Is the North-South divide really getting bigger?

Regional Affairs Reporter Rachel Wearmouth examines what the Centre for Cities' Outlook report means for the North East

Sunderland Central MP Julie Elliott
Sunderland Central MP Julie Elliott

Fresh headlines bemoaning a widening North-South growth divide this week hardly come as a surprise.

The Cities Outlook report lays bare the fortunes of the best and worst-performing towns and cities of the last ten years, underlining, once again, the dispiriting trend of growth in the South at the expense of the North.

But, do the figures really show the North East dancing to the same old tune or are there signs it is changing the record?

On average, for every 12 new jobs created in cities in the South only one was created elsewhere, the Centre for Cities says.

So, it is true that as the business base in places like London and Coventry is swelling, that is driving a migration of young and skilled workers from other parts of the country.

Yet, despite some figures having an all-too-familiar feel, there are many reasons to be cheerful if you live in the North East.

Unlike Blackpool, Wigan and Rochdale - which sit firmly in the bottom end of the table - Newcastle is a stand-out success story.

There were 29,300 jobs created there (and 8% rise), 3,280 business started (up 21%) and the population rose by 34,800 (4% more), as Tynesiders forcefully buck the national trend.

Newcastle tops the table of the country’s core cities - an elite group which includes Birmingham, Manchester, Leeds and Sheffield - and it is placed 8th among all 64 cities included in the study.

Middlesbrough is also showing strong signs of recovery with 2,260 more businesses (up 28%) since 2004, though this did nothing to curb unemployment, with the town losing some 5,200 jobs.

There is some cause for concern for Sunderland as its slow growth sees it ranked 46th out of 64.

Big employers such as Nissan and Sunderland Software City helped to create 6,800 jobs - a rise of 6% - but it doesn’t follow that people are choosing to live there and the population contracted by 1.4% between 2004 and 2013 - a stark contrast to, say, Milton Keynes, where the population has risen by 16.5%.

There was strong growth of small and medium enterprises (SMEs) and knowledge intensive businesses in all three cities - a sector that includes IT, data analysis, accounting and management/legal services, all of which are key to building sustainable economic growth.

In that area, Newcastle (5th with growth of 31%) and Sunderland (6th with growth of 30.4%) are both in the top 10 cities nationally.

Looking at a shorter time frame, Newcastle is placed 7th in terms of its expansion of such industry between 2010-2013 with an impressive 27.6% increase.

And as Chancellor George Osborne sets out plans for a Northern Powerhouse - a plan to revive North economies that will focus more government funding on innovation and research - the region’s cities could see more of a boost in coming years, says Ross Lillico, associate director (economics) at Nathaniel Lichfield and Partners.

“It is anticipated that Newcastle’s economic performance can increase at an even greater pace in the coming years, as the Chancellor’s plans to create a Northern Powerhouse are implemented,” he said.

“The enhanced connectivity of the city will also be critical in unlocking its growth potential and the positive announcements made in the Autumn Statement regarding investment in the infrastructure of Newcastle and the wider North East will play an important role in this regard.

“However a number of structural issues that could act as a constraint to future growth were also identified through the Centre for Cities analysis – principally linked to a comparative lack of dynamism in the regional cities.”

Encouraging more start-ups is another challenge. Newcastle (38.9), Sunderland (32.6) and Middlesbrough (39.8) all recorded levels of business start-ups per 10,000 people that fall below the all city average of 54. 

Changing that may be difficult in a region that continues to shoulder the country’s highest unemployment rate of 9.1%.

Thousands of public sector jobs have also been stripped away and unions caution that the impact of local authority cuts has yet to be felt.

The most worrying figure raised in the report, therefore, is a fall in private sector job growth in 2012-13 - with Newcastle and Middlesbrough down 0.9% and Sunderland down -2.3%.

But Sean Ball, marketing manager for Forfusion, a Wallsend-based IT and business consultancy, said the study made for frustrating reading for him and his colleagues as there is positivity among businesses.

