Aim for Resilience, Not Just Growth
This year's Cities Outlook revealed that while the UK economy has experienced a downturn of two halves – rapid decline from 2008-09 followed by a three year period of minimal growth – the performance of UK city economies has been more variable. Places such as Swindon and Cambridge recovered rapidly after a sharp decline early on in the downturn while others, such as Swansea or Bradford, were only hit in the later stage of the crisis.
Luton is another city which bucked the national trend. In the decade prior to the recession Luton's economic output grew by 3.6% a year exceeding the growth rate of the national economy by 0.5 percentage points, yet the city struggled through both phases of the downturn.
Luton's economy is dominated by the private sector which accounts for almost three quarters of jobs in the city. This helps to explain why it struggled during the first phase of the downturn when businesses were feeling the effects of the credit crunch. From 2008-09 Luton lost eight businesses for every 10,000 people which contributed to a 50% increase in the share of people claiming Job Seekers Allowance.
During 2009-12, when the national economy was shifting between low growth and stagnation, Luton didn't recover as strongly as some of the UK's other cities with strong private sectors. The make-up of Luton's business base helps explain this. Despite Luton having a high share of jobs in the private sector, meaning it is less vulnerable to public sector cuts than many other cities, its private sector relies heavily on large employers. Luton is ranked 48th (out of 63 cities) on the number of businesses for every 10,000 residents.
Cities Outlook 1901 showed that reliance on a small number of large firms can limit the resilience of a city economy and Luton's experience illustrates this.
Although the flow of business closures stemmed during 2009-12 and house prices recovered, real weekly wages fell by £86. This was due in part to job losses at Vauxhall, a significant local employer. The firm pays relatively high wages and, as a result, the 350 jobs lost in 2009 had a significant impact on the city's economy.
A significant drop in the number of passengers passing through the airport, the other major employer, also contributed to poor economic performance. Most significantly the decision of Easy Jet to reduce its presence in the airport affected the 550 strong workforce employed by the airline in Luton.
Figure 1. The impact of the downturn on Luton
Source: NOMIS Annual Survey of Hours and Earnings workplace-based analysis, DCLG, Office for National Statistics Business Demography, NOMIS Claimant Count
So what does the future hold for Luton? Vauxhall recently confirmed that it will produce its new Vivaro van at its Luton plant, safeguarding 1,100 jobs for a decade. And, Easy Jet's decision to introduce new flights along with rising passenger numbers suggests the airport is on its way to recovery.
To further support Luton's economy there also needs to be a focus on improving residents' skills. Luton is currently the city with the second highest share of residents without any formal qualifications in UK. As the UK economy continues to shift towards knowledge intensive activities higher level skills will become increasingly important. Luton Council is already working with schools to highlight the range of local career opportunities available and the qualities and qualifications needed to get these jobs. A combination of short term interventions and a long term strategy to increase skills and qualifications will be vital if Luton is to be more resilient in the future.