Unemployment and the Credit Crunch The impacts of local economic fluctuations often take several years to be felt across the wider global economy. While the subprime crisis in the American housing market was first acknowledged as early as 2004, it is only now that we are seeing the effects on a global scale. Four years on and with the world s economic cycle heading into recession, the UK economy is bracing itself for a major economic slowdown. Inflation in September 2008 was at 5.2 per cent - the Government s target is 2 per cent - house prices have fallen at their fastest rate since 2002, mortgage lending levels are at their lowest in nearly four years, and the FTSE 100 index has crept below levels registered in 1997. Not surprisingly, unemployment is rising. The credit crunch has lead to plummeting levels of business investment. Complementing this, consumer confidence is falling, affecting demand across all sectors. Industry is now seeking to cut costs, with the inevitable effect of reduced working hours and wide scale job losses. The European Union s Lisbon Strategy outlines an objective for Europe to become, by 2010, the most competitive and the most dynamic knowledge-based economy in the world. In order to achieve this every member nation is set the objective of maintaining an employment rate of above 70 per cent Currently, the UK has 29.41 million people in employment, representing a rate of employment % Change (Oct 07 Oct 08) Rank Unemployment rate Top 10: 1 Crawley 100.00 2 Mid Sussex 83.33 3 Fareham 71.43 4 East Staffordshire 69.23 5 Adur 66.67 6 East Dorset 66.67 7 Purbeck 66.67 8 Tandridge 66.67 9 Poole 66.67 10 South Derbyshire 66.67 % Change (Oct 07 Oct 08) Rank Unemployment rate Bottom 10: 397 Camden 0.00 398 Ceredigion 0.00 399 Hackney 0.00 409 Lambeth -2.56 401 Boston -4.00 402 Western Isles -4.55 403 Brent -5.56 404 Southwark -5.56 405 Cambridge -7.14 406 Slough -8.70 Source: Local Knowledge of 74.4 per cent. This is 4.4 per cent (or 1.74 million people) above the Lisbon Strategy target. Based on current rates of unemployment, the UK would need to see unemployment rise to around 3.6 million in order to contravene the Lisbon Strategy target. Until recently this level of unemployment seemed inconceivable, however this picture is changing at an alarming rate. Out of work individuals in the UK currently total 1.825 million, giving an unemployment rate of 5.8 per cent. This is the highest rate for eight years. Furthermore, the quarterly rise in unemployment, from July to September, of 140,000, was the largest quarterly increase in the UK since the early 1
1990 s the last time the UK suffered from a recession. There are widespread expectations that unemployment will continue to rise, and will break the 2 million mark by Christmas, with further predictions that unemployment will reach 3 million by early 2010. Alongside the unemployment figures we have seen an increase in claimant count figures, with an additional 36,500 individuals claiming unemployment benefits over the last month and 154,800 over the last year; and falling vacancy levels, with job vacancies down 53,000 over the last month and 128,000 over the last year. The largest falls in employment thus far have been seen in distribution, hotels and restaurants and finance and business services. Also badly impacted in terms of increased redundancies and reduced vacancies has been the construction industry. If we analyse the geography of unemployment change in Great Britain obvious trends can be seen. The map opposite shows how changes in levels of unemployment vary