A top priority in the next Budget should be keeping the £20 uplift to Universal Credit (UC) and setting out a sensible wind-down of the Coronavirus Job Retention Scheme (CJRS) to fully support families and businesses through the difficult year ahead.
The Government’s roadmap for easing lockdown restrictions in England leaves the Chancellor with important decisions about the future of coronavirus support in next week’s budget. In this blog we explore the places that have most to lose from early withdrawal of support. For these towns and cities, maintaining support is vital to protect incomes and ensure they stay afloat until restrictions are fully lifted. The Chancellor must do the right thing and chart a course out of the storm for the places hardest hit so far.
We list 20 places in Great Britain that are currently most reliant on support and have suffered significant economic damage from the pandemic. These are places that have high numbers of people furloughed, a high proportion of people claiming unemployment benefits, and a high proportion of people claiming Universal Credit more broadly. With the exception of Manchester, the towns and cities that feature can be broadly categorised as:
- London Boroughs: Barking and Dagenham, Brent, Ealing, Enfield, Hackney, Haringey, Hounslow, Lewisham, Newham, Tower Hamlets, Redbridge, Waltham Forest.
- Seaside Towns: Blackpool, Eastbourne, Great Yarmouth, Hastings, Thanet (Margate).
- Airport Towns: Crawley, Slough.
Local authorities ranking highly on furlough, unemployment benefit, and UC
These places are especially vulnerable to upcoming policy decisions in the March budget on two fronts. First, if the furlough scheme is removed too soon, these places will likely see a sharp rise in unemployment, further weakening already struggling local job markets. Second, if the £20 uplift to Universal Credit and Working Tax Credits is cut in April, or in a few months, there will be a sudden drop in income for a high proportion of families and a knock-on impact on these local economies as they cut back on spending. Without the extension of both the furlough scheme and the UC uplift, these places will struggle to recover from what has already been a difficult year.
Where are these places and why is the budget announcement so important for them?
London dominates the list with 12 of the 20 spots, highlighting the scale and severity of the economic hit to the capital since the start of the pandemic. Despite high poverty rates, the proportion of working-age adults claiming unemployment benefits in London boroughs pre-crisis was below the national average. But over the past year, London has seen the largest increase in unemployment rate of all UK regions. The city now has the highest official unemployment rate of any UK region at 6.9%.
Part of the issue has been down to many Londoners’ reliance on a service-based economy that has been hit hard by plummeting numbers of visitors and commuters. Footfall in London remains amongst the lowest in the UK compared to pre-crisis levels, while total spend in the city also continues to struggle. The decline in international tourism will have also significantly impacted the city. In 2019, there were over 20 million international visitors to London, most of which will have been lost over the course of the last year.
However, the impacts of this have not been felt evenly across the city. Those working in lower-paid retail, hospitality and tourism roles are more likely to live in London compared with higher-paid workers, many of whom live outside the city and commute in (and now work from home). Residents in the boroughs listed are likely to work in sectors affected by restrictions and closures, with around one in four working residents in Barking and Dagenham employed in the hospitality or retail sector, two of the hardest hit industries during this crisis.
As a result, reliance on furlough in many London boroughs has been high. While 17% of the city’s eligible workers were furloughed at the beginning of this year, this was much higher in many of the boroughs identified above, such as Newham and Haringey (both 22% furloughed). While furlough has protected many jobs in these boroughs, unemployment claims have also sky-rocketed, reflecting job insecurity for many workers pre-crisis. In some boroughs, unemployment claims have more than doubled, hitting as high as 11% in Barking and Dagenham, Haringey, Newham, and Brent.
Tourist hotspots around the UK have been hit hard by the pandemic as restrictions have closed hospitality businesses for much of the year and an already short British tourist season was further reduced by lockdowns and the tier restrictions. This has left businesses in many towns around the UK in a difficult financial position.
Most tourist locations in the UK are leaning heavily on the furlough scheme right now and in many of these areas this has helped stem a rising tide of unemployment. For example, in South Lakeland one in four eligible employees were furloughed as of 31 January, the highest of any local authority in the UK, but only 3.2% of the working-age population are claiming unemployment benefits and only 10% are claiming Universal Credit – way below the national average of 6.6% and 15% respectively.
