The coronavirus pandemic has shone a spotlight on the inequalities in our society. Those in comfortable jobs have largely been able to work remotely from home. Those in precarious sectors and occupations have lost the most, particularly in deprived communities. The tighter restrictions imposed on Greater Manchester since the easing of the first lockdown in July 2020 will require a different scale of policy response for the regional COVID-19 recovery and “levelling-up”. In this blog Dr Marianne Sensier from the Alliance Manchester Business School assesses the depth of economic scarring in Greater Manchester from both the coronavirus pandemic recession and the 2008 global financial crisis. This blog accompanies a Greater Manchester Dashboard of statistics.
- Greater Manchester’s economy recovered from the 2008 financial crisis with a smaller hit to Gross Domestic Product than the national economy, but employment had a deeper recession.
- Budget reductions brought in from 2010 meant communities across the city-region entered the pandemic with local government services under strain.
- Greater Manchester employment is yet to regain its pre-pandemic peak level but the boroughs of Manchester, Bolton, Bury and Wigan have recovered.
- Local development strategies for “levelling up” have a crucial role to play in the pro-active recovery of regions from the crisis.
The national lockdown between March and June 2020 meant many sectors of the economy closed down. The subsequent hit to the economy registered in the national accounts by a second quarter fall in Gross Domestic Product (GDP) of 19.5% (19.4% in the North West of England). The coronavirus crisis has caused economic scarring on people in the form of unemployment and on businesses that have been forced to close.
I have interrogated sub-regional data to investigate the extent of economic scarring that Greater Manchester (GM) has sustained following the 2008 recession and during the coronavirus pandemic. My analysis of the business cycle in output, employment, unemployment, weekly wages and house prices provides a gauge of how the boroughs of Greater Manchester have fared.
The impact of the 2008 financial crisis on Greater Manchester
Following the 2008 global financial crisis Greater Manchester’s economy recovered with a smaller hit to Gross Domestic Product (-4.1%) than the national economy (-4.4%). This concealed larger output falls in GM boroughs with the largest hit to Wigan (-7.6%) between the peak turning point of 2007 to the trough in 2009. Tameside took the longest to recover its output to pre-recession peak level in 2017 (ten years). Manchester and Salford were both in recession for a year as their peak was one year later in 2008. Manchester had a shallower recession than Salford. Stockport had the lowest loss to GDP (-1.4%) but eight GM boroughs had deeper recessions than the UK, including Bolton, Oldham, Rochdale, Salford, Tameside, Trafford and Wigan.
GM employment following the 2008 global financial crisis experienced a longer recession (three years compared to one year nationally) with a greater fall of -2.3% compared to -1.6% for the UK as a whole. For GM boroughs, Stockport experienced the biggest fall in employment at -9.5% and is lower now than it was in 2004. Oldham’s employment loss was second highest, then Tameside. These boroughs took 14 and 11 years respectively to recover their pre-recession peak levels. Manchester and Rochdale experienced short recessions lasting one year, with Rochdale having a shallow employment recession.
The GM context when the pandemic hit
Following the financial crisis, the coalition government came to power in 2010 and embarked on budget reductions. Less local government funding and reduced services has been shown to hit more deprived communities harder. For example when we look at the service spending cuts across Greater Manchester (calculated by the IFS between 2009/10 to 2016/17) Salford had the deepest cut of -45%, then Oldham, Wigan, Manchester, Rochdale, Tameside, Bury, Bolton, Stockport and Trafford at -26%. Communities across GM, therefore, entered the pandemic with local government services under strain.
The Government’s Index of Multiple Deprivation (IMD, 2019) demonstrates inequalities across GM. Manchester, Oldham, Salford and Rochdale are in the top 20 list of English local authorities with the highest proportion of neighbourhoods in the most deprived 10% and all these boroughs suffered large cuts to their budgets. The IFS noted the inequity of these spending cuts, stating that “between 2009/10 and 2019/20, spending on non-education services by the tenth of councils serving the most deprived areas fell by an average 31% per resident, almost twice as much (16% per resident) as among the tenth serving the least deprived areas.”
The impact of the pandemic on GM
The COVID-19 pandemic led to loss of UK output from peak business cycle turning points to trough of -21.6%. The fall in the North West of England output was slightly less at -20.8% with a recovery underway.
The Greater Manchester employment series is yet to regain its pre-pandemic peak level but the boroughs of Manchester, Bolton, Bury and Wigan have recovered. Within employment the number of self-employed workers have fallen substantially in all boroughs.
The monthly ONS real-time information for GM employees on company payroll has grown at a faster rate than the UK and North West since 2014. Manchester and Salford gained 25% additional employees over seven years. All the employee series across GM have recovered.
Wigan is the only borough to have recovered its pre-recession peak real wage level in 2020 and had the smallest fall in wages at -6.3%. The largest fall in wages was in Tameside (-15.1%) and then Rochdale (-12.8%).
House Prices have grown during the last two years across all the GM boroughs.
Building community resilience
The challenge now is for localities to increase their resilience as they move into the recovery phase. During the pandemic, we have seen the rise of mutual aid community organisations and support for local business. Local development strategies for “levelling up” have a crucial role to play in the pro-active recovery of regions from the crisis to encourage reorientation and renewal within local economies. Building on the success in Preston’s community wealth building strategy, councils should be encouraged to procure goods and services to local co-operatives. These could be developed in partnership with further and higher education institutes that help graduate start-up co-ops.
To mitigate the long-term unemployment scarring effects on their local populations, action could include job guarantee schemes, designed to keep young people engaged with the labour market. In GM the Good Employment Charter implementation is vital here for employers to pay the real living wage. It is also imperative to open opportunities for young people to stay on or return to further education, through access courses and recovery apprenticeships linking to jobs in the green economy (for example, retrofitting, energy).
In the Levelling Up White Paper, the government have announced a consultation on a Community Wealth Fund (championed by the APPG for Left Behind Communities) created from the Dormant Assets Scheme which will go towards youth and social investment. An example of a group that could benefit from this in GM is Middleton Cooperating, a community-led partnership between the voluntary sector, community groups and Rochdale Borough Council. The Greater Manchester Strategy is currently developing a Community Wealth Building Hub and is including voluntary and community groups in the design. It is essential to rebuild communities from the ground up with groups collaborating to improve localities for future generations.
For further analysis of the data please download the GM response to crises report.
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