Deprived rural and inner London areas hardest hit by coronavirus jobs crisis

Some parts of the country have more than twice the proportion of furloughed employees than others

Data points to a very uneven economic recovery

Deprived rural and inner London boroughs have been the hardest hit by the coronavirus jobs crisis, according to an analysis by Price Bailey, the Top 30 firm of chartered accountants.

Price Bailey analysed data obtained from HM Revenue & Customs and National Statistics, which shows that the 10 hardest hit out of 370 local authorities in the UK as measured by the proportion of employees furloughed are either in rural areas heavily dependent on tourism or deprived London boroughs.

The three hardest hit local authorities are South Lakeland (Cumbria), Pendle (Lancashire) and Craven (North Yorkshire), which have 46.9%, 40.3% and 39.9% of their employees being paid via the Government’s Coronavirus Job Retention Scheme respectively. This compares to just over a quarter (26.4%) of all UK employees who are currently furloughed.

The next hardest hit are the London boroughs of Brent, Haringey, Hounslow and Newham, in which 39.5%, 37.7%, 37.3% and 36.5% of employees are furloughed respectively (see table 1 below for details).

According to Price Bailey, the analysis shows that employees in the parts of the economy that were shut down entirely, including non-essential retail, hospitality and tourism, are disproportionately concentrated in certain parts of the country, which suggests that there are likely to be significant regional disparities in the economic recovery.

Commenting on the analysis, Stuart Curtis, Partner at Price Bailey, said: “These data indicate that the recovery could be very geographically uneven. The proportion of employees furloughed is twice as high in some boroughs as in others, revealing a stark divide in how the economic crisis is affecting different parts of the country.”

“Rural areas in the North of England, which are heavily reliant on tourism, along with boroughs in London with a high proportion of service sector jobs, such as Hounslow, which is home to thousands of people working at Heathrow airport, have borne the brunt of the economic impact of the lockdown.”

“Nearly half of all employees in South Lakeland in the Lake Distract are on furlough compared to just one fifth in Cambridge. The divide in London is starker still given the close proximity of the boroughs. The proportion of employees furloughed in Harringay, Hounslow and Newham is nearly twice as high as in Camden, the City, Islington or Westminster.”

“Furloughed employees will be spending less in their neighbourhoods, which will have a knock-on effect on local businesses. We could see pockets of deprivation become more entrenched as the areas which have been hardest hit take considerably longer to recover lost output.”

Curtis went on to say “The proportion of the workforce which has been furloughed is a barometer of the health of local businesses. As the furlough scheme unwinds, businesses will need to consider the turnover levels they are likely to achieve and the impact on cashflow of bringing furloughed staff back onto payroll. While some sectors of the economy likely will rebound quickly, others will need to take a more cautious approach.”

Areas with higher proportions of public sector jobs and high-value private sector jobs least affected by jobs crisis

The research by Price Bailey reveals that cities and localities with a high proportion of public sector jobs, and private sector jobs which allow for remote working, have not been as badly affected by the economic impact of the lockdown as other parts of the country.

Cambridge has the lowest proportion of workers furloughed in the UK, with 12,300 out of 63,900 employees, representing 19.2% of the total.

Other cities such as Sheffield, which has 20.8% of employees (53,500 out of 257,000) furloughed and Cardiff, which has 21.4% of employees (36,000 out of 168,300) furloughed, have also benefited from a high proportion of workers being public sector employees. 27.7% of the workforce in Cardiff are employed in the public sector, compared to just 16.5% nationally.

Curtis offers an explanation this by saying “The world-renowned education sector in Cambridge is clearly a major factor in the significantly lower number of employees being furloughed. A large proportion of workers in the education sector are not eligible for the furlough scheme and have been retained on full pay instead. The Cambridge economy, including the education sector, is highly internationalised, which has shielded it from the direct impact of the lockdown on the UK economy.”

“Other cities with a high proportion of public sector workers, such as Cardiff and Sheffield, have also fared better than the national average.”

Price Bailey points out that the introduction of flexible furloughing will add complexities to the furlough claim process. The firm has processed over 500 claims to date, from basic claims to those with complex salary sacrifice and pension arrangements.

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