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Economy / Jobs

The Covid-19 pandemic has complicated the UK’s north-south divide

An analysis of economic data shows unemployment rose first in northern cities, then surged in better-off southern ones. There’s no one-size-fits-all explanation why some have suffered more than others.

people stroll down a commercial road
Data shows that the UK’s larger cities have been particularly affected by the slow recovery in foot traffic in commercial districts. (Photo by Ben Stansall/AFP via Getty Images)

The Covid-19 pandemic has had a huge impact on labour markets around the world – and the UK is no exception. At 4.8%, the national unemployment rate is the highest it’s been in three years, and most economists expect it to continue to rise for the rest of 2020.

The jobs crisis has, however, played out differently across the country. The pandemic has exacerbated existing geographical vulnerabilities and created new ones as some previously strong cities have been hit by the highest rises in joblessness.

Analysis shows there’s no one-size-fits-all explanation why certain cities have suffered more than others. We looked at economic, geographic and socioeconomic variables for 58 of the largest cities in England, Scotland and Wales for which comparable data was available to reveal some of the factors driving the crisis at the local level.

Throughout the analysis, we used the UK Office of National Statistics’ (ONS) monthly claimant count rate – the percentage of working-age people claiming a benefit related to being unemployed – as a proxy for unemployment, since this is the only measure available regularly at the local level. Except for London, where we used regional or metropolitan-county-level data, local-authority data is used as a proxy for the cities.

North-south divide

For many years, there has been a split between the less prosperous north of the country and the more prosperous south, with lower rates of unemployment and most of the country’s better-paid jobs in the latter region.

Prior to the pandemic, for the one-year period up to March 2020, almost all the cities in our analysis with the highest average claimant count rate were outside the south of England. The north-west seaside resort of Blackpool and the Midlands hub of Birmingham had the highest percentage of people claiming unemployment-related benefits.

This has, to a large degree, persisted into 2020. The Covid-19 pandemic has hit northern cities with weaker economies such as Blackpool and Hull hard. Such cities are central to the government’s “levelling up” agenda, which seeks to narrow regional disparities between the north and Midlands and the generally better-off south. In October 2020 (the latest available data), more than one in ten working-age people in Blackpool (11%) were claiming benefits for unemployment – up from 7% in February 2020. In Hull, almost one in ten were receiving support (9%).

But as analysis from the urban-focused think tank Centre for Cities has shown, after initially climbing in the northern cities from March to April, unemployment has since risen sharply in some cities in the south. Of the 20 cities where the pandemic has sparked the biggest percentage-point rise in people claiming unemployment benefits, half are in the south of the country. At the top of the list are the south-eastern towns of Slough, Luton and Crawley, where the number of claimants has almost tripled.

“Before the pandemic, there was a very clear north-south divide,” says Elena Magrini, a senior analyst at the Centre for Cities. “What we can see now is that the picture is a bit more complicated. While the overall general pattern still stands, alongside the places that were struggling are a handful of places in the south-east.”

Income

When it comes to income levels of cities affected by unemployment, the pandemic has also propelled some wealthier cities up the rankings partly linked to geography, as incomes are generally higher in southern cities. Analysis of the average claimant count rate for March to October shows that while there is still more joblessness in cities where earnings are lower, ones with greater prosperity have seen big spikes in unemployment. Overall, there has been a slight “levelling down”, with unemployment rising a touch more in places with higher average incomes.

From March to October 2020, Blackpool had the highest claimant count rate: the median annual gross pay was £19,486 ($26,063) well below the UK level of £24,937. The biggest jump in unemployment, however, was in Slough, where the median pay of £28,086 put it in the top third of the country for wages. London which, despite huge variations between boroughs, had one of the highest median income levels in the country saw the fourth-highest rise in claimant count rate.

The fact that northern cities saw unemployment rise first but other areas have now caught up, and in some cases seen higher rates, partly reflects the ability of some cities to weather lockdowns better than others.