between districts. The map shows that the majority of districts with the highest increases in unemployment rates the darker the colour the greater the increase in unemployment over the last 12 months are to be found in the south of England. Areas of Northern England, Wales, and Scotland also feature areas experiencing increases; however, the south of England has by far the highest proportion of districts experiencing large increases. Looking more closely at the south of England, it appears that a cluster of counties, Hampshire, Dorset, Wiltshire, Surrey and West Sussex have been affected most prominently. Indeed, of the 43 districts displaying the highest rate of change nationally, half are to be found within the borders of these five counties. Staffordshire is the only county outside of this cluster to feature a notable presence in this list. On the face of it this finding may appear somewhat surprising. Much of the attention on job losses in the national media has been on redundancies in the City of London, and amongst businesses 2
based within other major conurbations such as Birmingham and Manchester. Given these job losses we may therefore have expected to see high rates of change in the unemployment rate within London and the UK s core cities. However such a trend is not yet apparent with, for example, most of the London s boroughs failing to register significant shifts. Indeed, five London boroughs feature amongst the best ten performers, with the unemployment rate actually falling in Lambeth, Brent and Southwark. This is because redundancies by workplace do not necessarily impact upon the local resident workforce. Because of the high levels of in-commuting into London and other major cities, it is the suburban districts (with high net outflows of workers) that suffer most. Another feature of the current economic downturn is its impact on consumer confidence. This itself is having a significant effect on unemployment locally. The fall in demand for new housing and commercial floorspace has affected the construction sector. The slow down in economic activity has troubled the transport and distribution sectors. This lack of consumer confidence has also seen reduced expenditure on entertainment, affecting the hotel, leisure and restaurant sectors. Therefore any district relying on high levels of local spending and consumption will be at risk. Looking at the worst affected districts, they all appear to have an above average proportion of workers employed in those sectors most affected by the recession - whether these workers are employed locally or elsewhere. It is clear the economic slowdown is affecting different places in different ways. As the recession deepens, it will be important for regional and local agencies to assess their exposure, both to job losses within local businesses and increased unemployment within the local workforce. It will also be important for Government s national response to be targeted at those areas that are most at risk. 3
Case Study: Fareham vs. Cambridge With an increase of 71.4 per cent Fareham, in Hampshire, has experienced the 3 rd highest increase in unemployment rates over the last year. Using the spider charts to the right we are able to look more closely at Fareham. When the national average is represented by the 50 th percentile line, we see that the district has an above average proportion of its resident workforce employed in banking, real estate and construction. Interestingly Fareham also has very high numbers of individuals working outside the district. This would suggest that the