforemploymentoftheHondafactoryandamajorWoolworthsdistribution
centre;redundanciesweremadeatHonda,whichshuttemporarily,whileWoolworthshas
nowclosed.However,thevastmajorityofareaswiththebiggestincreasesinthe
unemploymentrateareintheWestMidlandsandYorkshire,includingWalsall,
Wolverhampton,DudleyandSandwellintheformerandKingstonuponHull,Barnsley,
DoncasterandRotherhaminthelatter.
Whatthismeansisthatthelargestincreasesintheunemploymentratehavetendedtobein
thoseareaswhereunemploymentwasalreadyrelativelyhighinMarch2008.Sothoseareas
withtheweakestlabourmarketshavebeenhithardestbytherecession.7
7.ThisanalysissupportsDeloittes(2009)findingsthatareasofhighunemploymenttendtoexperience
proportionatelylargeincreasesinunemploymentduringrecessions.Thatpaperalsoarguesthatearnings,
outputandotherindicatorsconvergeintimesofrecession.
Table2:Largestandsmallestchangesinunemployment,March2008toAugust2009,local
authoritydistricts
Smallestchanges pp
Westminster 1.0
AberdeenCity 0.9
RibbleValley 0.9
Cambridge 0.9
EileanSiar 0.8
Highland 0.8
EastLindsey 0.8
WestDorset 0.8
NorthDevon 0.8
Copeland 0.8
WestSomerset 0.8
ArgyllandBute 0.7
Eden 0.7
Aberdeenshire 0.6
SouthLakeland 0.6
CityofLondon 0.6
Gwynedd 0.6
Ceredigion 0.5
ShetlandIslands 0.4
Moray 0.2
IslesofScilly 0.0
OrkneyIslands -0.1
Largestchanges pp
Limavady 3.8
Sandwell 3.8
Cookstown 3.8
Walsall 3.7
MerthyrTydfil 3.6
Dungannon 3.5
Swindon 3.4
BlaenauGwent 3.4
NewryandMourne 3.3
KingstonuponHull 3.3
Rotherham 3.2
Redditch 3.1
Magherafelt 3.1
CannockChase 3.1
Derry 3.1
Corby 3.1
Dudley 3.1
Wolverhampton 3.1
Moyle 3.1
Leicester 3.0
Craigavon 3.0
Rochdale 3.0
Source:OfficeforNationalStatistics
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions10
EmploymentdataavailabletoJune2009showtherehasalsobeenabiggerproportionate
fallinjobsinmanufacturingintheWestMidlandsandYorkshireandtheHumberthanin
otherregions.ThisisparticularlytrueintheWestMidlands,wheretherewasafallof12.5
percentinemploymentinmanufacturingbetweenMarch2008andJune2009(compared
withan8percentfallacrossGreatBritain).TheWestMidlandsalsosawthebiggestproportionatedropinemploymentinservices,at2.5percent,overthisperiod.Inpart,this
willhavebeenduetolostemploymentincompaniesservicingmanufacturing(suchas
canteenstaff,cleanersandaccountants).Itwillalsoreflecttheeffectonthelocaleconomy,
especiallyretailing,ofbigjoblossesinmanufacturing.
Itistooearlytobesurebutitseemstheseregionsaresufferingbecausetheirmanufacturing
capacitywasconcentratedatthestartoftherecessioninoneoftwoareas:eitherlowvalue-
addedareas,andsoexposedtoexternalcompetitionfromlow-wage,emergingeconomies,
orinareasthathaveseenasignificantdropindemandbecausetheirproductsarejudgedto
benon-essentialintoughtimes.Manufacturingcompaniesinthefirstgroupwerealready
underpressureandlayingoffworkers(orclosingdowncompletely).Asaresult,frictionalunemploymentcausedbypeoplemovingjobsthroughchoiceorotherwisewasrelatively
highintheseregions,evenwhentheeconomywasoperatingatclosetofullcapacity,asit
undoubtedlywasin2007.Thecreditcrunchandrecessionhaveservedtoacceleratethis
process.Companieshaveclosed,orcutbacktheirproductionlevelsandlaidoffworkers
evenmorerapidly,eitherbecausedemandhasfallen,orbecausetheycouldnotborrowthe
fundstheyneededtosurviveorboth.Asaresult,frictionalunemploymentintheseregions
hasgoneupfaster.
ArecentpaperfromtheWorkFoundationalsonotesthatakeydeterminantofhowwell
localareasareperformingintherecessionagainbasedontheunemploymentdataisthe
skillsprofileofthearea(thoughthisclaimisactuallybasedoninformationabout
qualificationsratherthanskills).Itclaimsthereisaclearrelationshipbetweenlowskillsina
LocalAuthorityandTraveltoWorkareaandinincreasesinunemployment(Leeetal 2009:
21).Inpart,thiswillsimplybebecausethosewithlowskillsarefoundinproportionately
greaternumbersinthoseindustriesthathavelostthemostjobs,suchasmanufacturingand
retailing.However,itislikelythatfirmsarealsochoosingtoretainskilledworkersduringthe
downturnbecausetheywillbehardertorecruitwhentheeconomyrecovers.
Theremay,however,bebetternewsinthenearfuture.Ifthefortunesofthemanufacturing
industryarethemaindriverofregionaltrendsinunemployment,thereisapossibilitythat
thefortunesoftheareashitmostbadlysofarintherecessionwillimproveatleastin
relativeterms.Manufacturingoutputfellsharplyinthesecondhalfof2008andtheearly
partof2009becausecompanieswereanxioustoreduceinventorylevels(theamountof
finishedbutunsoldgoodsmanufacturersorretailershave).Surveyevidencesuggeststhese
arenowexceptionallylow,whichhasledtoastabilisationofoutputinrecentmonths.
