Outlook for cities: how will they ride out the storm?

Author: Hannah Brown
Date: 26/02/2009
Publication: New Start

The UK economy has entered a severe recession, and for cities around the country this is one of the most challenging periods in their recent economic history.  After a decade in which the country's urban centres benefited from benign conditions and seen jobs growth and prosperity, they are now suffering growing waves of redundancies.  These are predominantly hitting the key sectors - financial services, retail and construction - at the heart of the last decade's urban renaissance.  Liverpool has benefited from 70,000 more jobs since 1997 - how many of these are now under threat?  The chart below gives an indication of vulnerable cities.

Source: NOMIS 2008.  ABI employee analysis broad sectional groups (2006 data).  Rochdale excluded from banking index due to errors in the underlying data.

Last year the global credit crunch hit home with news of large-scale job losses in financial services, particularly in the City of London.  This prompted speculation that this time, unlike previous crises, it was the South that would suffer the sharpest fall.  But we are in the middle of a full-blown recession that is going to hit all cities all over the UK.  The waves of redundancies across different places and sectors announced since Christmas bear witness to this - 1,200 laid off by Nissan in Sunderland; 367 redundancies in Stoke-on-Trent as Waterford Wedgewood goes into administration; 500 jobs lost at distribution group Wincanton in Gloucester; 1,200 jobs to go around the country from Marks and Spencers; up to 4,000 jobs at Barclays now gone; and empty Woolworths stores in high streets across the UK. 

As the global outlook weakens and credit constraints remain, it is clear that the effects of the recession will be widespread.  So city leaders everywhere need to do what they can to alleviate the worst effects.  This means exploring what measures they can take at the local level to keep employees in work and prevent skills wastage,  and working with Jobcentre Plus to prevent today's recently unemployed becoming the future long-term workless of tomorrow.

Of course some cities will be better placed to ride out the recession than others.  This year's edition of Cities Outlook - the annual publication from Centre for Cities - includes the first in a series of indices showing the long-term economic potential of UK cities.  While it does not show which cities are being hit hardest now by the deteriorating economic situation, it does show which cities may be best placed to bounce back.

Cities such as Reading, Edinburgh and Warrington, which have invested in skills and infrastructure, are nearer the top of the list of economic strength, whereas those that are still grappling with the longer-term effects of industrial decline - among them Stoke, Mansfield and Burnley - may struggle to find new sources of growth and jobs.  And in spite of the turbulence caused by the recession, longer-term issues still remain - our indices also show that even after a decade of urban renaissance and substantial progress made, inequality remains a big issue in city economies - particularly in large cities like Birmingham, Liverpool and London.

Despite continuing news of redundancies and firm closures, the recession will not last forever.  And our cities will again be the centres of growth to lead the UK out of recovery.  While managing the impacts of rising unemployment and local business closures will be a priority right now, city leaders must also have an eye to the future.  If financial and business services are not going to be the source of high-value jobs growth that they have been in the past, and public spending is going to have to be curtailed, where will the high value jobs of the future come from?  And how can city leaders work with business and central Government to grow these new sectors?

As well as national recession-busting measures, Government will need to devolve more powers to city leaders and city-regions, so they have the levers over housing, training, skills and planning to ensure more resilient economies in the future.

A version of this article first appeared in New Start.