unemployment figures for Fareham do not necessarily reflect job losses within Fareham itself, but job losses in neighbouring Southampton, Portsmouth and Gosport. Cambridge, on the other hand, ranks as one of the best performing districts in the country, in terms of unemployment change, with unemployment actually falling over the previous 12 months by 7.14 per cent. Levels of employment in construction, transport, and banking are well below the national average. Cambridge does, however, have a high proportion of residents working in the hotel industry, suggesting that, with falling unemployment across the district, tourism in the locality has not yet suffered, despite the current economic climate. The district also has a large inflow of workers, with few residents working outside the district itself. It would appear so far that the economy within Cambridge is proving sufficiently diverse to stand up to the effects of the economic downturn. 4
Case study: Crawley Crawley ranks as the district with the highest growth in unemployment in the UK over the last 12 months. Since October 2007 the unemployment rate in Crawley has doubled from 1.25 per cent to 2.5 per cent. This increase in unemployment over the last 12 months is almost four times higher than the national average of 27.78 per cent. The previously low unemployment rate in Crawley now sits above the national average of 2.24 per cent. Looking at the spider diagram we are able to get a better understanding of how this change has come about. As a district Crawley has levels of employment in banking, real estate, transport and hotels well above the national average. These are all sectors of the economy that have been hit particularly hard by the economic downturn. Crawley also has a very high proportion of workers employed in large businesses, with XL Airways, Zoom, and First Choice for example, making large scale redundancies of late. Crawley also appears to suffer from high levels of business closure. The map on the right shows the percentage change in the unemployment rate over the last 12 months, benchmarked at a ward level. It is clear from this map that communities across the entire district of Crawley have been affected. Dealing with the effects of rising unemployment will place considerable pressures on local authorities and local services providers. 5
Unemployment Barometer Annex Change in Unemployment Rate: October 2007 October 2008 District Change (%) Nat. Rank Aberdeen City 9.09 363 Aberdeenshire 14.29 332 Adur 66.67 5 Allerdale 22.22 248 Alnwick 16.67 303 Amber Valley 46.67 48 Angus 10.00 358 Argyll and Bute 15.79 318 Arun 53.85 29 Ashfield 31.58 139 Ashford 36.36 107 Aylesbury Vale 37.50 95 Babergh 25.00 202 Barking and Dagenham 15.15 326 Barnet 10.53 355 Barnsley 43.48 58 Barrow-in-Furness 4.17 383 Basildon 35.29 115 Basingstoke and Deane 55.56 23 Bassetlaw 31.25 142 Bath and North East Somerset 33.33 127 Bedford 19.05 288 Berwick-upon-Tweed 36.36 108 Bexley 23.53 229 Birmingham 5.56 379 Blaby 50.00 32 Blackburn 23.08 233 Blackpool 17.24 302 Blaenau Gwent 25.58 201 Blyth Valley 29.63 161 Bolsover 27.27 186 Bolton 26.92 192 Boston -4.00 400 Bournemouth 40.00 76 Bracknell Forest 37.50 96 Bradford 17.86 298 Braintree 28.57 167 Breckland 18.75 290 Brent -5.56 402 Brentwood 37.50 97 Bridgend 27.27 187 Bridgnorth 7.69 369 Brighton and Hove 20.00 271 Bristol 22.22 249 Broadland 33.33 128 Bromley 11.76 347 Bromsgrove 23.53 230 Broxbourne 20.00 272 Broxtowe 33.33 129 Burnley 25.00 203 Bury 31.58 140 Caerphilly 34.62 119 Calderdale 37.50 98 Cambridge -7.14 404 Camden 0.00 390 Cannock