Cities with stronger economies were able to shield themselves from the worst effects, says Magrini – but only to a point.

“In the first month between March, which is the last month pre-pandemic, and April, what we see is a big spike in claims, mostly in cities with weaker economies in the north of England and the Midlands,” she says. “Then, after that, it increasingly seems its cities in the south.”

A similar pattern is evidenced by the number of workers who are on the government-funded furlough scheme, which pays most of the wages of employees who have been placed on leave. The latest statistics for the end of August show that in places like London and Crawley, the government is paying the wages for twice the proportion of workers than in traditionally weaker city economies like Middlesbrough and Doncaster. 

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When it comes to explaining precisely why certain cities have been hit hard, the picture is more complicated. Few sectors have been spared from the collapse in demand, and some of the hardest-hit sectors, such as hospitality and retail, are big employers in most of the UK’s cities.

Instead, factors such as whether footfall tends to return to the city centre once lockdowns are over, as well as how much of the economy depends on certain highly vulnerable sectors, additionally come into play.

Also important is the extent to which local employers have taken up the furlough scheme and how much of a city’s workforce is employed in precarious or low-paid work, for which data at the city level is not available.

Looking at where unemployment has risen most, it is clear that groups of these cities share commonalities that make them vulnerable in similar ways.

“Aviation towns” hit hard

One industry that has undoubtedly been hit hard is aviation. The 14-day quarantine on travellers returning to the UK from abroad and the drop-off in travel as a result of the pandemic have resulted in the loss of some 34,000 jobs in aviation in the UK. The economies of the three towns that have seen the sharpest rise in unemployment – Slough, Luton and Crawley – depend heavily on airports and international travel.

The latest furlough data shows that at the end of August, Crawley and Slough were among the five cities with the biggest share of their workforce being supported by the scheme.

Worst hit was the Berkshire town of Slough, where the claimant count rate rose 5.3 percentage points from March to October. Although official government statistics measuring the percentage of jobs in an industry within a city show that a small number of Slough’s jobs are in aviation, more than a quarter of the city’s working-age population is employed in aviation or aviation-related jobs at nearby Heathrow Airport.

Conversely, proximity to the airport was one of the factors that lent places such as Slough a competitive edge prior to the pandemic: the town was the UK’s most productive urban area in terms of roughly how much economic activity every worker in the city produced.

The International Air Transport Association, the global body for air travel, recently downgraded its forecast for 2020, expecting traffic to be down 66% compared with 2019.

The prospects for recovery in the aviation sector remain particularly bleak. This, Magrini says, could permanently damage the economy of towns such as Slough.

“Crawley, Luton and Slough are probably the three worst-affected places in the country at the moment,” she says. “If international travel doesn’t pick up, it will have long-lasting effects on their economies.”

Tourist towns hit hard

The virtual shutdown of travel has also hit tourist spots.

An analysis by the Labour party in July showed greater increases in the number of people claiming unemployment benefits in areas heavily reliant on national and international tourism. Although worst hit were smaller locales, such as towns on the Cornish coast, larger cities have not been spared.

“Coastal towns had been quite hard hit, both because of a large presence in tourism and hospitality,” says Anna Round, a senior research fellow at the Institute for Public Policy Research, a think tank.

Since March, Blackpool has seen the ninth-highest rise in unemployment of the cities in our list; Brighton has seen the 13th-biggest. In both places, more than 15% of the workforce is employed in sectors linked to tourism, such as accommodation, food and drink, and vehicle hire.

And of the 20 worst-hit places, half had higher-than-average workforces in tourism.

Slow to return to city centres in large towns

Another factor that correlates with the size of Covid-era unemployment rises seen in our cities is whether people have been slow to return to city centres.

In September, the Centre for Retail Research estimated that nearly 125,000 UK retail jobs were lost in 2020 between January and August, while the industry trade body Hospitality UK in November said the hospitality industry had laid off 660,000 people.

