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Hannah Brown: Has Darling done enough to save our regional revival?
THIS week, the Government set out the measures that they believe are necessary to help businesses, people and cities ride out the deepening recession.
What do they mean for the cities and towns that have driven Yorkshire's growth over the last 10 years, and are they enough?
Yorkshire's cities have seen a resurgence over the last decade – creating jobs and prosperity for their residents. Leeds is now England's second financial services centre, and York – England's founding Science City – has carved a niche around its university's strength in science.
But the recession is hitting the sources of success in our cities. Across the country, a once booming financial services industry faces a period of insecurity and restructuring.
This will bite in Yorkshire cities – York has already seen 500 jobs go at Norwich Union, while Aviva Insurance, in Sheffield, laid off 300 workers, and the merger between HBOS and Lloyds TSB will doubtless reverberate in Leeds, where up to 2,000 jobs are at risk.
Now that the credit crunch has turned into a full-blown recession, other sectors, such as construction and manufacturing, are bearing the brunt – 718 jobs in the caravan industry have been lost in East Yorkshire, Sheffield Homes has announced 200 redundancies, and another 220 jobs went at the Optare bus manufacturer, in Rotherham.
Which measures in this week's Budget will help Yorkshire's cities, and have they gone far enough?
Recession and redundancy go hand in hand. Unemployment in Yorkshire and the Humber rose by 21,000 between July and September – a bigger increase than all other UK regions. Announcements by the Government that the region also has 33,544 vacancies smacks of complacency when, in Leeds, nearly 15,000 people were claiming Job Seekers Allowance (JSA) in October – up nearly 3,000 from a year earlier.
And with the full force of the recession yet to be felt in key industries like financial services, construction and retail, unemployment will rise further in 2009.
The Chancellor, Alastair Darling, announced an extra 1.3bn to help get people made redundant back into work. These fire-fighting measures are welcome – but 4,000 of those claiming JSA in Leeds have been doing so for more than six months, and the Government needs to ensure that attention is not taken away from those facing extra hurdles in finding work.
News of businesses going under is another stark reminder of recession. Yorkshire and the Humber has a strong entrepreneurial spirit, with nearly 350,000 small and medium-sized businesses in the region, providing dynamism and employment to local economies. But even healthy businesses are being hit by the shock to the global economy, as access to vital credit lines has been withdrawn and their markets start to slump.
The majority of businesses in Leeds have a turnover of less than 1m and employ fewer than 25 people. Firms of this size are the cornerstone of the economy but don't have the reserves needed to ride out this period of uncertainty. The Chancellor has responded by opening 1bn of Government credit – and access to 4 billion of European credit – and by offering flexibility over tax payments.
He's also tried to get the customers of these businesses to spend – by cutting VAT by 2.5 per cent in the key period in the run-up to Christmas – although given uncertain job prospects and the news of looming hikes in National Insurance, they may choose to save rather than splurge.
Yorkshire's construction industry has been hit hard by the recession. Projects like the 230m redevelopment of the former Yorkshire Chemicals site in Leeds, or an 810,000 project to build flats and shops in Doncaster, are being delayed or shelved.
As well as employing up to six per cent of the workforce in
cities like Leeds and York, investment in the fabric of Yorkshire's urban centres is crucial to help cities to compete in the global economy. To kick-start the industry, Darling and Brown have brought forward a significant chunk – 3bn – of investment in long-term infrastructure projects such as schools, social housing and roads.
This is welcome, but only time will tell whether 800m for schools, 775m for housing and regeneration, and a further 700m for transport will be sufficient across the UK or targeted in the right places.
Transport infrastructure to relieve congestion in major cities like Leeds and improve links to London and the South-East would make a significant difference in the long-term.
So, will Darling's gamble come off?
Big cuts in interest rates have appeared impotent in the face of dire economic conditions – measures to support businesses, consumers and homeowners were certainly needed in our largest cities and city regions.
The Chancellor's package of reforms is designed to keep businesses afloat, to get consumers to spend, and to support people struggling to repay mortgages. But uncertain economic prospects mean that this costly package is still a gamble – and questions will remain over whether he has done enough, and what happens when the people of Leeds, Bradford and Doncaster have to start paying for this year's early Christmas bonus.
Hannah Brown is research manager for the Centre for Cities think-tank.
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Saturday 26 May 2012
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