February 10, 2013 4:30 pm

Private sector helps spur UK jobs growth

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A general view of the Tyne Bridge through the Millennium Bridge as the city of Newcastle©Getty

Tyne Bridge seen through the Millennium Bridge in Newcastle

Private sector job creation is helping to spur a labour market recovery in some of the regions of northern England and the Midlands hardest hit by the financial crisis.

Employment in the northeast, Yorkshire and the Humber and the West Midlands has been growing significantly faster than the national average since last summer, Financial Times research has revealed.

If the trend continues, it could boost the coalition’s hope of rebalancing the economy by spreading job growth more widely beyond London and the southeast, which has proved elusive.

The northeast has seen employment grow 2.2 per cent in the past four sets of monthly data from the Office for National Statistics, covering a period between early summer and November. That is more than five times the national increase of 0.4 per cent.

While unemployment there is still the UK’s highest, at 9.1 per cent of the workforce, it is down from nearly 12 per cent just over a year ago, the fastest drop in the country.

In Yorkshire and the Humber, and in the West Midlands, job creation has also risen, 1.7 per cent and 1.2 per cent respectively, in sectors ranging from manufacturing to hotels, bars and restaurants.

Many jobs are likely to be part-time, temporary or self-employed, as is the case nationally. The surge underlines the UK’s productivity puzzle because hiring in those regions has not been matched by a rise in output, according to Lloyds TSB’s regional purchasing managers’ index.

There is debate about the likely causes of the surge. Some of it may be a “bounceback effect” – a recovery from the depths of the recession.

But John Philpott, director of the Jobs Economist consultancy, said the trend appeared consistent with the theory that a sizeable public sector had “crowded out” the private sector in some regions – and thus cuts in state jobs and pay allowed the private sector to hire more cheaply.

He added that it showed the recession had not wreaked the same structural damage on the north as the 1980s recession, in which workers with outdated skills were thrown permanently on the dole.

Andrew Carter, policy director at the Centre for Cities think-tank, said the squeeze on wages across the private as well as the public sector might be encouraging employers to hire.

James Ramsbotham, chief executive of the North East Chamber of Commerce, said his region’s strong private sector jobs growth was “mainly on the back of engineering, manufacturing and exporting”.

In the past five years, northeast exports have risen from £8bn annually to more than £14bn. Many manufacturers, such as carmaker Nissan, having found they were using their existing workforce to full capacity, have been recruiting recently thanks to rising workloads.

“Almost every decent business we’re talking to at the moment are talking about how many more people they are taking on,” Mr Ramsbotham said.

In the past 10 days, he has been to two new workplace openings – Vantec’s huge distribution base outside Sunderland, serving Nissan, and Ford Component Manufacturing’s new precision pressings and metal treatment plant.

Len Cruddas, chief executive of the Leeds, York and North Yorkshire Chamber of Commerce, said he had been picking up “a lot more positive news from the business community”. “Those companies that had problems have gone. There are still a few zombies around but a lot of growing businesses too.”

Steve Brittan, managing director of BSA machine tools in Birmingham and president of the Birmingham Chamber of Commerce, said manufacturing was growing striongly in the West Midlands, with Jaguar Land Rover among a number of large companies hiring staff.

John Phillips of the Institute of Directors said: “I think we have got to the point where companies are saying to themselves: it’s now or never.” Richard Butler of the CBI said: “ I can’t say this is the start of a sustained recovery but the mood is certainly more optimistic.”

Additional reporting by Andrew Bounds, John Murray Brown and Chris Tighe

 

Services keep historic railway city rolling

 

York was a jobs hotspot even before the latest surge. Now its rate of jobseeker’s allowance claimants has fallen from 2.5 to 2.2 per cent in the past year, compared with 3.7 per cent nationally, Brian Groom reports.

Like elsewhere, some of the new jobs will be part-time. But more than three-quarters of the city’s adult population is in work, the sixth highest out of 64 UK towns and cities, according to the Centre for Cities think-tank.

Once the city was famed for railways and chocolate: Nestlé still employs 1,800 making KitKats and Aeros there. But jobs are now largely in services such as tourism, professional and financial services, university spin-offs and biomedical and creative industries. Skill levels are high. Hiscox, the insurer, recently chose York for an office that will eventually employ 500.

As a historic city with 200,000 residents, attracting 7m tourists a year, it suffers from pressures of success. “We have a housing crisis. Average prices and rents are much higher than the regional average,” says James Alexander, council leader. “Increasingly we are finding that a low-wage workforce in retail and tourism is struggling to live in the city. Some are moving further away, which means greater congestion.”

The Labour-controlled council is trying to boost housebuilding and has set up a £28.5m fund to improve infrastructure. Its aim is to be among the top 10 medium-sized city economies of Europe. As part of Leeds city region it also wants to use skills funding to get the remaining long-term unemployed into work.

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