The direct links between cities and towns
Cities are not islands. While the majority of the economy is clustered within them, a series of interactions with their surrounding areas takes place, which is important to the success of the city’s economy. As far as available data permits, this section looks at the nature of the links between cities and towns.11
Box 4: The economic scale of towns
The 164 towns in this research accounted for 1.5 per cent of land, 16 per cent of the population and 17 per cent of jobs in 2011. By way of comparison, using the more specific definition of cities that Census data allows, shows that cities accounted for 3.7 per cent of land, but 56 per cent of population and 58 per cent of jobs.
Cities provide jobs, particularly high-skilled ones, to town residents
The most obvious direct link between cities and towns is through commuting. Cities are an important source of jobs for workers living in towns, with 18 per cent of them commuting to cities in 2011 (accounting for 791,000 jobs). Unsurprisingly, these figures were higher for those towns in the hinterlands of cities at 22 per cent, and much lower at 6 per cent for residents in rural towns.
Higher-skilled people were more likely to make this commute. In total, a quarter of all residents working in high-skilled occupations commuted to a city, with this rising to 30 per cent for those towns in the hinterlands of cities.12 These commuters accounted for 401,000 jobs, meaning half of town commuters worked in a high-skilled occupation in a city.
This means that towns have a role to play in supplying the most important input into a city economy – workers. In total, non-city residents accounted for 17 per cent of city jobs in 2011. Within this, towns accounted for 5 per cent.
These findings illustrate two points. Firstly, the relationship that the city has with its surrounding towns is important for its own performance, as towns supply high-skilled workers. Secondly, cities play a significant role in supplying jobs – particularly high-skilled jobs – to the residents of nearby towns.
Towns close to cities have better employment outcomes than those in rural areas
While recent commentary on the fates of towns has focused on struggling towns, a large number actually outperform the national average on employment outcomes. Figure 6 maps the employment outcomes of town residents (defined as those that were either unemployed or claiming long-term benefits in 2011).13 There are three implications to draw.
Firstly, reflecting the geography of economic outcomes for cities14, towns in the South, such as Winchester and Maidenhead, tend to be the strongest performers.
Secondly, beyond the more traditional view of a north-south divide, there are also differences depending on a town’s proximity to a city. In 2011, towns located in the hinterlands of a city had a lower share of residents unemployed or on long-term benefits on average (10.6 per cent) than those which are in more isolated rural locations (12.1 per cent). This suggests that proximity to a city may impact a town’s economic outcomes, and highlights how important it is to understand the relationship between cities and towns when considering how and why the prosperity of towns vary.
Thirdly, not all towns close to cities do well. Being close to a city does not guarantee better outcomes for town residents – the poor outcomes of Hartlepool (near Middlesbrough) and Llanelli (near Swansea) are examples of this. The rest of this section explores this in more detail.
Figure 6: Share of residents unemployed or in receipt of long-term benefits, 2011
Skills are a strong predictor of employment outcomes
Irrespective of proximity to a city, it is first important to note that (as is the case in cities) the skills of residents are a strong predictor of employment outcomes in towns. As Figure 7 shows, where degree holders made up a greater share of the overall working-age population of a town, the share of people unemployed or claiming long-term benefits was also lower. This suggests that a principal focus of any policy to improve the outcomes for towns has to be to improve the skills of a town’s residents.
The skills of a town’s residents are also related to the economic performance of the nearest city, which is shown by the colour of the dots in Figure 7.15 Those towns closest to stronger cities tend to have a higher share of residents with a degree.
Figure 7: Town employment outcomes and skills of their residents, 2011
It is difficult to say exactly why this is the case, but we do know that cities are playing some role in the skills profile of towns. As shown above, cities lose high skilled residents to towns. All but 10 English and Welsh cities saw a net outflow of these high-skilled residents to the hinterlands and rural areas of their wider region, from which towns are likely to have benefited.16
Box 5: Out migration of degree holders from Hull
Like most cities, Hull lost graduates to its wider region in 2011. There were just over 200 more graduates who left the city for a town or the countryside in Yorkshire and the Humber than made the move the other way. Those aged 31-45 made up the vast majority of these moves.
While data is not available for the specific destination of these graduates, data for those aged 31-45 irrespective of qualification level shows that the majority of people did not move far, crossing into neighbouring East Riding.
Beverley, a town just north of Hull, is likely to have been a beneficiary of these moves. The town appears as something of an anomaly in Figure 7, having both high shares of residents with a degree and strong employment outcomes, despite being close to a poorly performing city.
Despite Hull’s poor performance, the residents of Beverley are still dependent on the jobs it provides. One third of the town’s working residents are employed in Hull – as many as work in Beverley itself – and this rises to 44 per cent for the town’s residents who work in high-skilled occupations. Despite the low shares of higher-skilled jobs in Hull, the presence of them combined with the low shares of degree-holding residents in the city mean that it provides many thousands of high-skilled job opportunities for people who live in Beverley.
