Over the past decade, the public sector has been one of the key drivers of growth in the UK. Over two thirds of the 1.2 million net additional jobs created in UK cities between 1998 and 2007 were in public administration, education and health.
The recession has resulted in a permanent hit of £90 billion a year to the Government’s income. The Government deficit could now reach 14 percent of GDP in 2009-10. Spending cuts look to be inevitable and the public sector will need to shrink. Local authorities and many central departments – all major employers in UK cities – may face annual spending cuts that exceed five percent in real terms during the period 2011-14.
Those cities overly dependent on public sector employment will be hit hard. While flexible working and wage freezes will provide some of the savings required, job losses are inevitable. Public sector employment could shrink by 240,000 to 290,000 jobs between 2009 and 2014.
This report develops a new measure of city vulnerability to public sector job losses. Cities, such as Swansea, Hastings, Ipswich, Newcastle and Barnsley, which have experienced large-scale public sector growth over the last decade, will need to prepare for the consequences of significant cut backs in the size of their public sector workforce.
The report is part of our Surviving Recession series, which looks at the impact of the recession on cities in the UK, focusing on a range of themes and identifying what measures might cushion the damage.
Public sector cities: Trouble ahead is supplemented by a supporting paper providing further context and analysis.