UK's COVID pandemic recovery uneven as cities outside London lag behind

People wearing protective face masks walk over Westminster Bridge in front of the Big Ben, in London. The pandemic has affected different parts of the economy in 'very different' ways, research found.
People wearing protective face masks walk over Westminster Bridge in front of the Big Ben, in London. The COVID-19 pandemic has affected different parts of the economy in 'very different' ways, research found. Photo: Henry Nicholls/Reuters

The pandemic and its aftermath have slightly reduced employment and house price gaps in the UK, but left outer London behind, a new research published on Saturday suggests.

Analysis from the Resolution Foundation found that despite those gaps narrowing, the recovery hasn’t reduced wider economic divides, with ethnically diverse areas of outer London at risk of falling behind.

The report, a collaboration with the London School of Economics (LSE) and funded by Nuffield Foundation, examines how the pandemic and its aftermath have affected different areas of the UK.

According to the foundation, the pandemic has affected different parts of the economy in "very different" ways.

It found that the changes, including the work from home "revolution" that have occurred have been far less transformative, and have not helped to "level up" deprived parts of the UK.

The Resolution Foundation notes that while at a national level, unemployment has fallen to a joint 40-year low, some parts of the country, notably areas near airports and outer London, have yet to return to pre-pandemic level.

Nine of the 10 local authorities that have experienced the biggest rise in unemployment are in London, the other being Luton, it said.

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Strong jobs growth in traditionally low-employment areas in the country such as the North East have helped to reduce the regional employment gap from 7 to 6.5, the RF said.

This is the difference between the rate of employee jobs of the top and bottom quarter of local authorities.

Despite the "weakest jobs growth" taking place in ethnically diverse areas around the capital with high levels of deprivation, COVID has "not closed employment gaps between rich and poor parts of the UK".

Nationally, around one-in-five workers report that they were "mainly" working from home (WFH) in early 2022, the study claims, with London experiencing the biggest drive in the quantity of work and becoming the epicentre of the big shift to remote working.

"The WFH revolution has had a bigger impact on individual workers and firms than local economies though, with much of the change taking place in the same local areas," the report said.

Lalitha Try, researcher at the Resolution Foundation, said: "As Britain finally emerges from the pandemic, the early signs are that the COVID-19 crisis has failed to scar Britain’s economic geography, but nor has it soothed the big spatial inequalities that beset pre-pandemic Britain.

"It is encouraging that strong jobs growth has reduced regional employment gaps. But with many deprived parts of outer London struggling, and the WFH revolution mainly benefitting already prosperous areas, Britain’s big economic divides are as entrenched as ever.

"This makes the task of ‘levelling up’ the country all the more challenging, and all the more pressing."

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The foundation argues that the pandemic’s impact on the housing market could turn out to be more lasting than the effect on the labour market amid the race for space.

Between February 2020 and February 2022, house prices have grown twice as fast in villages and small towns as they have in major cities, 22% and 12% respectively.

This has led to a slight closing of regional house price gaps, as areas with lower house prices (at the 25th percentile) have seen house price growth of 19%, versus higher-priced regions (at the 90th percentile) experiencing growth of 15%.

The Resolution Fundation warns that despite this, the growth in average rents for new tenancies in London, some of the "rebalancing of housing demand that took place during the pandemic may yet unwind over the coming months and years".

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