Centre for Cities

Lessons for Luton: aim for resilience, not only growth

This year’s Cities Outlook revealed that while the UK economy has experienced a downturn of two halves – rapid decline from 2008-09 followed by a three year period of minimal growth – the performance of UK city economies has been more variable. Places such as Swindon and Cambridge recovered rapidly after a sharp decline early on in the downturn while others, such as Swansea or Bradford, were only hit in the later stage of the crisis.

Luton is another city which bucked the national trend. In the decade prior to the recession Luton’s economic output grew by 3.6% a year exceeding the growth rate of the national economy by 0.5  percentage points, yet the city struggled through both phases of the downturn.

Luton’s economy is dominated by the private sector which accounts for almost three quarters of jobs in the city. This helps to explain why it struggled during the first phase of the downturn when businesses were feeling the effects of the credit crunch. From 2008-09 Luton lost eight businesses for every 10,000 people which contributed to a 50% increase in the share of people claiming Job Seekers Allowance.  

During  2009-12, when the national economy was shifting between low growth and stagnation, Luton didn’t recover as strongly as some of the UK’s other cities with strong private sectors. The make-up of Luton’s business base helps explain this. Despite Luton having a high share of jobs in the private sector,  meaning it is less vulnerable to public sector cuts than many other cities, its private sector relies heavily on large employers. Luton is ranked 48^th (out of 63 cities) on the number of businesses for every 10,000 residents.

Cities Outlook 1901 showed that  reliance on a small number of large firms can limit the resilience of a city economy and Luton’s experience illustrates this

Although the flow of business closures stemmed during 2009-12 and house prices recovered, real weekly wages fell by £86. This was due in part to job losses at Vauxhall, a significant local employer. The firm pays relatively high wages and, as a result, the 350 jobs lost in 2009 had a significant impact on the city’s economy.

A significant drop in the number of passengers passing through the airport, the other major employer, also contributed to poor economic performance. Most significantly the decision of Easy Jet to reduce its presence in the airport  affected the 550 strong workforce employed by the airline in Luton.

Figure 1. The impact of the downturn on Luton

 

Source: NOMIS Annual Survey of Hours and Earnings workplace-based analysis, DCLG, Office for National Statistics Business Demography, NOMIS Claimant Count

So what does the future hold for Luton? Vauxhall recently confirmed that it will produce its new Vivaro van at its Luton plant, safeguarding 1,100 jobs for a decade. And, Easy Jet’s decision to introduce new flights along with rising passenger numbers suggests the airport is on its way to recovery.

To further support Luton’s economy there also needs to be a focus on improving residents’ skills. Luton is currently the city with the second highest share of residents  without any formal qualifications in UK. As the UK economy continues to shift towards knowledge intensive activities higher level skills will become increasingly important. Luton  Council is already working with schools to highlight the range of local career opportunities available and the qualities and qualifications needed to get these jobs.  A combination of short term interventions and a long term strategy to increase skills and qualifications will be vital if Luton is to be more resilient in the future.

Deprivation - an urban issue?

There are almost 122,200 very deprived households in England and Wales.

Yesterday, another slew of Census data was released. This included statistics on deprived households measured across four different factors: levels employment, education, and health and disability as well as quality of housing.  

To some extent the data tells us what we already knew; a disproportionate number of England and Wales’ very deprived households – those counted as deprived on all four of the factors listed above – can be found in cities.

But levels of deprivation do vary across cities. As the map below shows Hastings, Liverpool and Bradford have the highest share of people in very deprived households. But, naturally, it is England and Wales’ largest cities that house the largest number of very deprived households – London and Birmingham together account for almost one third (or 38,500 households) of all very deprived households.

At the opposite end of the spectrum in places such as York, Aldershot and Crawley only a very small proportion of households are very deprived. In York, for example, only 211 households (0.2 per cent of the total number of households in the city) are very deprived.