While the crisis facing local services such as shops, restaurants and cafes is national in scope, the cities where footfall has been particularly slow to recover are the most vulnerable.

Data shows that larger cities have been particularly affected by the slow recovery in footfall. London is one place where the lack of city centre footfall has helped propel its unemployment rate upwards, says Magrini. The capital’s city centre foot traffic is just half the average of the cities included in this analysis.

The slow speed at which people have returned to the city centre is linked to the greater ability of people in places like London and other big cities to work from home, since more people are employed in higher-skilled occupations that can be done from a computer.

Data from 2018 shows that 41% of the city’s population could work from home – compared with places like Barnsley and Wakefield at the other end of the spectrum, where less than 20% of people could remote-work. More recently, a survey from the ONS showed that 57% of London’s workforce operated from home in April 2020, compared with a UK average of 47%.

It is the very fact that London has so many high-skilled professional jobs – which can be done from home – that puts the city’s lower-skilled service-sector jobs uniquely at risk.

“In London, it’s mostly about the city centre,” says Magrini. “A lot of people are working from home, and these people are not going to the city centre. At the same time, there’s fewer tourists going to the city centre, and a lot of the shops, cafes and restaurants that would normally be buzzing are not at the moment. That’s reflected in the claimant count figures.”

Hospitality is a huge part of the modern UK economy. In particular, some of the cities where footfall has been slowest to recover and unemployment has risen most sharply have sizeable hospitality sectors. In Manchester, which has one of the most diversified economies in the UK, hospitality is the biggest workforce sector in terms of employment (10.9%). In Birmingham, hospitality accounts for  10.1% of jobs – again, more than any other sector. Both cities, however, also have large workforces that can operate from home. (Manchester, for instance, has a large technology and business service sector). As in London, so with Britain’s other biggest cities: the ability to work from home has simultaneously protected some jobs while disproportionately affecting others.

What does this mean for recovery?

In terms of how some of the changed geographical patterns of unemployment will play out post-Covid-19, as well as the hit to local service jobs, there are two key considerations: the importance of the lost work to a city’s export economy and how financially strong or weak that city was before the pandemic.

The first of those can be easily overlooked. Yet analysis by the Centre for Cities suggests that recovery prospects aren’t just about how many jobs in vulnerable industries have been affected but how many of these jobs are linked to a city’s regional, national and international exporting base. Those, after all, are the jobs that bring money into a locale.

“If these jobs in a city are affected, this means flow of money into this economy has been affected, and once restrictions are lifted, people will have less money in their pocket,” Magrini says. “Whereas if these jobs are protected and the only jobs affected during lockdowns are jobs in local services required to shut, as soon as the economy reopens, there is still money going around, as people in exporting industries have not lost their jobs, so people will spend money once the restrictions are lifted.”

This is why Magrini believes cities such as Reading, Cambridge, Oxford and Exeter will probably emerge relatively unscathed.

“These places had fewer jobs taken up in the furlough scheme, and fewer of these jobs we think are exporting jobs,” she says. “We would expect them to go back to normal more quickly than other places.”

According to Round, pre-existing geographical vulnerabilities will also affect how cities recover. Cities in the north-east, for instance, are likely to face a long-term fallout from increased job losses.

“We’re concerned about how long-term trends have allowed places to build resilience,” she says. “In areas with long-term challenges such as high rates of unemployment or high rates of low-paid or precarious work, recovery will be more problematic.”

Round says that while Covid-19 has created new pockets of vulnerability, it has also complicated regional inequalities.

She and Magrini agree that the pandemic makes the government’s levelling-up agenda more important than ever.

“Covid has made levelling up even more important,” says Magrini. “There are some places now in south-east England that are struggling, but this shouldn’t shadow interventions for places in the north of England, as the last thing we want is a situation where we are levelling down.”

Aisha Majid is a data journalist at New Statesman Media Group.

Aisha Majid

Aisha Majid is a data reporter at New Statesman Media Group, where she splits her time between City Monitor and Press Gazette.