Consequently,anyrevivalindemandcouldbeaccompaniedbyanimmediateincreasein
outputandpossiblyemploymenttoo.
ThemostrecentCharteredInstituteofPersonnelandDevelopment/KPMGsurveyofthe
jobsoutlookfoundamodestimprovementinrecruitmentintentionsintheprivatesector
(CIPD2009).Interestingly,theregionsmostlikelytorecruitstaffinthenextthreemonths
(acrossallsectors)areintheNorthofEngland.72percentofemployersintheNorthof
Englandand82percentintheNorthEastareplanningtorecruit,thehighestfigures
sincelastsummer.
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions11
So,whileforecaststhattherecessionwouldhittheSouthrelativelyhardhaveprovedwideof
themark,itisalsotoosimplistictosuggesttheNorthasawholehassufferedbadlywhile
theSouthhasescapedunscathed.Someofthebiggestincreasesinunemploymenthave
beenoutsidethenorthernindustrialregions,inplaceslikeSwindonandCorby,whilepartsof
theNorth,inparticularCumbria,arefaringrelativelywell.TheSouth,particularlyLondon
anditscommuterbelt,hasseenthebiggestincreasesinunemploymentratesformanagers
andprofessionals.Butmorejobsinaggregatehavebeenlostinelementaryoccupationsand
skilledtradesandsincetheseaccountforalargerproportionoftheworkforceintheWest
MidlandsandpartsoftheNorth,itisthesegeographicalareasthathavegenerallyseenthe
biggestincreasesinunemployment(seeLocalGovernmentAssociation2009).
Theimpactoftherecessiononthenortherncity-regions
OutsideoftheWestMidlandsandareaslikeSwindonwheretherearespecialfactors,most
oftheareasthathaveseenthebiggestincreasesinunemploymentsinceMarch2008are
foundwithinthenortherncity-regions.
IthasbeenunfashionableinrecentyearstotalkaboutaNorth-SouthdivideintheUKbut,
inEnglandatleast,thatdividehasnevergoneaway.Thenortherncity-regionscomprise26
ofthe133NUTSLevel3areasthatmakeuptheUK.Ofthese,23hadanunemployment
rateoverthenationalaverageof2.2percentinMarch2008and21haveseenabigger
increaseinunemploymentthanthenationalaverageof2percentagepointssincethen.Thethreeareaswithlowunemployment(andrelativelysmallincreasesinunemployment)are
Table3:Recruitmentintentionsbyregion(Summer2009)
Region Percentageofcompaniesplanningtorecruit
North 72
Wales 69
South 66
Scotland 62
Midlands 54
Source:CharteredInstituteofPersonnelandDevelopment(2009)
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
0 1 2 3 4 5 6
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch
2008(pp)
Other areas
Northern city regions
Figure6.Levelof
unemploymentin
northerncity-
regionscompared
withotherareas
inMarch2008
andincreaseto
Sept2009,at
levelofNUTS3
Source:OfficeforNationalStatistics
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions12
York,theEastRidingofYorkshireandLancashireCountyCouncil8.Thethreeareaswithinthe
northerncity-regionswiththehighestunemploymentratesareHull,LiverpoolandSouth
Teesside.BlackpoolandNorthumberlandrepresenttwoanomalies,inthattheyhadabove-
averageunemploymentinMarch2008butbelow-averageincreasesinunemploymentsince
then.
Asatthenationallevel,thereisapositivecorrelationbetweenemploymentinmanufacturing
inMarch2008inthenortherncity-regionsandtheincreaseinunemploymentsincethen,
thoughtherelationshipisalittlelessstrong.ThisislargelyduetoLiverpoolandSefton,
whereunemploymenthasincreasedbyalittlemorethanthenationalaveragerisedespite
employmentinmanufacturingbeingwellbelowtheaverage(7.8and8.8percent
respectively,comparedwith12.7percentinMarch2008).Unfortunately,thedataweneed
toexplainthisanomalyarenotyetavailable.
Theimpactoftherecessionlocallywithinthenortherncity-regions
Interestingly,thepatternwherebythoseareasthathadthehighestunemploymentratein
March2008haveexperiencedthebiggestincreasesinunemploymentsincethenalso
emergesatamorelocallevelwithineachofthenortherncity-regions.
IntheLeedscity-region9,forexample,therearefiveCensusAreaStatistics(CAS)wards
whereunemploymenthasincreasedby4percentagepointsormoreoverthelastyear:
WombwellNorth,Hunslet,SelbySouth,OvendenandRichmondHill.Threehad
unemploymentratesabove5percentinMarch2008andallhadarateabovetheaverageof
2.4percentforthecity-region.Attheotherendofthescale,thereare25wards(outofa
totalof244)whereunemploymenthasincreasedbylessthan1percentagepoint,andallbar
twohadanunemploymentrateoflessthan1percent.
8.NorthYorkshireCCispartoftheLeedscity-regionandNortheastDerbyshireCCandDerbyshireCCare
partoftheSheffieldcity-regionbutforthepurposesofthisanalysistheyareexcludedfromthecity-regionsbecausepartsofthemareruralinnature.
9.TheanalysiscoversthewardswithintenlocalauthoritiesthatcomprisetheLeedscityregion;North
YorkshireCCisexcluded.