Chase 61.11 12 Canterbury 25.00 204 Caradon 45.45 49 Cardiff 33.33 137 Carlisle 31.25 143 Carmarthenshire 21.05 268 Carrick 28.57 168 Castle Morpeth 16.67 304 Castle Point 50.00 33 Ceredigion 0.00 391 Charnwood 23.08 234 Chelmsford 25.00 205 Cheltenham 27.78 182 Cherwell 30.00 154 Chester 20.00 273 Chesterfield 11.54 350 Chester-le-Street 38.89 84 Chichester 36.36 109 Chiltern 25.00 206 Chorley 42.86 59 Christchurch 55.56 24 Clackmannanshire 34.78 118 Colchester 35.71 111 Congleton 45.45 50 Conwy 28.57 178 Copeland 8.70 366 Corby 36.36 110 Cotswold 42.86 60 Coventry 5.88 377 Craven 50.00 34 Crawley 100.00 1 Crewe and Nantwich 15.79 319 Croydon 13.04 340 6
Dacorum 35.71 112 Darlington 21.43 261 Dartford 12.50 342 Daventry 16.67 307 Denbighshire 22.73 242 Derby City 24.00 223 Derbyshire Dales 22.22 250 Derwentside 38.10 93 Doncaster 29.63 162 Dover 15.00 327 Dudley 16.67 308 Dumfries and Galloway 18.18 294 Dundee City 10.81 353 Durham 58.33 15 Ealing 8.00 367 Easington 47.83 44 East Ayrshire 19.35 287 East Cambridgeshire 44.44 54 East Devon 22.22 251 East Dorset 66.67 5 East Dunbartonshire 38.46 89 East Hampshire 57.14 18 East Hertfordshire 37.50 99 East Lindsey 4.55 382 East Lothian 45.45 51 East Northamptonshire 28.57 169 East Renfrewshire 30.00 155 East Riding of Yorkshire 31.25 144 East Staffordshire 69.23 4 Eastbourne 21.74 259 Eastleigh 50.00 35 Eden 16.67 309 Edinburgh, City of 18.75 291 Ellesmere Port and Neston 25.00 207 Elmbridge 33.33 120 Enfield 3.23 387 Epping Forest 35.71 113 Epsom and Ewell 42.86 61 Erewash 40.00 77 Exeter 54.55 28 Falkirk 35.00 116 Fareham 71.43 3 Fenland 26.32 196 Fife 24.00 224 Flintshire 31.25 145 Forest Heath 55.56 25 Forest of Dean 42.86 62 Fylde 10.00 359 Gateshead 21.43 262 Gedling 29.41 163 Glasgow City 17.65 299 Gloucester 36.84 106 Gosport 58.33 16 Gravesham 4.17 384 Great Yarmouth 16.67 305 Greenwich 12.50 343 Guildford 25.00 208 Gwynedd 15.00 328 Hackney 0.00 392 Halton 24.14 219 Hambleton 18.18 295 Hammersmith and Fulham 7.41 371 Harborough 37.50 100 Haringey 0.00 393 Harlow 14.29 333 Harrogate 30.00 156 Harrow 5.56 380 Hart 33.33 121 Hartlepool 22.50 247 Hastings 21.88 258 Havant 27.78 183 Havering 31.25 146 Herefordshire, County of 30.77 149 Hertsmere 15.38 322 High Peak 33.33 130 Highland 20.00 274 Hillingdon 11.11 352 Hinckley and Bosworth 23.08 235 Horsham 50.00 36 Hounslow 10.53 356 Huntingdonshire 40.00 78 Hyndburn 38.89 85 Inverclyde 18.18 293 Ipswich 21.43 263 Isle of Anglesey 7.41 372 Isle of Wight 10.00 360 Islington 2.78 388 Kennet 57.14 19 Kensington and Chelsea 5.88 378 Kerrier 41.67 72 Kettering 47.06 46 King's Lynn and West Norfolk 23.53 231 Kingston upon Hull 26.67 194 Kingston-upon-Thames 20.00 275 Kirklees 31.82 138 Knowsley 17.50 301 Lambeth -2.56 399 Lancaster 25.00 209 7
Leeds 25.00 210 Leicester City 12.82 341 Lewes 38.46 90 Lewisham 6.06 376 Lichfield 63.64 11 Lincoln 20.69 270 Liverpool 11.76 346 London city 0.00 394 Luton 14.29 334 Macclesfield 50.00 37 Maidstone 27.27 188 Maldon 15.38 323 Malvern Hills 18.18 296 Manchester 14.71 330 Mansfield 30.00 157 Medway Towns 18.18 297 Melton 20.00 276 Mendip 66.67 8 Merthyr Tydfil 29.41 164 Merton 6.25 374 Mid Bedfordshire 33.33 131 Mid Devon 40.00 79 Mid Suffolk 20.00 277 Mid Sussex 83.33 2 Middlesbrough 20.00 278 Midlothian 26.67 195 Milton Keynes 38.89 86 Mole Valley 33.33 122 Monmouthshire 33.33 123 Moray 0.00 395 Neath Port Talbot 26.09 198 New Forest 50.00 38 Newark and Sherwood 23.08 236 Newcastle-under-Lyme 37.50 101 Newcastle-upon-Tyne 16.13 317 Newham 7.14 373 Newport 23.08 237 North Ayrshire 16.67 306 North