Opinion: Resilient Sunderland

Sunderland is not somewhere you’d expect to be topping any list which ranks the economic performance of the UK’s cities. But such is the nature of the coronavirus pandemic that a new report from Irwin Mitchell and the Cebr has found that Wearside had the smallest recession anywhere in Britain at the end of last year. Richard Dawson celebrates Sunderland’s newfound resilience

A new report has found that Sunderland recorded the smallest decline in output of any major UK city in the fourth quarter of 2020.

Law firm Irwin Mitchell, working in partnership with the Centre for Economics and Business Research (Cebr), made the surprising finding in its UK Powerhouse report.

Sunderland has historically been among the hardest hit areas by previous economic downturns, arguably still bearing the scars of deindustrialisation in the 1980s.

However, the city has come out of the most recent recession with smaller losses than anywhere else in Britain.

This is down to its large manufacturing sector, which accounts for approximately 16 per cent of its economy.

Manufacturing firms weren’t prevented from operating in Q4 2020 and didn’t see the limits on activity that enterprises in the services sector did.

As such, Sunderland saw just a 5 per cent year-on-year contraction in economic output, the best performance of any major UK city and a fitting testament to just how resilient the Wearside economy has become.

Coventry was second place in the rankings, recording a 5.6 per cent decline.

Owing to the fact that nearly a third of jobs in Sunderland are in the public sector, the city’s labour market also outperformed most other areas in the last three months of 2020.

In fact, Sunderland was one of only three UK cities to create jobs in the quarter, achieving modest employment growth of 0.4 per cent.

The other two cities were Oxford and Cambridge, where growth in the life sciences and research sectors contributed to 3 per cent and 2.9 per cent of employment growth respectively.

Newcastle was fourth in the employment rankings and just behind Sunderland, registering a small contraction of 0.2 per cent.

The UK Powerhouse report has come about in response to the fact that official economic data sources for the UK’s cities are often dated and fail to provide a reliable snapshot of the UK’s localised economies

To more accurately estimate current economic activity, the Cebr has utilised a range of indicators to create a ‘nowcast’ of GVA and employment for the 50 largest cities in the UK.

The think tank has also modelled the economies of these cities to produce a forecast for their performance in the year ahead.

This means that, as well as providing insights into how regional economies performed in Q4 2020, the report predicts how cities are expected to perform in Q4 2021.

Looking ahead to the end of this year, London is expected take see the largest decline in employment levels, with Outer London areas potentially losing 5.4 per cent of their workforce.

It is thought that the capital’s big accommodation and food services sector has seen the largest usage of the furlough scheme and therefore could be vulnerable when this ends in September.

The latest data from HMRC shows that 56 per cent of employees in this sector were using the furlough scheme at the end of February 2021.

London also has a big arts, entertainment and recreation industry and nationally, 55 per cent of employees in this sector were recently being paid through the furlough scheme.

Cambridge is expected to see the biggest increase in employment in Q4 2021 at 2.9 per cent, with Cardiff (2.5 per cent) and Swansea (2.2 per cent) close behind.

Sunderland and Newcastle are expected to see reductions in their workforces of 0.9 and 1.1 per cent by the end of this year.

Irwin Mitchell, which published the report alongside the Cebr, has made a number of recommendations to businesses and local governments looking to overcome any economic challenges in the year ahead.

First is to take advantage of policies to encourage investment and improve skills such as the business investment super-deduction scheme, which enables companies to reduce their tax bill by 130 per cent of the cost of the investments they make, and the Help to Grow scheme, which offers subsidies for management training and productivity enhancing software.

Secondly, businesses should be preparing for the end of the furlough scheme and other stimulus measures being tapered or brought to a close later this year.

Thirdly, firms should consider if their staffing levels meet the future needs of the business and should start having conversations now with employees if redundancies will be needed.

Finally, businesses should be thinking about how they use their office space and how they will use it in the future as workers come back into the office.

They should also be having conversations with their landlords if they need to review their business rents or the amount of space they need.

For local government, Irwin Mitchell says the most important thing to do is have plans in place to support job creation when the furlough scheme ends, and the economy recovers.

Local authorities should create bespoke plans, based on the industries established in their areas, to reskill and re-employ those who have lost their jobs as a result of this crisis.