1.0
1.5
2.0
2.5
3.0
3.5
6 8 10 12 14 16 18 20 22
Employment in manufacturing in March 2008 (% of total)
ChangeinunemploymentratesinceMarc
2008(pp)
Figure7.Increase
inunemploymentandemployment
inmanufacturing
inthenorthern
city-regions
comparedwith
otherareas,level
ofNUTS3,
March2008
Sept2009
Source:Officefor
NationalStatistics
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ipprnorth|TheImpactoftheRecessiononNorthernCity-Regions13
ThesamebroadpatternisrepeatedintheLiverpoolcity-region,thoughtherelationship
betweenthechangeinunemploymentanditslevelinMarch2008isalittlelessstronghere
becausethereareseveralwardswithveryhighratesofunemploymentthathaveseenonly
averageincreasesoverthelast16months.Still,twoofthefivewardswhereunemployment
hasincreasedby4percentagepointsormore(ParrandHardshawandLongview)already
hadveryhighunemploymentratesandtheotherthree(Riverside,AppletonandMersey)
hadaboveaverageratesforthecity-region.
ThesamepatternisapparentintheTeesValleycity-region,whichhaselevenwardswhere
unemploymenthasincreasedbymorethan4percentagepointssincetherecessionbegan.
Unemploymentratesinthesewardsrangedfrom4.5to9.1percentinMarch2008,
comparedwithanaverageforthecity-regionof3.8percent.Meanwhile,therearejustfive
wardsoutof116whereunemploymenthasincreasedby1percentagepointorless.These
hadunemploymentratesrangingfrom0.8to2.0percentbeforetherecessionbegan.The
outlierinthisregionisMiddlehaven,whereunemploymentwas13.2percentinMarch2008
butithasincreasedbyonly2.2percentagepointssincethen.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0 1 2 3 4 5 6 7
Unemployment rate in March 2008 (%))
Changeinunemploymentra
tesince
March2008(pp)
Figure8.
Unemployment
rateinMarch
2008and
increasetoSept2009,Leedscity-
region
Source:Officefor
NationalStatistics
0
1
2
3
4
5
6
0 2 4 6 8 10 12
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch2008(pp)
c
0
1
2
3
4
5
6
0 2 4 6 8 10 12
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch2008(pp)
c
Figure9.
Unemployment
rateinMarch2008and
increasetoSept
2009,Liverpool
city-region
Source:Officefor
NationalStatistics
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Thepatternisthesameintheotherfivenortherncity-regions(seeAppendix3,p24).The
relationshipisstrongestinHullandtheHumberPortsandstillclearalthoughalittleweaker
inCentralLancashireandTyneandWear,wheretherearesomeareasthatpreviouslyhadlow
unemploymentthathavehadbigincreasessinceMarch2008.Statisticalanalysisshowsthe
relationshipissignificantinalleightcity-regions(seeAppendix4,p32).
Deprivationisbestmeasuredbyarangeofindicators,asintheGovernmentsIndexof
MultipleDeprivation(IMD),whichincorporates37indicatorsundersevensub-headings10.
ButitwillbeafewyearsbeforethedataareavailabletocalculatehowtheIMDforeach
city-regionhasbeenaffectedbytherecession.Inthemeantime,ifthedeprivationofa
CensusAreaStatisticswardisdefinedverynarrowlybyreferencetothelevelof
unemployment(orifbroadermeasuresofdeprivationarecloselycorrelatedwith
unemployment),thenthesedatasuggestthattherecession,sofar,hashadabiggerimpact
onrelativelydeprivedcommunitieswithinnortherncity-regions.
Implicationsfordeprivedcommunitiesinthenortherncity-regions
Atthisstage,itisonlypossibletodrawtentativeconclusionsabouttheimplicationsofthe
recessionfordeprivedareaswithinthenortherncity-regionsbutitlooksliketheyarebeing
hit,orareabouttobehit,bythreeunwelcomefactors:
First,areaswhereunemploymentwasalreadyhigharefaringrelativelybadly.
Second,regenerationworkrelatedtohousinghasbeenbadlyaffected.Third,theycouldsufferrelativelyhardwhenpublicspendingiscut.
Ouranalysisoftheunemploymentdatademonstratesthatdeprivedareasaresufferingmore
thanotherareasasaresultoftheslowdown.Itshowsbiggerincreasesinunemployment
ratesinareaswhereunemploymentwasalreadyhigh(whichmightbeexpectedtocorrelate
withbroadermeasuresofdeprivation).Higherunemploymentislikelytobeassociatedwith
lowerincomes,lowerspendingand,therefore,increasedpressuresonlocalbusiness.
Inmanycases,therelativelylargeincreasesinunemploymentreflecttherelativeimportance
oflowvalue-addedmanufacturingindustriesforjobs.Althoughthefallinsterlings
exchangerateoverthelasttwoyearsmighthelpintheshortterm,thiswillcontinuetobea
10.Income,employment,healthanddisability,education,skillsandtraining,barrierstohousingandservices,andlivingenvironmentandcrime.
0
1
2
3
4
5
6
7
0 2 4 6 8 10 12 14
Unemployment rate in March 2008 (%)
Changeinunemploymentratesince
March2008(pp)Figure10.
Unemployment
rateinMarch
2008and
increasetoSept2009,TeesValley
city-region
Source:Officefor
NationalStatistics
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vulnerablepointformanynortherncity-regionsbecausecompetitionfromoverseas
manufacturersislikelytointensify.Ineffect,therecessionhastemporarilyacceleratedthe
declineintheUKsmanufacturingindustries.
Policymakerswillthereforeneedtoincreasetheireffortstofindwaysofgettingpeoplewho
losetheirjobsintheseindustriesbackintotheworkforce.Intheshortterm,theWork
Foundationnotesseveralareasinwhichcityeconomiesareactingtolimitthescaleofthe
downturnintheirarea(forexample,byimprovingcreditavailabilityforlocalbusinesses),to
minimisejoblossesandprovidehelptotheunemployed,tomakeplacesmoreattractiveand
topreparefortheupturn(Leeetal2009).Longerterm,thiswillalsorequireavisionofwhat
theeconomicmake-upofthecity-regionsmightbelikein10yearstime.Thisshouldnot
involveareturntothepre-recessioneconomyintheUK,sinceitwasneithersustainablenor
just.Instead,thenextdecadeshouldbeusedasanopportunitytoreshapetheeconomyin
fairerways.