Cornwall 27.27 189 North Devon 45.45 52 North Dorset 14.29 335 North East Derbyshire 31.25 147 North East Lincolnshire 11.76 348 North Hertfordshire 25.00 211 North Kesteven 7.69 370 North Lanarkshire 30.43 152 North Lincolnshire 26.09 199 North Norfolk 11.76 349 North Shropshire 20.00 279 North Somerset 55.56 26 North Tyneside 25.93 200 North Warwickshire 57.14 20 North West Leicestershire 23.08 238 North Wiltshire 55.56 27 Northampton 22.73 243 Norwich 18.52 292 Nottingham 10.81 354 Nuneaton and Bedworth 24.00 225 Oadby and Wigston 20.00 280 Oldham 21.43 264 Oswestry 29.41 165 Oxford 25.00 212 Pembrokeshire 21.43 265 Pendle 41.18 74 Penwith 17.65 300 Perthshire and Kinross 16.67 310 Peterborough 3.57 385 Plymouth 30.00 158 Poole 66.67 9 Portsmouth 20.00 281 Powys 28.57 170 Preston 16.67 311 Purbeck 66.67 6 Reading 10.53 357 Redbridge 16.67 312 Redcar and Cleveland 22.86 241 Redditch 30.00 159 Reigate and Banstead 37.50 102 Renfrewshire 22.73 244 Restormel 42.86 63 Rhondda, Cynon, Taff 47.62 45 Ribble Valley 28.57 171 Richmondshire 33.33 132 Richmond-upon-Thames 10.00 361 Rochdale 25.00 213 Rochford 44.44 55 Rossendale 53.33 30 Rother 25.00 214 Rotherham 33.33 124 Rugby 27.78 184 Runnymede 14.29 336 Rushcliffe 44.44 56 Rushmoor 45.45 53 Rutland 14.29 337 Ryedale 20.00 282 Salford 26.92 193 Salisbury 42.86 64 Sandwell 13.95 339 Scarborough 12.00 344 Scottish Borders 33.33 125 8
Sedgefield 50.00 39 Sedgemoor 30.77 150 Sefton 20.00 283 Selby 38.46 91 Sevenoaks 42.86 65 Sheffield 20.83 269 Shepway 12.00 345 Shetland Islands 57.14 21 Shrewsbury and Atcham 30.77 151 Slough -8.70 405 Solihull 19.05 289 South Ayrshire 16.67 313 South Bedfordshire 35.71 114 South Buckinghamshire 28.57 172 South Cambridgeshire 25.00 215 South Derbyshire 66.67 10 South Gloucestershire 37.50 103 South Hams 33.33 133 South Holland 5.00 381 South Kesteven 33.33 134 South Lakeland 16.67 314 South Lanarkshire 38.89 87 South Norfolk 27.27 190 South Northamptonshire 42.86 66 South Oxfordshire 28.57 173 South Ribble 41.67 73 South Shropshire 16.67 315 South Somerset 22.22 252 South Staffordshire 42.86 67 South Tyneside 23.08 239 Southampton 26.32 197 Southend-on-Sea 28.00 181 Southwark -5.56 403 Spelthorne 9.09 364 St Albans 22.22 253 St Edmundsbury 21.43 266 St Helens 28.57 174 Stafford 50.00 40 Staffordshire Moorlands 40.00 80 Stevenage 10.00 362 Stirling 40.00 81 Stockport 37.50 104 Stockton on Tees 24.14 220 Stoke on Trent 24.14 221 Stratford-on-Avon 9.09 365 Stroud 27.27 191 Suffolk Coastal 44.44 57 Sunderland 22.58 246 Surrey Heath 42.86 68 Sutton 21.43 267 Swale 15.00 329 Swansea 23.81 226 Swindon 53.33 31 Tameside 30.43 153 Tamworth 38.89 88 Tandridge 66.67 7 Taunton Deane 40.00 82 Teesdale 58.33 17 Teignbridge 30.00 160 Telford and Wrekin 28.57 179 Tendring 11.54 351 Test Valley 42.86 69 Tewkesbury 25.00 216 Thanet 24.14 222 Three Rivers 20.00 284 Thurrock 23.81 227 Tonbridge and Malling 22.22 254 Torbay 38.10 94 Torfaen 29.17 166 Torridge 23.53 232 Tower Hamlets 1.92 389 Trafford 31.25 148 Tunbridge Wells 22.22 255 Tynedale 15.38 324 Uttlesford 28.57 175 Vale of Glamorgan 50.00 41 Vale of White Horse 60.00 13 Vale Royal 27.78 185 Wakefield 35.00 117 Walsall 15.79 320 Waltham Forest 7.89 368 Wandsworth 0.00 396 Wansbeck 21.62 260 Warrington 47.06 47 Warwick 20.00 285 Watford 6.25 375 Waveney 3.45 386 Waverley 50.00 42 Wealden 57.14 22 Wear Valley 40.74 75 Wellingborough 23.81 228 Welwyn Hatfield 15.38 325 West Berkshire 37.50 105 West Devon 22.22 256 West Dorset 28.57 176 West Dunbartonshire 28.13 180 9
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