These outflows were dominated by London. In 2011 alone, towns and rural areas of the Greater South East gained 6,600 more people from London than they lost to the capital. This was followed by Birmingham and Bristol, which lost 700 and 550 people in this demographic to the towns and rural areas of the West Midlands and South West respectively. Generally speaking, those cities that had the largest outflows tended to have stronger economies.17 Meanwhile, those cities that had the smallest outflows tended to have the weakest economies.
This suggests that weaker economies make a much smaller contribution to the number of skilled residents in their nearby towns than stronger cities do.18 A notable exception to this is Hull, as discussed in Box 5.
Strong cities improve employment outcomes in nearby towns
As well as having the required skills, employment outcomes depend on having access to job opportunities. A town offers this to a greater or lesser extent in two main ways: through creating jobs in its own economy and by offering access to jobs nearby.
Figure 8 plots out how these two sources of jobs vary across towns (with the share of jobs in high-skilled exporters representing the strength of the economy, discussed in Box 2), and adds two further variables:
- The size of the bubble represents the share of town residents that were unemployed or were claiming long-term benefits in 2011.
- The colour of the bubble refers to the strength of the nearest city to the town, as in the previous chart.
The chart shows that:
1. More isolated towns tend to have worse employment outcomes
The clustering of rural towns in the bottom left of the chart shows that many struggle to offer either access to jobs in a city (due to location), or to attract investment from exporting businesses into their own economy. The result is that employment outcomes are poor – 12.1 per cent of residents in rural towns were unemployed or claiming long-term benefits in 2011, compared to 10.6 per cent in hinterland towns.
2. Towns with strong links to productive cities had the lowest unemployment rates
In contrast, towns in the hinterlands of a productive city (light or dark green bubbles) tend to be in the top right side of the chart. These towns have strong links to the labour market of their nearest city and have a strong economy themselves,
providing sufficient jobs to maintain a low unemployment rate. On average, the unemployment and long-term benefit rate in these towns was 7.7 per cent.
Figure 8: Town economic outcomes in relation to its economy and labour links with cities, 2011
3. Towns with close links to less productive cities do not see the same positive employment outcomes
Proximity to a city does not guarantee a town’s economic prosperity. A third group of towns are in the hinterlands of less productive cities (light and dark blue bubbles) and these are clustered in the bottom right of the chart.
These towns have a weaker economy themselves, but despite the high share of residents commuting into a city for work, unemployment is relatively high (12.2 per cent). This suggests that the weak economic performance of the nearby city
is unable to compensate for the lack of jobs locally.
4. Few towns have strong economies in their own right and only weak links to cities
There are a few exceptions to these patterns, found in the top left of the chart. These towns, such as Chippenham in Wiltshire and Newbury in Berkshire, have strong economies in their own right but weak labour market links to cities. Despite this, they are able to sustain low unemployment rates.
Box 6: The employment outcomes of towns around cities
Reflecting the findings above, the performance of towns within the hinterlands of cities varies across cities. As Figure 9 shows, the more productive a city, the better the employment outcomes of the towns around them. This is most clearly seen for cities in the Greater South East, and is likely to be affected as much by London as any of the cities in the chart.19 Meanwhile the towns around Newport, Swansea and Liverpool have the poorest employment outcomes, reflecting the poor skills levels of these towns and the low productivity of their closest cities.
Figure 9: The employment outcomes of towns around cities, 2011
Most of these towns are located within the hinterland of stronger-performing cities. Of the five rural towns in this category, three owe the presence of higher-skilled exporters in part to a legacy of public sector defence activities. Great Malvern has had a specialism in defence since a number of activities were moved there during World War Two. BAE makes submarines in Barrow for the Royal Navy and it has a presence in Yeovil too, along with helicopter and other aviation manufacturing.
The policy implication from these findings is that the economic performance of the nearest city to a town has consequences for the employment outcomes of the residents of that town (Box 6 looks at the outcomes of towns through the lens of cities). This means that transport connections between cities and towns will be important to allow town residents to access jobs in cities.
Box 7: The relative importance of skills and neighbouring cities
The analysis presented above suggests which factors have an impact on unemployment outcomes in towns, but it doesn’t say anything on the magnitude of them. The regression below gives some insight into this. It shows that:
- Skills are the most important determinant of unemployment outcomes – a 1 per cent increase in the number of people holding a degree results in a 0.64 per cent decrease in people unemployed or claiming long-term benefit
- This is followed by the productivity of a city – a 1 per cent increase in this variable leads to a 0.16 per cent decrease in unemployment outcomes
- Lastly, a 1 per cent increase in the number of high-skilled exporting jobs creates a 0.12 per cent decrease in unemployment outcomes
Because the productivity of the nearest city variable accounts for the productivity of the closest city only, it ignores the influence of other strongly-performing cities that are close by. This is particularly the case for cities located close to London. Changing the value for this variable to be the productivity of London for those towns that fall within the capital’s hinterland, increases the impact of this variable to 0.35 per cent.
