A hundred years ago, which English cities were most vulnerable to economic change?

She’s probably an iPhone now. Image: Getty.

The latest instalment of our series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Britain’s cities. 

One of the more fascinating subplots in this year’s Cities Outlook report, published back in January, takes the form of a flashback. Back in 1911, just as in 2018, a significant share of the workforce had jobs that were at risk from technological change.

Back then, the biggest threat was automation: over the next few decades, the rise of labour saving devices like washing machines would wipe out an entire class of jobs in domestic service. Over the same period, better communications technology would wipe out assorted porter and messenger jobs, while the rise of the supermarket would kill off various door-to-door delivery jobs.

The idea that, say, telephones or tumbledryers are a bad thing looks distinctly silly from a modern perspective. If you were one of the people whose income was at risk, though, you may have had other ideas. This chart shows some of the jobs under threat:

By my count, that’s nearly one in eight of the workforce, whose jobs were about to get wiped out by new technology.

It’s also worth looking at a map showing where these changes would be felt most. On this map, dark green dots represent English cities which would see the highest numbers of job losses due to automation. What do you notice about it?

Click to expand.

At first glance this is pretty surprising. In many southern English cities – which even in 1911 were pretty prosperous, and now are leaps ahead of the north – between a sixth and a quarter of jobs were at risk from automation, far higher than in many northern industrial centres.

Think about this for a moment, though, and it makes sense. Rich southern cities were more likely to have households stuffed with domestic servants. But those cities did not stop being rich just because they replaced maids with washing machines.

Here’s another map, showing which cities had large numbers of jobs in another vulnerable sector, mining and manufacturing:

Click to expand.

This time it’s a more familiar pattern: it’s in the industrial cities of the midlands and the north where the threat was greatest. The numbers are also much bigger than those on the first map. Every city was looking at losing over 10 per cent of its jobs; for most in the industrial heartland it was over a third, and in some it was nearly 70 per cent.

There are, best I can see, three takeaways from all this. The first is that not all job destruction is bad: the rise of the modern home put an entire class of domestic servants out of work, but it was also clearly positive for the society as a whole. Nobody today seems likely to swap their washing machine and tumble dryer for a live in servant, let alone the opportunity to take a job as one.

The second is that some job destruction is much more traumatic. The cities that lost jobs to washing machines are largely fine today; many of those which lost jobs in mining and manufacturing aren’t. The cities on that second map where the job losses were greatest are, with few exceptions, still struggling today.

The third lesson requires another map. Almost everywhere, there were more jobs overall in 2016 than there were in 1911:

Click to expand.

This trend isn’t quite universal, and several of the cities which have lost jobs are among those whose dependence on manufacturing made them most vulnerable in 1911. Nonetheless, the trend is clearly towards more jobs rather than less.

The British economy is once again – or perhaps, more accurately, still – facing radical change. The future is unpredictable, and the past is not always a guide. Nonetheless, I do remain suspicious of those who argue that new technologies which destroy jobs today will automatically mean fewer jobs tomorrow. They haven’t before.

You can read the whole of Cities Outlook 2018 here.

Sources of data: Census 1911 (England and Wales only); University of Portsmouth, A Vision of Britain Through Time.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

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High streets and shopping malls face a ‘domino effect’ from major store closures

Another one bites the dust: House of Fraser plans to close the majority of its stores. Image: Getty.

Traditional retail is in the centre of a storm – and British department store chain House of Fraser is the latest to succumb to the tempest. The company plans to close 31 of its 59 shops – including its flagship store in Oxford Street, London – by the beginning of 2019. The closures come as part of a company voluntary arrangement, which is an insolvency deal designed to keep the chain running while it renegotiates terms with landlords. The deal will be voted on by creditors within the month.

Meanwhile in the US, the world’s largest retail market, Sears has just announced that it will be closing more than 70 of its stores in the near future.

This trend of major retailers closing multiple outlets exists in several Western countries – and its magnitude seems to be unrelated to the fundamentals of the economy. The US, for example, has recently experienced a clear decoupling of store closures from overall economic growth. While the US economy grew a healthy 2.3 per cent in 2017, the year ended with a record number of store closings, nearly 9,000 while 50 major chains filed for bankruptcy.

Most analysts and industry experts agree that this is largely due to the growth of e-commerce – and this is not expected to diminish anytime soon. A further 12,000 stores are expected to close in the US before the end of 2018. Similar trends are being seen in markets such as the UK and Canada.

Pushing down profits

Perhaps the most obvious impact of store closures is on the revenues and profitability of established brick-and-mortar retailers, with bankruptcies in the US up by nearly a third in 2017. The cost to investors in the retail sector has been severe – stocks of firms such as Sears have lost upwards of 90 per cent of their market value in the last ten years. By contrast, Amazon’s stock price is up over 2,000 per cent in the same period – more than 49,000 per cent when considering the last 20 years. This is a trend that the market does not expect to change, as the ratio of price to earnings for Amazon stands at ten times that of the best brick-and-mortar retailers.

Although unemployment levels reached a 17-year low in 2017, the retail sector in the US shed a net 66,500 jobs. Landlords are losing longstanding tenants. The expectation is that roughly 25 per cent of shopping malls in the US are at high risk of closing one of their anchor tenants such as a Macy’s, which could set off a series of store closures and challenge the very viability of the mall. One out of every five malls is expected to close by 2022 – a prospect which has put downward pressure on retail real estate prices and on the finances of the firms that own and manage these venues.

In the UK, high streets are struggling through similar issues. And given that high streets have historically been the heart of any UK town or city, there appears to be a fundamental need for businesses and local councils to adapt to the radical changes affecting the retail sector to preserve their high streets’ vitality and financial viability.


The costs to society

While attention is focused on the direct impacts on company finances, employment and landlord rents, store closures can set off a “domino effect” on local governments and businesses, which come at a significant cost to society. For instance, closures can have a knock-on effect for nearby businesses – when large stores close, the foot traffic to neighbouring establishments is also reduced, which endangers the viability of other local businesses. For instance, Starbucks has recently announced plans to close all its 379 Teavana stores. Primarily located inside shopping malls, they have harshly suffered from declining mall traffic in recent years.

Store closures can also spell trouble for local authorities. When retailers and neighbouring businesses close, they reduce the taxable revenue base that many municipalities depend on in order to fund local services. Add to this the reduction in property taxes stemming from bankrupt landlords and the effect on municipal funding can be substantial. Unfortunately, until e-commerce tax laws are adapted, municipalities will continue to face financial challenges as more and more stores close.

It’s not just local councils, but local development which suffers when stores close. For decades, many cities in the US and the UK, for exmaple Detroit and Liverpool, have heavily invested in efforts to rejuvenate their urban cores after years of decay in the 1970s and 1980s. Bringing shops, bars and other businesses back to once derelict areas has been key to this redevelopment. But today, with businesses closing, cities could once again face the prospect of seeing their efforts unravel as their key urban areas become less attractive and populations move elsewhere.

Commercial ecosystems featuring everything from large chain stores to small independent businesses are fragile and sensitive to change. When a store closes it doesn’t just affect employees or shareholders – it can have widespread and lasting impacts on the local community, and beyond. Controlling this “domino effect” is going to be a major challenge for local governments and businesses for years to come.

Omar Toulan, Professor in Strategy and International Management, IMD Business School and Niccolò Pisani, Assistant Professor of International Management, University of Amsterdam.

This article was originally published on The Conversation. Read the original article.