Forfusion doubled its turnover to £1.4m last year after winning hotly-contested contracts with HMRC, GCHQ and the prestigious Westfield shopping centre, in Shepherds Bush.

He said: “I actually recently graduated in July 2014 and had job offers from several firms, all of which offered me a lower salary and less opportunities for growth than Forfusion – so if anything the North East stole me from London.”

The Sunderland Business Improvement District as well as ambitious plans for the Vaux site in Wearside show the Cities Outlook figures may not be as grim for Sunderland as they appear.

Julie Elliott, Labour MP for Sunderland Centre, said: “The figures in this report show a tiny reduction in the population for Sunderland.

“However this doesn’t reflect the current picture or the plans already in the pipeline which will ensure a brighter future for the city.

“Last week we cut the first sod of grass on the development of a new college, there is the exciting development of the new Keel Square in the city centre and the new Wear Crossing.

“So despite the backdrop of huge central government cuts, Sunderland has a positive vision which it is driving forward.”

Paul Woolston
Paul Woolston
 

Paul Woolston, chairman of the North East LEP agreed.

“A strong measure of the strength of the North East economy is the on-going confidence shown in it by private sector investors and national Government,” he said.

“Nissan and Hitachi’s huge investment into the area is a real vote of confidence in the North East, its competitive business base and skilled workforce.

“And confidence in our future contributing more to UK plc is further bolstered by rapid growth in boom sectors like digital and tech, where the North East is recognised as one of the fastest growing locations for these firms outside London.

“The Government awarded the North East the third highest Growth Deal in the country with £290m to create 4,000 new jobs and Sunderland in particular will reap the benefits of a new advanced manufacturing park through a City Deal estimated to attract £295m worth of private sector investment.”

The Centre for Cities report is no measure of the regional economy as a whole. It does not cover County Durham - where Consett, to use just one example, has lost two major employers in recent months - or Northumberland, which suffered a devastating blow when the Alcan aluminium smelter, in Lynemouth, closed in 2012.

But, if things are not as bad as they seem, what can be done to make them even better?

Ed Cox of IPPR speech
Ed Cox of IPPR speech
 

Ed Cox, director of the influential centre-left think tank the Institute of Public Policy Research (IPPR) North, is among those intensifying calls for greater devolution away from Whitehall.

Proponents for more local control say funding and support can be wrestled from the “one size fits all” model of central government to make a real difference.

The North East Combined Authority will meet today to decide on devolved powers it will request from George Osborne. Members are set to meet with the Chancellor to make a devolution deal within weeks.

Mr Cox said: “With more devolved powers, cities have the potential to work more creatively with those places in their hinterlands to stop them falling further behind.

“Not to do so will have a drag on the whole city region. We need a decade of devolution to create prosperity in all parts of the country.

“This report shows that we cannot afford to leave behind smaller towns and cities in attempts to rebalance the economy. It reveals the troubling extent to which areas outside of big cities are falling behind their near neighbours.”

Andrew Carter, acting chief executive of the Centre for Cities, said the report challenges whichever party is to take power in May to form a strategy that tips the balance in favour of the North.

He said: “Five months out from the election, this report makes the strongest economic case yet for the next Government to step up to the challenge of investing in the long-term success of our cities, and build a brighter future in which more people and places can contribute to, and share in, prosperity and growth.

“The stark picture the report paints of the enormous gap in the fortunes of UK cities over 10 years underlines why a ‘steady as she goes’ approach must be scrapped.

“We must move from thinking that bundling up new funding streams with bureaucratic delays, or simply tinkering around the edges with well-intentioned announcements, will be enough to reverse trends that are becoming increasingly entrenched.

“Cities need long-term funding and strategic planning, and policies that go to the heart of addressing the key drivers of economic growth – including transport, planning, skills and housing.

“This report throws down the gauntlet for all parties to turn their recent interest and pledges around cities and devolution into a clear plan to grow jobs and businesses, and improve quality of life throughout the United Kingdom.”

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