Figure 10: Regression of the determinants of unemployment outcomes in towns
Strong cities boost investment in nearby towns
As well as providing jobs, cities also appear to have an impact on the nature of a town’s economy. Figure 11 plots the share of jobs in a town that are in high-skilled exporting activities against the distance that the town is from a city.
As the chart shows, proximity to a city alone is not enough to influence the ability of a town to attract in higher-skilled exporters – there are a number of towns in close proximity to a city, such as Blyth (near Newcastle) and Tonypandy (near
Cardiff) that have low shares of high-skilled exporters. But Figure 11 shows a divide depending on whether that city is a stronger or weaker performer, with those towns close to a strongly performing city having a higher share of high-skilled exporting jobs in their economy, despite the higher cost of commercial space. These jobs tend to be in service-exporting activities rather than goods-exporting ones, as discussed in Box 8.
Figure 11: The economic structure of a town, proximity to a city and cost of commercial space
There are very few towns in the top right of Figure 11. Yeovil is the only town that appears in this area. It has a relatively high share of high-skilled exporters in its economy despite its distance from a city. This is in large part due to the
manufacture of helicopters and other aircraft that is undertaken in the town.
This suggests that the performance of a nearby city is important for the ability of a town to attract investment from high-skilled exporting businesses. Proximity to a strongly-performing city is still important for high-skilled exporting businesses, even if they choose not to be based in a city.
Box 8: The economic make-up of towns and cities
As shown in Box 2, where businesses locate depends on the relative benefits that different places offer. Figure 12 shows how the industrial structure of places differs according to their location. There is little variation in terms of local services across cities and towns, but there are differences in terms of the make-up of the export base.
The share of jobs accounted for by services exporters is highest in cities, followed by the towns which are closest to the most productive cities. This decreases as the strength of the nearest city decreases and is lowest for rural towns. This is likely to reflect both the knowledge spillovers that cities offer, as well as the higher-skilled workers that towns close to more productive cities offer.
The opposite is seen for goods exporters. Cities have the lowest shares, while towns closest to the weakest cities have the highest shares. This is likely to reflect the relative benefits that these towns offer – namely access to lower-skilled workers and cheaper land, which is more important for goods exporters.
The exception to this pattern is rural towns, suggesting that their more remote location and smaller numbers of potential workers make them relatively less attractive locations for goods exporters, despite their lower costs of land.
Figure 12: Industrial structure in towns and cities, 2011
The performance of towns in the city regions of Core
Cities and London follow broader trends
The outcomes for towns in the city regions of the Core Cities20 and London match the outcomes for towns overall. In general, the more productive the city, the better the average employment outcomes for the towns around it (see Figure 13).
Figure 13: The performance of towns in the city regions of Core Cities and London’s hinterland, 2011
Towns surrounding London and Bristol have the lowest unemployment rates. Because these two cities are relatively more productive, they provide a higher share of high-skilled jobs for town residents and make the towns more attractive places for productive firms to do business. In comparison, towns within the city regions of Sheffield and Cardiff have higher unemployment rates as the lower productivity levels mean the cities cannot offer towns these benefits to the same extent.
But not all towns in a city region have similar employment outcomes – proximity to a productive city does not guarantee strong employment outcomes. The skills levels in each town play a big part in explaining this variation.
Taking Birmingham city region as an example, Figure 14 shows a strong relationship between the skills of each town’s residents and their unemployment levels. Stratford-upon-Avon and Bromsgrove have the best employment outcomes and have the highest share of residents with a degree.
On the other hand, towns such as Burton-upon-Trent and Cannock have higher unemployment despite their similar proximity to Birmingham. This echoes the findings for all towns, highlighting how proximity to a city is not sufficient for a strong town economy; the skills of the town’s workforce must be high enough to allow them to benefit from the jobs on offer in the city. As Box 5 shows, this is reflected within the urban authorities of a city region too.
Figure 14: Employment outcomes and skills of towns in Birmingham city region, 2011
Box 5: Commuting links within Greater Manchester
Even within the urban authorities of a city region there is variation in the way different areas interact with the centre.
Not all of Greater Manchester’s authorities have equally strong commuting links to the central part of the city. For example, 22 per cent of Trafford residents commuted into the Manchester local authority to work (see Figure 15) – and 8 per cent were destined for the city centre. In contrast, only one in 10 Rochdale residents made the commute to Manchester local authority and 5 per cent into the city centre.
As with towns, there is a strong relationship between the skills levels of a local authority’s residents and its employment outcomes. In Manchester, Trafford and Stockport had low unemployment, 9 and 10 per cent respectively, and also had the most highly qualified residents (one in three Trafford residents had graduate-level skills). In Tameside and Oldham less than a fifth of residents had these skills and unemployment reached 14 per cent.
This suggests that although the Manchester local authority provides many jobs to suburban residents, not all are equally well placed to take advantage of these opportunities.
Figure 15: Share of residents commuting into Manchester local authority and Manchester city centre, 2011