Figure 1: Share of households that are very deprived

Source: Contains Ordnance Survey data © Crown copyright and database right 2013, Census 2011

Urban deprivation is of course a bad thing and is, quite rightly, being tackled through initiatives such as the Work Programme and Troubled Families programme.

Yet, as Ed Glaeser reminds us, although cities house lots of poor people, they don’t make people poor. As we showed in Cities Outlook, cities cover nine per cent of landmass but house 53 per cent of businesses and 58 per cent of jobs. Because of this, helping those living in deprived households access these job opportunities is critical. And to do this policy makers should focus on things like improving skill levels and making transport to and from employment nodes more affordable.

Which of the UK’s cities are most devout?

Data from the Census released today reveals England and Wales’ most devout cities. 

Blackburn was the most religious city (see Figure 1). 86 per cent of people stated that they were religious according to the Census; 53 per cent were Christian while an additional 27 per cent were Muslim.

Northern cities on the whole tend to be more devout than those in the South. In Wigan, Liverpool Bolton Preston and Rochdale at least four out of five people were religious.

Cities in the south tend to be less devout. In Brighton, the least devout city in England and Wales, two out of five people held no religious beliefs. Similarly, in Cambridge, Hastings and Norwich relatively few people were religious. Exceptions to this include London and Luton. 

Figure 1: Proportion of residents that are not religious, 2011

Source: Contains Ordnance Survey data © Crown copyright and database right 2012, Census 2011 

Leicester was England and Wales’ most religiously diverse city. As Figure 2 below shows, although 39 per cent of people were Christian, 14 per cent were Muslim, 12 per cent Hindu and four per cent Sikh. 

Figure 2: Religious beliefs in Leicester, 2011

 

Source: Census 2011

Note: Centre for Cities defines cities according to their Primary Urban Areas, a definition of which can be found here.

Does the productivity slump mean good news for manufacturing cities?

The recent increase in employment at a time when the economy has been contracting has caused a fair bit of head scratching.  There’s certainly been no shortage of explanations put forward. But yesterday’s ONS release has confirmed the only clear answer so far is that no-one is really sure what is going on.

Labour hoarding - the tendency of companies to hold onto workers (or even employ new workers) during a downturn – is a common reason put forward to explain this trend. The reasoning goes that hiring and firing labour is expensive, and so businesses decide to keep hold of their employees instead. This may also indicate that businesses are expecting to get much busier before long, which was reflected in business confidence survey in Q2 2012.  While this is plausible when looking at national figures, when looking at individual industries some interesting divergences emerge (Fig. 1).

Figure 1. Employment and labour productivity (2009=100)

 

*Source ONS Employment productivity, ONS employment by industry

In the beginning of the recession both employment and productivity in manufacturing collapsed rapidly, while the service sector saw a much greater decline in productivity than employment. In many ways this is unsurprising. It is intuitive that the service sector should hoard labour, as its activity is on average more labour intensive than manufacturing. For a service sector business, letting go of employees may mean losing competitive edge, while competitiveness in manufacturing is much more dependent on capital and on production processes.

This national trend plays out differently in cities, however.  Cities that are traditionally more reliant on manufacturing, such as Middlesbrough and Bolton (Fig. 2), have lost jobs quicker than service-based cities such as Reading  and Milton Keynes , as Cities Outlook 2012 shows. This also tends to reinforce a north-south divide, as there are more cities reliant on manufacturing in the Midlands and the North than the South.

But now something different is happening.  For all of 2012 productivity decline and employment growth have been happening in both sectors and, most surprisingly, the effect has been much greater in manufacturing. So it looks as though manufacturing companies have also been hoarding employees.  Whilst we don’t really know why this change has taken place and how significant it will be over the longer-term, if nothing else, it provides a reason for optimism for some of the cities that have suffered the most during the current recession.

First, this is because new phenomenon may lead to some jobs being created or secured in the cities where arguably they are most needed. This may be a very short-term effect, but definitely a positive one. Second, if hoarding is actually a result of improved confidence there may be more good news for manufacturing cities in the months to come.

