A new report today shows startling news for the UK’s north-south divide. Its survey of employer hiring intentions finds the UK effectively split down the middle.
Below a line running from the Humber in the North East to the Bristol Channel in the South West, employers are broadly positive in their intentions to hire new staff (an index of +6 per cent).
But above that line, employers have largely negative intentions to take on new workers (an index of -2 per cent).
Research to be published tomorrow by IPPR also suggests regional disparities in employment are likely to grow – unless there is a massive turnaround in private sector employment growth.
Table 1 below shows employment growth during the 15 years from April 1993 (the trough for employment after the 1990s recession) to April 2008 (the peak for employment ahead of the most recent recession) when employment in Great Britain increased by almost a fifth.
A comparison of the first five years of this period with the last ten shows how in 1998-2008 the North East and Yorkshire and the Humber caught up with the South and the East on average employment rates.
But there is strong evidence to suggest this decade of growth was boosted by significant increases in public sector employment while private sector growth continued to fall far short of that in the rest of the UK.
This shows just how risky the government’s rebalancing strategy could be for some parts of the country. Public sector spending cuts are likely to be evenly spread across the UK, but the impact will be disproportionate in areas heavily dependent on public sector jobs such as the North West, Northern Ireland, Wales and Scotland.
Growth in private sector employment could well be slower in these nations and regions too. The most recent Lloyds TSB business surveys suggest positive private sector jobs growth in London, East of England, the Midlands and the North East, but a bleaker outlook for the North West, Scotland and Wales.
The Office for Budget Responsibility (OBR) forecasts that the private sector will create 1.5 million jobs over the next five years, but this will not be enough to replace jobs lost in the public sector, bring down unemployment and mop up new entrants to the labour market. The result could be increasingly unequal job prospects along regional lines.
Past experience suggests cutting corporate tax rates, further deregulating the labour market and creating new Enterprise Zones will not be enough to deal with this challenge. We argue in tomorrow’s report for the government to act on the poor short-term economic outlook by increasing capital spending to improve the country’s infrastructure and boost employment rates.
There is also a need to provide more support for those who will have to re-train to stay in the labour market, and to prevent hundreds of thousands from permanently drifting away from the labour market altogether, we call for a job guarantee scheme for those who have been out of work for more than 12 months.
We may well find out the answer to whether the public sector was ‘crowding out’ the private sector over the past decade or so, or whether it was in fact filling in for the failure of the private sector.
The choice for the government is between standing back to wait and see or acting now for those who stand to lose along the way.
• IPPR’s report, “Jobs for the future: The path back to full employment”, will be published tomorrow at www.ippr.org.
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