Meanwhile,constructionactivityinparticularresidentialconstructionwithinnorthern
citieshasbeenbadlyhitbytherecessionandthecreditcrunch.Itseemsthatsomeregionsarelikelytosufferdisproportionatelyasaresultofthedownturninthehousingmarket
associatedwiththerecession.BuildingofprivatehomesinManchesterhasbeen50percent
higher(relativetopopulation)thantheUKnationalaverageinrecentyears,withLeedsnot
farbehind(Parkinsonetal 2009).Arelativelyhighproportionofthesehomeswerebought
bybuy-to-letinvestorsorforpurelyspeculativepurposesbutthecreditcrunchmeans
potentialbuyerswillfindithardertoraisefundsforthenextfewyears.Thelikelyresultisa
muchlowerrateofbuildingnotjustforthedurationoftherecessionbutforseveralyears.
Thereisalsosomeevidencethatthemoredeprivedareaswillsufferthemost:
Residential-ledregenerationschemeslocatedinlessprosperous/peripheral
economies,particularlywherethemajorityofpotentialbuyersarethoserelying
ongainingfinancethroughthesub-primemortgagemarkethavebeenhit
[relativelyhard].Thesearenowtheleastattractiveschemestodevelopers.
(Parkinsonetal 2009:32-3)
Thesameauthorsreportthatmanyregenerationschemesledbyhousebuildinghavecome
toastandstillintheNorthEast,whichhasledtoredundancies.Asortofviciouscirclemight,
thus,bedevelopingasregenerationdevelopmentsaredelayedinareaswithweaknessinthe
localeconomyduetotheirdependenceondecliningmanufacturingindustries,leadingto
lessemployment,whichinturncreatesmoreeconomicweakness,andsoon.
Asignificantworryisthathousing-ledregenerationactivitywillnotreboundin2010or2011,eveniftheeconomyemergesfromrecession.Theperiodofabundantprivate-sectorcredithas
cometoanendandbanksarelikelytobereluctanttolendforwhattheyseeasmarginalor
riskyprojectsforseveralyears.Thiscouldbeasevereblowtohousing-ledeffortsaimedat
regeneratingdeprivedareaswithinnortherncitiesunlessanalternativesourceoffundscanbe
found.Futurepoliciestargetedatdeprivedcommunitieswillneedtotreatthisasonefocus.
Thereisalsoevidencethatsmallercities,suchasHullandSunderland,andtheperipheryof
largercitiesarefaringworsethanlargenortherncitycentres.CatherineGlossoparguesina
recentSmithInstitutepaperthatitmaybenecessarytorespondtothisdevelopmentby
switchingfundsfromthelargecitycentreswhichhavetraditionallygleanedthelionsshare
ofregenerationfundstotheworsehitareas(Hackett[ed]2009:62).Ineffect,thiswould
meanabandoningthenotionthatspendinginareasofopportunitywillalsoboostpoorer
areasthroughsomesortoftrickle-downeffect.
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TheforthcomingsqueezeonpublicspendingisalsoaconcernbecausetheNorthofEngland
reliesmoreheavilythanotherpartsofthecountryonpublicspending.Cutsinpublicsector
spendingwillhaveadirecteffectonemploymentandincomes,buttheywillalsohave
second-roundeffectsasaresultofreducedconsumptionandorganisationalspending,which
willleadtofurtherjoblossesintheaffectedareas.
Inaggregateterms,theNorthEastlooksthemostvulnerableregioninEngland.According
tothelatestfigures,publicspendingisequivalentto52percentofgrossvalueaddedinthe
region,comparedwithanationalaverageof38percent11.TheNorthWest(47percent)and
YorkshireandtheHumber(44percent)arealsoaboveaverage.
Initiallyatleast,thefocusislikelytobeonefficiencysavingsandcutsinadministration
costs,ratherthanonfrontlineservices.IftheConservativeswinthenextgeneralelection,
theyhavesaidthattheywillseeksignificantcutsinspendingonquangos.Thecitiesthatwill
bevulnerable,therefore,arenotnecessarilythosewiththehighestproportionofpublic
sectoremployees(OxfordandCambridge)butthosewiththewrongsortofpublicsector
employmentinauxiliarycentralgovernmentfunctionsandquangos.Wherethereisa
clusterofgovernmentofficesorquangos,cutscouldleadtolarge-scaleredundanciesina
particulargeographicalarea.
ArecentreportfromtheCentreforCitieshighlightsBarnsley,Newcastle,Liverpooland
Blackpoolascitieswithinthenortherncity-regionsthatarehighlyvulnerablebecausealarge
proportionoftheireconomyisreliantonpublicsectoractivities(alongwithSwansea,
Hastings,IpswichandNewport)(Larkin2009).Itsuggests6,600publicsectorjobscouldbe
lostinNewcastle(1.8percentoftotalemployment)and1,200inBarnsley(1.7percent).
Afterallowingforconsequentlossesintheprivatesector,Newcastlecouldlose8,600jobsin
totalandBarnsley1,600.
Theoutlookisparticularlyworryingforthoseareaswherepublicsectorjobshavebeen
createdinrecentyearsbytherelocationofpartsofcentralgovernmentthepublicationin
2004ofSirMichaelLyons'reviewforHMTreasuryonthepatternofgovernmentservice
(Lyons2004).
11.Theseratiosarecalculatedfromidentifiablepublicexpenditure(83percentoftotalmanagedexpenditure)for2007/08andgrossvalueaddedatbasicprices,byworkplace,incalendaryear2007.
