New North / South Divide Developing?

The Senior Economist at The Work Foundation, Neil Lee, said that \”The public sector is not just an employer – it provides services and is an important customer for local businesses. Cutting public spending will have knock-on effects on private sector employment, and this will be worse in areas with weaker economies.\”

The Director of the Institute of Public Policy Research North, Ed Cox, said that \”The severity and speed of the cuts threatens the recovery in Northern England which was hardest hit by the recession and is still struggling to recover. With so many jobs in the North reliant on the public sector, fast and deep cuts risk a sudden surge in unemployment and a leap in the welfare bill.\”

The General Secretary of the Trade Union Congress, Brendan Barber, said that \”Public sector job losses are likely to occur in some of the UK\’s more depressed regions where private sector job creation is already extremely poor. Job losses will depress local economies even further – and the cycle of decline has a good chance of bringing back the deep North/South divides of the 1980s.\”

PwC Spending Cut Report

The news follows a recent PriceWaterhouseCoopers (PwC) report that suggests that 500,000 jobs will be lost in the pubic sector due to Government spending cuts and a further 500,000 jobs will be lost in the private sector due to knock on affects created by the loss of public sector contracts and reduced demand. The PwC report, titled ‘Sectoral and Regional Impact of the Fiscal Squeeze’ predicts losses equal to 3.4% of jobs across the United Kingdom. However the good news is that the chances of a double dip recession are low and new jobs should be created in sectors such as outsourcing.

The areas of the country most likely to be hit by cutbacks are Scotland (4.1%), Wales (4.3%) and the North East (4.1%). The Chief Economist at PriceWaterhouseCoopers, John Hawksworth, said that “Although the recovery may not be as strong this time as in the 1990s, we would expect at least some rise in private sector employment over the next five years despite the fiscal squeeze, bearing in mind that this squeeze should allow interest rates to remain lower for longer.”

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