North/South divide in impact of public sector job cuts

Public sector job cuts have had a direct impact on levels of business confidence throughout the UK’s regions, according to a report by corporate restructuring firm Begbies Traynor.

The research found that organisations in those parts of the country most reliant on the public sector for employment reported the largest increases in levels of financial distress.

The worst affected area is the North-East, where 19% more companies reported “significant” or “critical” problems in the third quarter of 2011 than the previous three months.

But other parts of the UK that have traditionally been host to large public sector employers are also suffering, with the North-West reporting a 12% rise in difficulties, and Wales, the Midlands, and Yorkshire and Humberside all seeing a 10% increase.

Ric Traynor, chairman of Begbies Traynor, said: “As the threat of public sector job cuts became a reality in the past few months, a North/South divide has begun to emerge, with the South-East and London areas showing much greater economic resilience than the rest of England and Wales.

“Many of the regions worst affected – such as the North-East and North of England – are heavily dependent on the public sector, so it is telling that these areas are witnessing increased levels of financial distress.”

The only regions where there was a fall in the number of companies experiencing difficulty were London, where the figure fell by 6%, and the South-East, which saw a 3% drop.

The full impact of the public sector job losses has yet to be felt in Scotland, where there was a 4% fall in the number of companies experiencing difficulties.

Data provided recently by the Office for National Statistics indicated that 110,000 public sector workers lost their jobs in the first two quarters of 2011 alone, compared to initial estimates of 20,000 for the year as a whole.