0 10 20 30 40 50 60
United Kingdom
Northern Ireland
Wales
Scotland
South West
South East
London
East
West Midlands
East Midlands
Yorkshire & the Humber
North West
North East
Figure11.Public
spendingasa
shareofgross
valueadded,
2007/08(%)
Source:Officefor
NationalStatistics
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Itisnottoosoonforregionalbodiestobelobbyinggovernmentandtheoppositionin
anefforttominimisetheeffectofspendingcutsondeprivedareasintheNorth.Moregenerally,wherecity-regionshavereliedonpublicmoneyinthepasttofundeffortstohelp
deprivedareas,itwouldbewisetoassumethatlesswillbeavailableinthefuture.Apriority,
therefore,shouldbetoseekoutalternativeapproachestotheproblemofhowtolift
communitiesoutofdeprivation.
Conclusion
Therecessionisbadnewsfordeprivedcommunitiesinthenortherncity-regions,bringing
rapidincreasesinunemployment,cutbacksinhousing-ledregenerationprogrammesandthe
prospectofcutsinpublicspendingincomingyears.Itisimperative,therefore,thatefforts
aremadetoexplorehowdeprivedareascanbebetterlinkedtoareasofeconomic
opportunity,toconsidertherolesoflocal,city-regional,regionalandnationalbodies,andto
starttodevelopthenextgenerationofpoliciestargetedatdeprivedcommunities.
Table4:NortherncitiesthathavegainedpostsundertheLyonsrelocationprogramme
(20042009)
City Postsreceived
Liverpool/Bootle 1,667
Manchester 1,169
Sheffield 820
Leeds 728
Newcastle 668
Blackpool 503
Source:OfficeofGovernmentCommerce2009:www.ogc.gov.uk/government_relocation_relocation_
programme_progress__8180.asp
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References
CharteredInstituteofPersonnelandDevelopment(CIPD)(2009)LabourMarketOutlook,Quarterly
SurveyReport,Summer2009, availableatwww.cipd.co.uk/NR/rdonlyres/B825A8B2-7022-4D8A-
B321-1AB38F1999B2/0/Labour_Market_Outlook_Summer_2009.pdf
Deloitte(2009)StrengtheningtheNorthsEconomyintheRecoveryPhase,March,London:Deloitte,
availableatwww.thenorthernway.co.uk/downloaddoc.asp?id=649
HackettP(ed)(2009) Regenerationinadownturn:whatneedstochange?London:TheSmith
Institute,availableatwww.smith-institute.org.uk/pdfs/regeneration.pdf
InternationalMonetaryFund(IMF)(2009) WorldEconomicOutlook,October
KeepBritainWorking(2009)FlexibilityofUKWorkershelpssavejobs,newsrelease,June,available
atwww.keepbritainworking.com/newsitem_Flexibility_of_UK_Workers_helps_save_jobs_7.aspx
LarkinK(2009)Publicsectorcities:Troubleahead London:CentreforCities
LeeN,MorrisKandJonesA(2009)Recessionandrecovery:HowUKCitiescanrespondanddrivethe
recoveryLondon:TheWorkFoundation,January,availableat
www.theworkfoundation.com/assets/docs/publications/220_UK%20Recession_Recovery_Cities-
The%20Work%20Foundation.pdf
LocalGovernmentAssociation(2009)Thegrowthofclaimantunemploymentbybroadoccupation
andarea,London:LGA,availableatwww.lga.gov.uk/lga/aio/1974810
LyonsM(2004)WellPlacedtoDeliver:ShapingthePatternofGovernmentServiceLondon:HM
Treasury
ParkinsonM,BallM,BlakeNandKeyT(2009)TheCreditCrunchandRegeneration:Impactand
Implications,ReportfortheDepartmentforCommunitiesandLocalGovernment,London:CLG,
availableatwww.communities.gov.uk/documents/citiesandregions/pdf/1135143.pdf
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Appendix1:Divisionswithintheeightnortherncity-regions
CentralLancashire
1.BlackburnwithDarwen
2.Blackpool3.Preston
4.Fylde
5.Wyre
6.Chorley
7.SouthRibble
8.Hyndburn
9.RibbleValley
10.Burnley
11.Pendle
12.Rossendale
HullandHumberPorts
1.Hull
2.EastRidingofYorkshire
3.NELincolnshire
4.NorthLincolnshire
Leeds
1.Barnsley
2.Bradford
3.Calderdale
4.Craven
5.Harrogate
6.Kirklees
7.Leeds
8.Selby
9.Wakefield
10.York
11.NorthYorkshireCC
Liverpool
1.Liverpool
2.Wirral
3.StHelens
4.Knowsley
5.Sefton6.Halton
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GreaterManchester
1.Manchester
2.Bolton
3.Bury
4.Oldham
5.Rochdale
6.Salford
7.Stockport
8.Tameside
9.Trafford
10.Wigan
Sheffield
1.Barnsley
2.Doncaster
3.Rotherham
4.Sheffield
5.NEDerbyshire
6.DerbyshireDales
7.Chesterfield
8.Bolsover
9.Bassetlaw
10.NEDerbyshireCC
11.DerbyshireCC
12.PeakDistrictNPA
TeesValley
1.Darlington
2.Middlesbrough
3.Hartlepool
4.RedcarandCleveland
5.Stockton-on-Tees
TyneandWear
1.Newcastle
2.Gateshead
3.Sunderland
4.NorthTyneside
5.SouthTyneside
6.NorthumberlandCC(BlythValley,Wansbeck,CastleMorpeth,Tynedale)7.DurhamCC(Durham,Derwentside,Easington,Chester-le-Street)
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Appendix2:Thenatureoftherecessionandtherecovery
Thecurrentrecessionwascaused,primarily,byacreditcrunch.Thismakesitdifferentfrom
alltheotherrecessionstheUKeconomyhasexperiencedsincetheSecondWorldWar.
