Cities Outlook 2013: A downturn of two halves

For the past five years the UK economy has either been in, or on the brink of, recession, writes Rachel Smith of Centre for Cities.

Rachel Smith is an analyst at Centre for Cities

For the past five years the UK economy has either been in, or on the brink of, recession. But what’s clear is that, to date, it has been a downturn of two halves.

As we show in Cities Outlook 2013 (pdf), sponsored by the Local Government Association, from 2008 to 2009 there was a sharp decline in GDP accompanied by a significant rise in unemployment. Then, from 2009 onwards, while growth has continued to be fragile, unemployment levels actually stabilised.

Not all cities have followed this national trend. Places like Brighton and Leeds were hit hard during the first year of the downturn, but have since started to recover. Others, like Barnsley and Glasgow, avoided the downturn early on but are now feeling the pinch.

Although common factors like over-dependence on a single industry or low skill levels amongst residents affect a city’s resilience during recession, each city has its own story.

Swindon, for example, was a strong performer before the recession, but was hit hard during the first year of the downturn and has only more recently started to recover.

The closure of a Woolworths shop and distribution centre led to around 450 job losses and contributed to the rise in unemployment from 2008 to 2009. Reduced production at Honda also led to job losses in the supply chain. And, for people in work, average wages fell by £26 per week – more than the decline seen nationally.

But, from 2009 onwards, the city began to recover; the number of people out of work fell and the business base stopped shrinking.

Yet the outlook for the city remains mixed. Although public sector dependency is low and BMW has promised to expand Mini production at its plant in Swindon, Honda plans to cut around 800 jobs.

See Figure 1:

Unlike Swindon, Middlesbrough avoided the worst of the downturn early on but was affected more significantly from 2009 onwards.

During the first half of the downturn there was only a small reduction in the number of businesses in Middlesbrough and the average wage actually rose slightly. Yet at the same time the number of people claiming Job Seekers Allowance also rose and mainly amongst people in mid to lower skilled occupations.

See Figure 2:

During the second half of the recession Middlesbrough was hit hard. The number of people seeking a job continued to rise which contrasts to the decline seen nationally. The closure of the Corus steel plant which led to around 1,700 job losses was one reason for this.

Looking to the future, it’s positive the former steel plant has been reopened creating around 1,000 jobs. Nifco, which supplies automotive plants across the country, also plans to create and safeguard around 300 jobs in Stockton-on-Tees.

So, although the UK economy as a whole is facing sluggish growth prospects, experiences in individual cities are far from uniform. Many are seeing some green shoots, others are still struggling.

See also:

Investment in cities is key to economic recoveryJuly 15th, 2012

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