There is lots of talk about how our economy is starting to recover from the global financial crisis. Growth has returned after a number of years in the doldrums. No doubt the chancellor in his budget speech on 18 March will hail the UK miracle and put it down to his policies.
The common feature of these conversations is that they treat the UK as if it were a single whole. Look a bit more deeply and a much more complex picture starts to emerge.
First and foremost, the longer-term trend for Greater Liverpool is a city on the up. It’s blindingly obvious to anyone who strolls around the city centre how much has changed. New buildings, businesses and ambition are apparent around most corners.
This is not a new phenomenon. In 1997, economic output per head in Merseyside was 27% lower than the average for the UK, and the proportion of people in work was 18% lower. Looking at the chart, 1999 to 2004 was a period of fastest catch up for the city.
By 2004, the output gap had closed to 22% and the employment rate gap to 8%. It was also the period in which major investment was planned – the council go-ahead for Liverpool One was passed in 1999.
From 2004, Merseyside kept pace with the rest of the country until the global financial crisis of 2007/08, when it dipped and then recovered strongly as the investments in Liverpool One and the Capital of Culture began to bear fruit.
Since 2010, however, we have seen a slump in economic output relative to the rest of the country. The output gap in 2013, at 24%, is back to 1999/2000 levels. This was caused by flatlining in Merseyside whilst London stormed ahead, followed less strongly by other parts of the south and midlands.
(Unfortunately we don’t have more recent figures as the Office for National Statistics isn’t due to produce 2014 data until the end of this year - a perfect illustration of the lack of priority given to regional economic performance.)
For a time, employment rates continued to move upwards relative to the rest of the country. This divergence: relative output slumping but relative employment still growing means only one thing: a greater drop in wages than elsewhere. People in Greater Liverpool were more prepared to take pay cuts, or take jobs on low wages, just to be in work.
However in the last two years there are clouds appearing. We’ve seen a worrying drop in employment rates in Merseyside whilst it has been rising elsewhere.
What of the immediate future? It is undoubtedly the case that as recovery picks up across the country, Greater Liverpool will grow too. But how fast? Will this be a recovery that continues to be heavily concentrated in London?
The gap between Merseyside and the rest of the country, which shrank for many years, has now widened. It hardly feels like the relatively small sums of money that will be passed from Whitehall to regional control under devolution proposals will make that much of a difference in decisively reversing this trend.
Longer term, our second challenge is that of inequality. Just as there’s a gap between London and the rest of the country, so there is between people in our city. When growth finally starts to outpace inflation, who is going to benefit?
In pole position are those who already have the jobs, skills and confidence to seize the new opportunities. There are many who have been scarred by years of worklessness, or struggling to make life pay as wages have slumped. As we compete in the global economy with countries like Bangladesh and Vietnam for manufacturing, and India and China for services, jobs of the future in Britain are likely to demand new and higher skills.
Flitting in and out of temporary or part-time work, or managing the uncertainty of zero-hours contracts is hardly the way to enable people to develop the capacity or the self-belief to join the rising tide. Ensuring that no-one is left behind sounds like a moral project, and for some it is.
But for the dessicated calculating machines that economists are sometimes accused of being, it also makes sense in financial terms. Investing in the training, support and skills development of those out of work and on low wages increases labour supply and increases productivity, and we all benefit.
The common feature of these conversations is that they treat the UK as if it were a single whole. Look a bit more deeply and a much more complex picture starts to emerge.
First and foremost, the longer-term trend for Greater Liverpool is a city on the up. It’s blindingly obvious to anyone who strolls around the city centre how much has changed. New buildings, businesses and ambition are apparent around most corners.
This is not a new phenomenon. In 1997, economic output per head in Merseyside was 27% lower than the average for the UK, and the proportion of people in work was 18% lower. Looking at the chart, 1999 to 2004 was a period of fastest catch up for the city.
By 2004, the output gap had closed to 22% and the employment rate gap to 8%. It was also the period in which major investment was planned – the council go-ahead for Liverpool One was passed in 1999.
From 2004, Merseyside kept pace with the rest of the country until the global financial crisis of 2007/08, when it dipped and then recovered strongly as the investments in Liverpool One and the Capital of Culture began to bear fruit.
Since 2010, however, we have seen a slump in economic output relative to the rest of the country. The output gap in 2013, at 24%, is back to 1999/2000 levels. This was caused by flatlining in Merseyside whilst London stormed ahead, followed less strongly by other parts of the south and midlands.
(Unfortunately we don’t have more recent figures as the Office for National Statistics isn’t due to produce 2014 data until the end of this year - a perfect illustration of the lack of priority given to regional economic performance.)
For a time, employment rates continued to move upwards relative to the rest of the country. This divergence: relative output slumping but relative employment still growing means only one thing: a greater drop in wages than elsewhere. People in Greater Liverpool were more prepared to take pay cuts, or take jobs on low wages, just to be in work.
However in the last two years there are clouds appearing. We’ve seen a worrying drop in employment rates in Merseyside whilst it has been rising elsewhere.
What of the immediate future? It is undoubtedly the case that as recovery picks up across the country, Greater Liverpool will grow too. But how fast? Will this be a recovery that continues to be heavily concentrated in London?
The gap between Merseyside and the rest of the country, which shrank for many years, has now widened. It hardly feels like the relatively small sums of money that will be passed from Whitehall to regional control under devolution proposals will make that much of a difference in decisively reversing this trend.
Longer term, our second challenge is that of inequality. Just as there’s a gap between London and the rest of the country, so there is between people in our city. When growth finally starts to outpace inflation, who is going to benefit?
In pole position are those who already have the jobs, skills and confidence to seize the new opportunities. There are many who have been scarred by years of worklessness, or struggling to make life pay as wages have slumped. As we compete in the global economy with countries like Bangladesh and Vietnam for manufacturing, and India and China for services, jobs of the future in Britain are likely to demand new and higher skills.
Flitting in and out of temporary or part-time work, or managing the uncertainty of zero-hours contracts is hardly the way to enable people to develop the capacity or the self-belief to join the rising tide. Ensuring that no-one is left behind sounds like a moral project, and for some it is.
But for the dessicated calculating machines that economists are sometimes accused of being, it also makes sense in financial terms. Investing in the training, support and skills development of those out of work and on low wages increases labour supply and increases productivity, and we all benefit.
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