Previousrecessionswereprecededbyaperiodofexcessivelystronggrowthindemand,
whichcreatedbottlenecksintheeconomyandcausedtherateofinflationindomesticwagesandpricestoincrease.Insomeinstances,strongglobaldemandpushedup
commodityprices,particularlyoilprices,atthesametime.
Policymakersrespondedwithsubstantialincreasesininterestrates,whicheventuallycaused
demandandeconomicoutputtofallinotherwords,arecessionsoeasingthe
bottlenecksandallowinginflationtogobackdowntoacceptablelevels.
InflationintheUKdidincreasein2008,buttheinflationpressureswerealmostwholly
external.Thebulkoftheriseinconsumerpriceinflation,from2.1percentattheendof
2007toapeakof5.2percentinSeptember2008,wascausedbymuchhigherfoodand
energyprices.Domesticinflationremainedsubdued,withaverageearnings,forexample,
continuingtogrowatanannualrateof3.5to4percentthroughout2007and2008.While
theBankofEnglandincreaseditsofficialinterestratein2006and2007,itpeakedatonly
5.75percent(inJuly2007)nothighenoughtocausearecession.
Higherfoodandenergypricesdidplaysomepartinslowingdemandgrowth,byreducing
theamountofmoneyhouseholdshadavailablefordiscretionaryspending,buttheyplayeda
secondaryrole.Therecessionismainlytheresultofacreditcrunch,whichwas,inturn,
causedbyaburstingofhousepricebubbles,particularlyintheUnitedStatesandtheUnited
Kingdom.
IntheUS,housepricesstartedtofallin2007andtherewasariseinmortgagedefaults,
particularlydefaultsonsub-primemortgages(loansmadetothoseonloworirregularincomes).Alotofthesemortgageshadbeenparcelledupintomortgage-backedsecurities
(MBS),whichhadinturnbeenusedtocreatemorecomplexdebtinstruments,including
collateralizeddebtobligations(CDOs).Whenmortgagedefaultsrose,thepricesofthese
securitiesstartedtofall.Itthenemergedthatbanksandotherfinancialinstitutionswere
holdingvastquantitiesoftheseinstruments,oftenhavingusedborrowedmoneytobuy
them.Thesubsequentscrambletoselldrovepriceslower,ledtomassivelossesinthe
financialsectorandbankruptedsomeinstitutions.
Meanwhile,housepricesalsobegantofallintheUK,exposingaseriousweaknessin
householdsbalancesheets.HouseholddebtintheUKhadincreasedfrom109percentof
disposableincomein1999to176percentin2007.Muchofthisdebtwasbackedbyrising
housingwealthandtakenoninthebeliefthathousepriceswouldcontinuetoincrease.
Oncetheybegantofall,itwasunsustainable.Mortgagedefaultsrose,addingtothe
problemsbankswerealreadyfacing.
Oncebanksranintotroubleofthismagnitude,itwasinevitablethatthefinancialcollapse
wouldspilloverintotherealeconomy.Largelossescausedbankscapitalbasestoshrink,
forcingthemtocutbackonlendinginordertorepairtheirbalancesheets.Credit-worthy
householdsandbusinessescouldnolongerborrowthefundstheyneededtopurchase
houses,tomakeinvestments,orsimplytokeepcompaniesafloat.Consumerandbusiness
spendingwascut,workerswerelaidoffandtheeconomyfellintorecession.
ThecauseoftherecessionisimportantbecausestudiesbyorganisationssuchastheInternationalMonetaryFundconsistentlyshowthatrecessionsthatareprimarilytheresultof
balancesheetproblemstendtobeworsedeeperandlongerthanrecessionsthatresult
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fromatighteningofmonetarypolicytocounterinflationpressures.Similarstudiesshowthat
synchronisedrecessionstendtobeworseforindividualcountriesthanisolatedrecessions.As
wearenowexperiencingaglobal,balancesheetrecession,itisnosurprisethatitisturning
outtobetheworstsincetheSecondWorldWar.
IntheUK,therecessionhas,sofar,lastedforfivequarters(2008Q2to2009Q2)and
outputisdown5.6percentfromitspeak.Thefallinoutputoverthelastyearisthelargest
annualfallsinceatleast1956(whenquarterlyrecordsbegin),andprobablythelargestsince
the1930s.
Recentdatareleases,whichshowsomesignsofstabilisationinconsumerandbusiness
confidence,thehousingmarketandpartsoftheretailsector,couldbeinterpretedas
suggestingthedownturniscomingtoanend.However,thesedataneedtobetreatedwith
caution.Muchoftheimprovementisinmanufacturingwhereinventorylevelshavebeen
correctedandcompaniescannolongercutproductionwhilemeetingdemandfromstocks.
Othersectors,suchasconstruction,arestillcontractingsharply.Itistoosoontosaywithany
confidencewhethertherecessionisendingorjustthattheworstisover.Inprevious
recessions,outputhasoccasionallyreboundedtemporarilybeforecontractingagain.The
samemayhappeninthisrecession.
Theunusualnatureoftherecessionandthepolicyresponsetoitmakeitharderthanusual
topredictitscourseandthenatureofanysubsequentrecovery.Fiscalandmonetarypolicies
havebothmovedintounchartedterritory.Thefiscaldeficitthisyearisprojectedtobe175
billion,whichis12.5percentofGDPand,bysomeway,thelargestdeficitinUKpost-war
history.Meanwhile,theBankofEnglandhascutinterestratestoalmostzeroand
implementedapolicyofquantitativeeasing(boostingtheamountofmoneyinthe
financialsystem).Noonecanbesurehowtheeconomywillreacttothisstimulusbecauseit
hasneverbeentriedintheUKbefore.
