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Embargoed till 00.01 Wednesday 11 August 2010

European Regional Press Release

A jobless recovery
is expected for UK cities
 

Recent indicators have shown output to be on the rise across the UK; however job figures are not yet increasing with the same vigour, and this is expected to continue in the medium term.

The initial recovery in manufacturing industry from the heavy fall in output in 2009 is well under way, driven mainly by a rebuilding of inventories and a consequent marked upturn in world trade.  This is feeding through to improved performance in major industrialised centres.  At the same time, the emergence of the financial sector from crisis is underpinning growth in financial centres.  Against this, concern over sovereign debt and the implementation of fiscal austerity measures will lead to a weaker recovery in the countries with the largest deficits, and will particularly curb the growth in employment.

In the UK, the strongest recovery in terms of growth in value added (but not jobs) is expected in Belfast (see Chart 1: City level Output Growth, 2010-14). The recession hastened the downturn in manufacturing, while the city has also seen a sharp downturn in the construction sector which had been fostered by a property bubble more extreme than in the rest of the UK. However, Belfast has developed a thriving market service sector, and it is sector (and particularly Financial & Business Services) that will drive the recovery in the city, offsetting the negative impact of dependence of public spending.

However, across the border in the Republic of Ireland the situation is far more challenging. The harsh austerity measures bought in by the Irish government are expected to result in output in Non-Market Services falling over the period to 2014, and in Dublin the primary source of growth is expected to be the Financial & Business Services sector. The city has suffered in part due to the national debt crisis; however before the scale of this became apparent the city had already seen output fall sharply through 2008 and 2009. The city had a disproportionately large financial sector, which experienced a downturn due to the financial crisis, and the manufacturing based in the city has struggled in the face of the global recession.

In contrast to this, London is expected to recover strongly over the period 2010-14 in terms of output. The Financial & Business Services sector was badly hit by the banking crisis, but London's importance as a centre for economic activity not just within the UK but within the global economy has seen demand stand up relatively well through the recession. Cuts in central goverment budgets will have an impact upon growth prospects, but much of the infrastructure investment that had been committed to before the recession was in relation to the 2012 Olympic Games, and the vast majority of this work is continuing. Output in the Financial & Business Services industry is already growing, as activity in the markets picks up, and this will strengthen in the medium term.

Despite the projected recovery in output in the urban centres of the UK, employment growth is expected to be subdued, as output increases are realised through productivity gains rather than substantial increases in employment. Leeds is expected to see the most rapid increase in employment, but this still averages less than ¾% pa over 2010-14 (compared to output growth of 2¼%). Belfast is expected to see employment fall through the forecast period, as large efficiency gains are seen in the public sector, leading to employment in Non-Market Services to fall by an average of ½% pa over the period. London will see a modest increase in employment in the medium term, as growth in Financial & Business Services offsets falls in public sector employment (see Chart 2: City level Employment Growth, 2010-14).

Notes for Editors

Cambridge Econometrics prepares its European regional forecast in collaboration with consultants working in a wide network of European institutes, including Cardiff Business School, CEDRES / FEP (Oporto), CEET-Tomillo (Madrid), Centre for Economic Development (Sofia, Bulgaria), CERB (Brussels), COWI (Lyngby, Denmark), COWI Magjarország (Budapest), ECORYS-NEI (Rotterdam), Ecotec (Birmingham), FEEM (Turin), Ifo (Dresden and Munich), Infras (Zürich), Institute of Rural Economics (Bucharest), IRPET (Florence), Russian Academy of Sciences (Moscow), SEGESA (Paris), Technological University of Slovakia (Bratislava), University College Dublin, University of Barcelona, University of Bergen, University of Duisburg (Essen), University of Economics (Prague), University of Latvia (Riga), University of Tarto (Estonia), University of Gdansk (Poland), University of Vilnius (Lithuania), Urban Research (Helsinki), Wifo (Vienna), WSP Analysis & Strategy (Stockholm) and Edam (Istanbul). Cambridge Econometrics has coordinated the production of the report ‘European Regional Prospects’ since 1991.

The European regional area of the Knowledge Base covers general macro-economic, regional and urban trends, and 73 city-regions across Europe (including Moscow, St Petersburg and Istanbul).

Price €3,135 (£2,725); also available as part of a European regional forecasting subscription service.

Individual city access is available for €575 (£500).

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For further information contact:
Jonathan Stenning
Manager, European Regional Service
Tel: 01223 533100