However, for the locations on our list, heavy reliance on the CJRS has also been coupled with significant rises in UC and unemployment claims from an already high baseline pre-crisis. Due in part to the relatively cheap cost of housing, seaside towns like Blackpool, Margate, Hastings, Eastbourne and Great Yarmouth tend to have large populations of more vulnerable adults who face barriers to work and may be in receipt of Universal Credit. A total of 34% of working-age adults in Thanet (Margate) were registered as having a core equality act or work-limiting disability, far higher than the UK average of 21%.
For those in work, reliance on a highly seasonal tourism trade means that work is often insecure and heavily reliant on peak tourist seasons. The pandemic has exacerbated these issues as the hit to tourism has resulted in a significant number of jobs becoming unsustainable even with the CJRS in place.
International travel has understandably taken a significant downturn since the start of the pandemic and the impact of this has fallen heavily on airport towns in the South East. While the economic impact of less travel is not confined to the south east, over half of all international inbound visitors were visiting London pre-crisis, so restrictions are being felt most acutely in airports serving London. The job markets of Crawley and Slough are highly reliant on their respective airports, with as many as one in five workers in Slough employed in the transport sector, driven by its proximity to Heathrow, so the restrictions are driving high rates of furlough and job loss.
However, these towns did not begin the COVID-19 pandemic in a particularly weak economic position. Claimant unemployment and receipt of Universal Credit were both close to the national average back in March 2020, but then saw some of the fastest increases. The current struggles of these towns have very much been caused by the nature of the current downturn, but may outlast the easing of national restrictions if international travel restrictions remain in place.
Why are there so few northern and midlands towns and cities on this list?
While the list features many of the more deprived parts of London and the South East, it might seem surprising that there are very few of the so-called “left-behind” parts of the north and midlands. This is because the specific focus of this analysis looks at where reliance on furlough, reliance on UC, and high unemployment combine together, meaning they are heavily reliant on multiple support packages.
While their unemployment rates and UC claims are high, the use of furlough in many of these towns is comparatively low. For example, while Middlesbrough has one of the highest claimant unemployment and UC claimant rates in the country, the use of furlough is below the national average at 13% (compared to 16% UK-wide). As a result, while it will be hit hard by an end to the £20 uplift, it is not as vulnerable to a sudden end to the CJRS. Manchester and Blackpool are exceptions to this, both featuring on this list because they have tended to rely on furlough more than other areas of the North, while also experiencing high proportions of unemployment and UC claims.
With the right support, we can protect our hardest-hit places from the worst of the economic storm
The COVID-19 support measures have provided a lifeline to residents in these towns and cities throughout the pandemic so far. Jobs and incomes have been held up by the CJRS, and the additional £20 a week to UC has eased the pressure on families struggling to make ends meet. It is important the Chancellor does what’s right and extends this support.
Currently there is speculation that a six-month extension of the UC uplift will be announced at the budget, but extending by anything less than a year risks pushing families into poverty and putting the economic recovery of many towns and cities at risk. Unemployment is currently projected to peak in the summer, meaning a six-month extension will end just as it’s needed most. The furlough scheme must also be wound down in a way that prevents unnecessary unemployment and gives businesses certainty. Removing restrictions should follow behind the easing of health restrictions and the unwinding should be gradual, allowing workers to return part-time.
Making the UC uplift permanent, or at least extending it for the next financial year, and winding down the furlough scheme carefully and gradually will enable this support to bridge between the current economic downturn and the recovery to come. If done well, the current successes of these policies can be continued, protecting these parts of our country from the worst outcome of the economic storm.
Methodological note: The twenty local authorities listed all fall in the top 75 (in Great Britain) on three indicators: share of eligible employments furloughed as of 31 January 2021, the claimant unemployment rate in November 2020, and the share of the working-age population who are receiving Universal Credit in January 2021. All are the latest datasets available at time of analysis. We use the claimant unemployment rate, as opposed to the official labour force survey unemployment rate, because it is available at this local level.