However,despiteallthepolicymeasuresthathavebeentaken,theriskisthattherecovery,
whenitcommences,willbeslowerandweakerthanisnormalintheUK.Banksstillhavemuchmoretodotorebuildtheircapitalbasesandrepairtheirbalancesheets,sothe
availabilityofcreditwillimproveonlyverygradually.Meanwhile,althoughhouseholdshave
-6
-4
-2
0
2
4
6
8
10
1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Year
%
UKrealGDP
growth(%
changeonyear)
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startedtosavemoreandborrowless,theyhavealotofworktodobeforetheirbalance
sheetsareinbettershape,andcompaniesarealsoseekingtoreducedebtasapriority,so
creditdemandwillbesubdued.Furthermore,governmentspending,excludingdebtinterest
andwelfarepayments,willhavetobecutinrealtermsperhapsquitesharplyafter
2010/11.Thiswillholdbackaggregatedemandandoutputgrowthintheeconomy.
JustasthisrecessionhasbeendifferentfromallotherrecessionssincetheSecondWorld
War,sotherecoveryislikelytobedifferentfromallotherrecoveriestoo.Unfortunately,the
maindifferencecouldbethatitisslowandfaltering.Thelatestforecastsfromthe
InternationalMonetaryFundsuggestUKrealGDPwillcontractby4.4percentin2009,
followedbygrowthofjust0.9percentin2010(IMF2009).
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Appendix3:Increasesinunemploymentandunemploymentlevelsby
ward
CentralLancashire
Wardswithbiggestincreasesinunemployment:
MillHill(Blackburn)from3.2to7.2%
Sudell(Blackburn)from4.3to8.0%
WensleyFold(Blackburn)from5.7to9.4%
Trinity(Burnley)from4.4to8.0%
SpringHill(Hyndburn)from3.6to7.0%
Wardswithsmallestincreasesinunemployment:
ElswickandLittleEccleston(Fylde)from1.0to0.8%
BlackoandHigherford(Pendle)from0.9to1.1%
Gisburn,Rimington(RibbleValley)from0.6to0.8%
Bowland,NewtonandSlaidburn(RibbleValley)from0.4to0.6%
Garstang(Wyre)from1.0to1.3%
Wardswiththehighestunemployment:
Bloomfield(Blackpool)10.4%
Claremont(Blackpool)10.2%
Ribbleton(Preston)9.7%
WensleyFold(Blackburn)9.4%
ShadsworthwithWhitebirk(Blackburn)8.5%
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0 2 4 6 8 10
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch
2008(pp)
Levelof
unemployment
andincrease
March2008
Sept2009,
Central
Lancashirecity-
region
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HullandHumberPorts
Wardswithbiggestincreasesinunemployment:
Myton(KingstonuponHull)from10.3to16.1%
OrchardParkandGreenwood(KingstonuponHull)from9.5to15.2%
WestMarsh(NELincolnshire)from5.9to11.1%
EastMarsh(NELincolnshire)from8.4to13.1%
CrosbyandPark(NorthLincolnshire)from4.5to9.0%
Wardswithsmallestincreasesinunemployment:
BeverleyRural(EastRidingofYorkshire)from1.0to1.7%
BridlingtonNorth(EastRidingofYorkshire)from1.8to2.6%
WoldsWeighton(EastRidingofYorkshire)from0.8to1.8%
Dale(EastRidingofYorkshire)from0.8to1.8%
PocklingtonProvincial(EastRidingofYorkshire)from0.7to1.8%
Wardswiththehighestunemployment:
Myton(KingstonuponHull)16.1%
OrchardParkandGreenwood(KingstonuponHull)15.2%
StAndrews(KingstonuponHull)14.6%
EastMarsh(NELincolnshire)13.1%
WestMarsh(NELincolnshire)11.1%
0
1
2
3
4
5
6
7
0 2 4 6 8 10 12
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch
2008(pp)
Levelof
unemployment
andincreaseMarch2008
Sept2009,Hull
andHumber
Portscity-
region
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Leeds
Wardswithbiggestincreasesinunemployment:
SelbySouth(Selby)from5.1to10.0%
Ovendon(Calderdale)from4.3to8.7%
Hunslet(Leeds)from5.2to9.6%
WombwellNorth(Barnsley)from2.9to7.2%
RichmondHill(Leeds)from5.4to9.4%
Wardswithsmallestincreasesinunemployment:
BishopMonkton(Harrogate)from0.9to1.0%
Heslington(York)from0.1to0.2%
HellifieldandLongPreston(Craven)from0.8to1.0%
UpperWharfedale(Craven)from0.3to0.5%
Penyghent(Craven)from0.3to0.7%
Wardswiththehighestunemployment:
SelbySouth(Selby)10.0%
LittleHorton(Bradford)9.8%
Hunslet(Leeds)9.6%
StJohns(Calderdale)9.6%
RichmondHill(Leeds)9.4%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
0 1 2 3 4 5 6 7
Unemployment rate in March 2008 (%))
Changeinunemploymentratesince
March2008(pp)
Levelof
unemployment
andincreaseMarch2008
Sept2009,
Leedscity-
region
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Liverpool
Wardswithbiggestincreasesinunemployment:
Riverside(Halton)from4.1to9.6%
Appleton(Halton)from3.7to8.1%
Longview(Knowsley)from7.2to11.4%
ParrandHardshaw(StHelens)from7.1to11.2%
Mersey(Halton)from3.7to7.7%
Wardswithsmallestincreasesinunemployment:
Meols(Sefton)from1.3to2.0%
Clatterbridge(Wirral)from1.6to2.5%
Rainhill(StHelens)from1.9to2.9%