For those of us interested in the role of cities within the national economy next quarter’s ONS employment and productivity data will be even more exciting than usual.

Figure 2. Manufacturing and service Cities in England and Wales*

 

Source: ONS BRES 2011. Ordnance Survey.

*Manufacturing cities are defined as those with a share of manufacturing employment 10 per cent greater than the average for UK cities. Same methodology is used for defining service sector cities. Cities that didn’t fall into any of these categories are marked in blue.

From lost generation to regeneration: our Labour Conference fringe

Three knights, two mayors and a Lord joined me for Centre for Cities fringe at the Labour Party Conference on Tuesday night.

Taking place in Manchester’s Victorian town hall, our packed-out event tackled the century-old debate of the re-empowerment of local government. And, while the rest of the conference focused on what Labour should do if it regains power in 2015, our panellists focused on what they are doing to improve the success of their cities today.

Sir Richard Leese set out how he wants to improve the skills of Manchester’s population so that the recent success seen in Manchester’s city centre spreads out to the rest of the city and city region. As City Deals continue to be discussed, he will be arguing for skills commissioning powers to be devolved down to the city region level. 

Mayor Joe Anderson spoke about how becoming mayor has put him in a better position to promote and champion Liverpool both home and abroad.

Sir Robin Wales set out how Newham’s Skills Place initiative has seen great success in getting people into work in the Borough. Newham's proactive approach to working jointly with employers and jobseekers to better match jobs to jobseekers succeeded in getting 5,000 people into work last year.

Finally Lord Adonis, who is currently drawing up Labour’s industrial strategy, challenged the party to set out what metropolitan institutions it would like to see to support city growth. Following his support for the mayoral campaign, he would like to see more powers devolved to city regions to promote growth – a position the Centre has also championed for a long time.

In discussion Birmingham's leader, Sir Albert Bore, questioned whether academies, which are outside the control of local authorities, weakened a city’s ability to drive up educational attainment. There was no consensus on this point and it was interesting to see that opinion was divided on this topic across Conference.

At the end of his question and answer session at conference, Ed Miliband said that Labour policy needs to be formulated bottom up, working with local authorities. On the basis of our fringe event, there's no shortage of ideas from local government, or examples of what works on the ground and will support the local growth that the UK needs.

Where are the jobs?

New employment data released today gives us the latest picture on where jobs are located across the country. 

It shows that, if you draw a line horizontally across the country from London to Bristol, these cities and those to the south accounted for a staggering 42 percent of total city employment in 2011. London was the main contributor providing almost three quarters (or 5.0 million) of the 6.8 million employment positions housed in these 13 cities.

Unlike in the South and Midlands, there are more mid to large urban areas in the North, measured in employment terms. Manchester, Glasgow, Leeds, Liverpool and Sheffield together accounted for half of employment in cities north of Mansfield. That said, there were some smaller cities too. Blackburn, for example, had 15 times fewer employees than Manchester. 

Figure 1: Total employment, 2011 data

Contains Ordnance Survey data © Crown copyright and database right 2012. Business Register and Employment Survey.

In sum, the data provided by the Business Register and Employment Survey shows that cities in the South dominate in employment terms. Yet these jobs are housed primarily in London. In contrast, employment opportunities in the North are more evenly spread across its cities. 

City Matters - my weekly cities reading list

I hope you enjoyed some, if not all, of my reading suggestions from last week.  I received some great suggestions via Twitter and email from fellow city geeks, which are much appreciated.

This week I’ve gone for a mix of the current, the old and the classic.  I hope you enjoy these and please continue to suggest others that I should read and recommend. 

