Unemployment rises in deprived areas – as bankers consider bonuses The imbalanced economy?

The most deprived communities in England have been hardest hit during the recession and are likely to continue to suffer long after growth returns.

In the first analysis of its kind the Joseph Rowntree Foundation (JRF) has tracked the impact of recession on local communities over the last 30 years. It found that recent job losses have hit those areas already blighted by high unemployment. Communities with the highest numbers of Jobseeker’s Allowance (JSA) claimants are concentrated in the northwest, west midlands, London, Yorkshire and Humberside.

In June 2009 there were just nine areas where more than 20% of the working population claim JSA (including Birmingham and Oxford), but the report warns that this is likely to grow as unemployment rises next year.

JRF predicts that in the longer ‘wave 2’ of the recession, unemployment will rise even when growth returns to the economy and it will impact most heavily on neighbourhoods that suffered during the recession of 1993.

It estimates that around 200 areas will see rates of unemployment higher than 20% during 2010-11 and almost 2,000 communities will experience rates of 10% or more. JRF chief executive Julia Unwin said: ‘Talk is already focusing on the UK’s emergence from the current recession but this report illustrates how the poorest communities struggle to recover from economic downturns even in periods of wider prosperity.’

The report suggests a number of ways in which local authorities and third sector organisations can help ‘recession-proof’ the poorest areas. It recommends continued monitoring of the impact of job and service cuts on the most vulnerable, creating more services for young people and targeted attempts to boost economic growth in the most affected areas.

The BoE seems more concerned than the Government and FSA that an imbalanced economy over-dependent on financial services and knock on housing market effects in the South East is part of the problem, arguing that banks need to retain profits and build balance sheets before distributing bonuses. The depute governor has even suggested that the out migration of “talent” in this sector might help stability and sustainability in the longer term.

So where are businesses going to secure investment from and what is the next sector to become over-dependent on?

Communities in recession: www.jrf.org.uk/publications/communities-recession-impact