Varying unemployment across UK cities shows we’re Europe in a microcosm

Last week brought more bad news on the economy. The Office for National Statistics revised down its estimates of the UK’s economic output, revealing that the double-dip recession is deeper than first thought.

The outlook for the labour market remains fragile. Unemployment stands at 2.63 million and the National Institute of Economic and Social Research expects the unemployment rate to rise to 9% by the end of this year.

But national figures tend to mask what’s happening in different parts of the country. In the United States, for instance, the latest Metro Monitor by Brookings reports that less than 6% are unemployed in Boston and Washington compared with more than 16% in Fresno, California. And it tends to be city economies struggling prior to the onset of the recession have been hit hardest. In the UK, the claimant rate in Hull is now 4.5 times higher than in Cambridge.

One way to highlight the extent to which the scale of the challenge varies across UK cities is to compare rates with those of well-known international economies. For example, unemployment in Crawley and Reading at less than 5% are comparable to overall rates in Norway and the Netherlands; Warrington’s unemployment rate at 6% is comparable to Germany. In other cities, such as Middlesbrough and Hull, unemployment rates at 13% and 15% are comparable to Portugal and Ireland.

Disparities between UK cities are likely to widen further. Cities with less dynamic private sectors are suffering in the face of public sector cuts and global uncertainty. Other cities are likely to bounce back from the recession far more quickly. The claimant rate is still high and rising in Newport and Barnsley, whereas it has fallen in Reading and Swindon by over 20% from the peak in 2009.

Huge inequalities also exist within cities: the ‘worst’ neighbourhood in Rochdale has nearly six times more claimants than the ‘worst’ neighbourhood in Cambridge.

And the longer people are out of work, the worse their prospects are for the future. Spells of unemployment impact on individuals’ ability to develop their skills and can also have significant psychological and health-related impacts. This all works to worsen the situation in high unemployment cities and neighbourhoods over the longer term.

Yet despite the significant differences between cities, labour market policy in the UK is highly centralised, unlike other countries. This limits the ability of cities to respond to their particular circumstances, with many national policies continuing to be blind to the nuances of geography.

The major issue is lack of jobs. This requires a long-term, sustained and coherent approach from government. In the short term, government needs to maximise the impact of employment support programmes in order to keep people close to the labour market. The value of the Youth Contract should be uplifted in cities like Barnsley, for example, to increase the availability of work placements and apprenticeships.

The government needs to work with cities to extend the reach of national initiatives. One of the first City Deals saw the creation of the City Apprenticeship and Skills Hub in Manchester which promises to increase the number of apprenticeships available locally to 6,000 by focusing on SMEs – what might this look like elsewhere?

Programmes like the Youth Contract should also be complemented with action to remove other barriers to work. Individuals often face multiple barriers – from lack of appropriate skills to lack of access to transport or childcare – and intervention is most effective when tailored around the individual. Here is a real opportunity for cities to make a difference. Cities can bring together local partners and join up across policy areas to develop interventions that respond to individual and local circumstances.

It’s good news that neither Spain nor Greece appears on the UK city map – unemployment now stands at 24% and 22% in the two countries respectively. But there is an imperative to act now and to ensure policies go further if we are to avoid a situation where unemployment continues to rise to such levels in the UK’s most vulnerable cities.