How London's boom bust the Midlands

Robert Powell looks at which regions were hit hardest by the recession...

So it seems that my home region is taking the hit for the profligacy of London bankers.

Yes, a new report shows that it is the West Midlands, along with the North West of England that has suffered the most from the recession. That’s despite the cause of the financial downturn – the credit crunch – being located primarily in London. In fact, looking at the research, London has actually been least affected by the recession.

The report has been put together by the Office for National Statistics (ONS) and looks at a range of data relating to unemployment, income, housing, and social wellbeing.

So let’s take a closer look at the figures...

Unemployment and jobs

Unsurprisingly the report shows that the unemployment rate rose sharply across the country from early 2008 and throughout 2009 climbing from 5% to 8%. The rate has stayed at around this point since the recession ‘ended’ back in late 2009.

At its worst, the workforce of the West Midlands and North West were hit hardest and fastest by the recession, suffering unemployment rises of 4.7% and 4.0% respectively between June 2008 and 2010.

But interestingly, these two areas began to recover and pick up their employment rates far quicker than other regions after the recession. This may have been partly due to the relatively rapid increase in self-employed jobs across the two regions throughout late 2009 and early 2010.

The lowest rises over the same period were seen in the South East (an increase of 2.1%) and East of England (2.3%) and in London (2.6%).

Every region also suffered losses in full-time jobs throughout the recession. However again, the West Midlands was hit hardest, losing over 100,000 full time jobs between April 2008 and April 2010.

Income

Prior to the recession, Wales and the West Midlands showed the largest percentage increase in average total weekly household income. But following the recession household income rises slowed by the greatest rate in the West Midlands, as well as in the North East. This was primarily driven by a fall in salaries in these regions.

Wales was also affected by falling salaries but still managed to grow its average weekly household income by 6% between 2008 and 2010. This was partly due to an increase in self-employment, benefits and tax credit income.

Housing

As the housing bubble burst in the late noughties the entire UK property market was thrown into disarray as house prices plummeted and mortgage provider stiffened up their lending. The ONS report shows that property sales began to start falling nationwide around April 2007. By April 2008 sales had dropped by 40% across England and Wales. Rates began to pick up slightly in April 2009, but at a far lower level than prior to the 2007 credit crunch.

Despite being hit hardest by falling sales between 2007 and 2008, London made by far the best recovery as property sales increased by 49% between April 2009 and 2010. In fact, all regions saw an increase in sales throughout this period. But again the West Midlands and North East showed the slowest recovery rate.

House prices followed a similar pattern to sales, taking a dive in early 2008 (reaching a low in March 2009) following the credit crunch and making a recovery in the year running up to April 2010, with London again showing the strongest increases.

On a brighter note, mortgage repossessions actually fell between 2008 and 2010. This is an unusual trend for a recession period characterised by unemployment and a drop in household income. The ONS explains this apparent anomaly by pointing to the November 2008 ‘Mortgage Pre-Action Protocol’ – a government issued code designed to deal with mortgage arrears at an early stage and hence sidestep repossession.

Suicide

The report shows that suicide rates rose in most regions between 2007 and 2008, with the largest increases observed in the West Midlands (a 29% rise). Rates stabilised somewhat between 2008 and 2009. The largest rises throughout this period were in the North West where the rate jumped by 15%. Yorkshire and The Humber was the only region where rates decreased between 2007 and 2009.

But how are these morbid figures connected with the recession?

Further research conducted using World Health Organisation figures and released last week concluded that the financial crisis “almost certainly” led to an increase in suicides. Investment in welfare structures to help people back into work was identified as being a vital factor in keeping suicide rates down.

The Europe-wide study found that suicide rates increased the most in Greece – a country hit particularly hard by the global financial crash – while Austria fared the best.

A regional question?

So, has the West Midlands and North West really taken the fall for London and the South East? Personally, I think the idea that ‘London crippled the rest of the country’ is a little too simplistic.

Throughout the aftermath of the recession, everyone has looked to place the blame for the financial crash squarely on one group’s shoulders – be it bankers, the City, Gordon Brown or New Labour. But to do this is to miss the point on both a global and personal level.

Without sounding too much like a New Labour apologist, 2008 did see a worldwide financial crash. Yes, the City of London and the Labour Party played their part in greasing up the slippery slope to recession – but they by no means solely kicked us down it.

What’s more – as the CCCS reported in their latest debt blog – most of us also played a big part in causing the recession. A culture of credit-driven greed enveloped the whole country, not just the City of London.

It’s also slightly too simplistic to assume that London and the South East has somehow ‘offloaded’ its troubles onto the West Midlands and North West. Taking the case of unemployment, the West Midlands and North West has historically always had relatively high levels of joblessness (take a look at the BBC’s unemployment map to see for yourself), so when the recession struck, these regions suffered more. The same goes for housing. London and South East only emerged from this storm in a relatively healthy state because their property markets were stronger to begin with. This points to underlying cracks in the economic make up of the North West and West Midlands that were jimmied open when the crash hit.

What this ONS report really shows is not London actively kicking the Midlands and the North, but the disproportionate impact of a recession on poorer, less economically stable areas. And what’s worse is that this impact will surely only be advanced throughout the current cut-riddled, ‘age of austerity’.

How has the recession hit your region?

How hard has the recession hit your region?

Let us know your thoughts using the comment box below.

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