• ‘Homeownership and Entrepreneurship’ by Philippe Bracke, Christian Hilber & Olmo Silva (2012) - highly relevant analysis of how buying a house influences whether someone is likely to start their own business.
• ‘Regional Economic Resilience, Hysteresis and Recessionary Shocks’ by Ron Martin (2011) - provides substance to the widely used notion of resilience and explores how places can and do respond to economic shocks and what this means for their long-term success.  
• ‘Abundance of land, shortage of housing’ by Kristian Niemitz (2012) – critiques some of the reasons offered to explain why UK housing costs have increased over the last decade before calling for a more ‘liberal’ planning system.  
• ‘Contrasts in Agglomeration: New York and Pittsburgh’ by Benjamin Chinitz (1961) - all I can say is read this and enjoy.  10 pages of great insight into how industry dynamics affect city success.
• ‘Soft City’ by Jonathan Raban (1974) – a travel writer’s perspective on what makes cities so appealing and revolting.  Includes a great chapter on anonymity in crowds that reminds me of travelling on the tube every day.

Follow @AndrewCities on Twitter

City matters - my recommended reading list

One of the many joys of working at the Centre is having the opportunity to read and think about some of the great research that is undertaken across the globe looking at cities, their economies and why they matter to the future wellbeing of individuals, businesses and communities (however you define it). 

Also if you’re like me, you rely on a very wide range of sources and contacts to alert you to all this great work.    

So in my very humble way I thought I’d start a weekly blog highlighting my recommended reading list of research on cities that I’ve come across that week.  My recommendations whilst obviously personal and subject to all my biases and judgment errors, will be guided by the following criteria: a) those I’ve actually read; b) contains or is based on research; c) is accessible to a wider readership; and d) I enjoyed reading them.

So my initial list is:

• ‘Education or Creativity: What matters most for economic performance?’ by Emanuela Marrocu & Raffaele Paci - combines Glaeser’s ‘human capital’ and Florida’s ‘creative class’ ideas into three separate groups – creative  graduates,  bohemians and non-creative graduates – and looks at the effect of these groups on the economic performance of 257 regions across the Europe.
• ‘Defining a Great Street’ by Kaid Benfield - photo-based consideration of what makes a great street drawing on city streets from across the US and Europe.
• ‘When Migrants Rule: the legacy of mass migration on economic development in the US’ by Andrés Rodríguez-Pose & Viola von Berlepsch – fascinating analysis showing the lasting effects of migration in the late 19th and early 20th century on the current economic performance of US counties. History matters!
• ‘Great Britain’s Second-Order City Regions in Recessions, 1978-2010’ by Tony Champion and Alan Townsend – compares the jobs performance of UK’s big city regions in the current recession to show how much ground cities have lost  and how this differed from previous recessions.
• ‘New Geography of Jobs’ by Enrico Moretti – brilliant rich and insightful exposition of why and how the modern economy benefits certain people and places more than others.  He also has some interesting things to say about urban manufacturing.

I hope you like them.  Please feel free to add to my list and let me know other research that I should be reading.

Follow @AndrewCities on Twitter

 

Now the Games are over, the legacy begins

Yesterday I spent half my flight back from a weekend in Moscow discussing London 2012 with a stranger. The lady in question was neither British nor a Londoner, but she was just as excited about the Games as if she were.  A week after the Paralympics ended, my encounter gives a sense of how London 2012 acted as a showcase, getting people talking positively about Britain across the world. But now the Games are over, there is no time to rest on our laurels.  The world’s attention will move on, but the chance to create long-lasting change for London as a result of the Games starts now.

The experiences of past Olympic hosts show that a great Games does not necessarily mean a great legacy. The impressive venues built for Beijing 2008 are now underused, while cities from Montreal through to Atlanta and Athens have struggled to generate permanent benefits from staging the Olympics.  London has already applied a number of important lessons learned from previous Olympic hosts, including using temporary venues for many sports, setting up a legacy body early on, and agreeing a Convergence agenda to set social and economic targets.  Centre for Cities’ new report, A Marathon Not A Sprint?, looks at further ways in which London can learn from other cities and improve its legacy prospects.  Analysis reveals both successes to imitate and pitfalls to avoid.