Eccleston(StHelens)from1.4to2.4%
Harington(Sefton)from0.9to2.0%
Wardswiththehighestunemployment:
Granby(Liverpool)13.5%
Birkenhead(Wirral)13.5%
Breckfield(Liverpool)11.9%
Kensington(Liverpool)11.7%
Vauxhall(Liverpool)11.6%
0
1
2
3
4
5
6
0 2 4 6 8 10 12
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch200
8(pp)
c
0
1
2
3
4
5
6
0 2 4 6 8 10 12
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch200
8(pp)
c
Levelof
unemployment
andincreaseMarch2008
Sept2009,
Liverpoolcity-
region
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GreaterManchester
Wardswithbiggestincreasesinunemployment:
Brinnington(Stockport)from6.6to11.8%
WalkdenNorth(Salford)from3.6to8.0%
Ince(Wigan)from3.9to8.3%
Norley(Wigan)from5.1to9.5%
Newtown(Wigan)from4.4to8.7%
Wardswithsmallestincreasesinunemployment:
Bowdon(Trafford)from0.7to1.4%
SaddleworthEast(Oldham)from1.0to2.0%
Tottington(Bury)from1.2to2.4%
WestBramhall(Stockport)from0.7to1.9%
Ramsbottom(Bury)from1.5to2.7%
Wardswiththehighestunemployment:
CentralandFalinge(Rochdale)13.3%
Brinnington(Stockport)11.8%
Coldhust(Oldham)10.1%
Langworthy(Salford)9.6%
Benchill(Manchester)9.6%
0
1
2
3
4
5
6
0 2 4 6 8 10
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch
2008(pp)
Levelof
unemployment
andincreaseMarch2008
Sept2009,
Manchester
city-region
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Sheffield
Wardswithbiggestincreasesinunemployment:
ShirebrookEast(Bolsover)from3.7to8.9%
Greasbrough(Rotherham)from3.5to8.3%
Herringthorpe(Rotherham)from5.0to9.6%
Central(Rotherham)from5.4to9.8%
Manor(Sheffield)from5.2to9.6%
Wardswithsmallestincreasesinunemployment:
Chatsworth(DerbyshiresDales)from0.7to0.2%
WinsterandSouthDarley(DerbyshiresDales)from1.0to1.0%
HathersageandEyam(DerbyshiresDales)from1.1to1.2%
Sutton(Bassetlaw)from0.7to1.0%
Ashover(NEDerbyshire)from0.8to1.1%
Wardswiththehighestunemployment:
Burngreave(Sheffield)10.4%
Central(Doncaster)10.1%
Central(Rotherham)9.8%
Herringthorpe(Rotherham)9.6%
Manor(Sheffield)9.6%
-1
0
1
2
3
4
5
6
0 1 2 3 4 5 6 7
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMar
ch
2008(pp)
Levelof
unemployment
andincreaseMarch2008
Sept2009,
Sheffieldcity-
region
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TeesValley
Wardswithbiggestincreasesinunemployment:
PortrackandTilery(Stockton-on-Tees)from9.1to15.2%
BlueHall(Stockton-on-Tees)from4.5to9.3%
ParkEast(Darlington)from4.7to9.5%
Coatham(RedcarandCleveland)from6.7to11.4%
NorthOrmesbyandBramblesFarm(Middlesbrough)from8.4to13.1%
Wardswithsmallestincreasesinunemployment:
Elwick(Hartlepool)from1.1to1.4%
Hummersknott(Darlington)from1.3to2.0%
ParkWest(Darlington)from1.3to2.3%
HeighingtonandConiscliffe(Darlington)from0.8to1.8%
College(Darlington)from2.0to3.0%
Wardswiththehighestunemployment:
Middlehaven(Middlesbrough)15.4%
PortrackandTilery(Stockton-on-Tees)15.2%
Grangetown(RedcarandCleveland)14.0%
NorthOrmsebyandBramblesFarm(Middlesbrough)13.1%
Thormtree(Middlesbrough)12.5%
0
1
2
3
4
5
6
7
0 2 4 6 8 10 12 14
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch20
08(pp)Levelof
unemployment
andincreaseMarch2008
Sept2009,Tees
Valleycity-
region
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TyneandWear
Wardswithbiggestincreasesinunemployment:
AcreRigg(Easington)from1.5to5.6%
EdenHill(Easington)from3.8to7.8%
Castletown(Sunderland)from3.5to7.3%
HordenSouth(Easington)from2.8to6.4%
Catchgate(Derwentside)from3.4to6.9%
Wardswithsmallestincreasesinunemployment:
Shincliffe(Durham)from0.9to0.7%
StNicholas(Durham)from0.2to0.3%
Wark(Tynedale)from1.0to1.1%
Elvet(Durham)from0.2to0.4%
SouthTynedale(Tynedale)from0.7to0.9%
Wardswiththehighestunemployment:
Rekendyke(SouthTyneside)10.9%
Walker(Newcastle)10.7%
Bede(SouthTyneside)10.5%
Hirst(Wansbeck)10.4%
Hendon(Sunderland)9.4%
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0 2 4 6 8 10
Unemployment rate in March 2008 (%)
ChangeinunemploymentratesinceMarch
2008(pp)
Levelof
unemployment
andincreaseMarch2008
Sept2009,Tyne
andWearcity-
region
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Appendix4:Correlationsbetweenincreasesinunemploymentandunemployment
levelsbyward
City-region Correlation* Numberofwards
CentralLancashire 0.48 249
HullandHumberPorts 0.87 81
Leeds 0.77 244
Liverpool 0.48 138
GreaterManchester 0.68 214
Sheffield 0.71 208
TeesValley 0.65 116
TyneandWear 0.46 278
*CorrelationbetweentheunemploymentrateinMarch2008andthechangeinunemploymentbetweenMarch2008andSeptember2009
Allthesecorrelationsarehighlystatisticallysignificant.