Three main lessons are apparent from Olympic cities elsewhere. First of all, a legacy depends upon a clear, consistent vision. The regeneration of Barcelona was underway before the 1992 Games, and continued long after. The Games were part of a longer-term strategy for the city, and it took commitment to see it through.  In the mid-90s recession, the legacy could have been seen as a failure, but the vision for the city was central to Barcelona’s economic future and therefore able to survive short-term setbacks.

The legacy vision for London 2012  should aspire to the same level of clarity and purpose.  During the life of the bid, legacy aims have moved significantly from social and environmental focus to a post-recession economic rationale.  With Boris Johnson’s installation as its third chair in the space of a year, the London Legacy Development Corporation (LLDC) needs to publicly demonstrate its clear political commitment to a single legacy vision and pull together the people who can ensure London’s legacy plan is strong enough to survive future political and economic challenges.

The second crucial lesson is that London needs to have a clear and consistent plan for the Olympic Park.  A permanent physical legacy on an Olympic site requires political and financial backing over time, as for example in Barcelona where a new business district was developed around the main Games site.  London is still agreeing uses for the Olympic venues; the current masterplan focuses on housing, but the Prime Minister and others have suggested that Tech City businesses might also be a part of its future (although Centre for London’s research casts doubts on the likelihood of the latter happening). To deliver results, a persuasive and single vision for future business and residential development is the real priority.  The LLDC is the first legacy body to have been set up before the end of the Games; it needs to make the most of this advantage by setting out why potential firms and residents would benefit from locating in the Park. 

Thirdly, analysis of past host cities spotlights the challenge of delivering long-term change for East London beyond the Olympic Park.  No Olympic host city has used the Games as a tool to reduce deprivation, but the transformation of East London is London 2012’s marquee legacy objective.  This will only be delivered with a commitment to social as well as physical improvements, for example increasing skill levels to help local people access jobs.  The Olympic Host Boroughs are working closely together to improve socio-economic indicators across their boundaries and have made a good start.  However, lasting change will require both Government and the Mayor of London to provide support and resources for many years to come.

The Games are a once-in-a-lifetime opportunity for London, and so far they could not have gone better.  However, the toughest job starts now, away from the limelight and in the context of squeezed budgets and political realities.  Learning the lessons of modern host cities will help London deliver a legacy to match the resounding success of London 2012.

Will GCSE reforms improve young people’s employment prospects?

Nick Clegg and Michael Gove today announced a reform of secondary education in which GCSEs will be replaced by the English Baccalaureate.

From details released to date, the reform appears to focus on changing the structure of the examination process in secondary schools. But it appears to avoid changing the incentives that are currently in the system – namely those that incentivise schools to push themselves up league tables, rather than incentivising a focus on what pupils most need for the world of work, which means good results in Maths and English in particular.

Our briefing note on educational attainment published last week re-emphasised the attainment gaps between cities with strong economies and those with weak economies. When looking at the number of pupils gaining 5A*-C GCSEs including Maths and English – which are vital to gaining future employment - there was a 12 percentage point gap between buoyant and struggling cities in 2010/11, a gap which has persisted for some time.

A key issue here is how schools respond to incentives set by the system. Our research suggests that in cities with weak economies in particular there has been a strong emphasis on so-called ‘softer’ subjects and to focus on the D-C grade borderline in recent years. Doing this improved schools’ overall pass rates. But it leaves question marks over whether young people are gaining the qualifications that will help them most in the labour market.

Announcing a replacement to the GCSE is the next big reform for the education sector. But the changes need to engage with the fact that schools respond to incentives, and incentives currently are mis-aligned, despite some recent changes to the measurement of school performance.

The Government must avoid simply changing the qualifications without changing the way that school performance is rewarded. Schools need to be incentivised to focus on subjects that will make a difference to the long term employment outcomes of their pupils rather than simply their position in next year’s league tables. It could make a big difference to the prospects of young people across the country.