How Osborne's cuts are creating a two-speed Britain

New report reveals how cities reliant on public sector employment are falling behind their rivals

The wealth gap between Britain's most prosperous and poorest cities is widening as the economic crisis hits hardest in areas most dependent on public sector jobs, research reveals today. Cities like Hull, Sunderland and Swansea are struggling to cope with widespread redundancies and are seeing wages failing to keep pace with prices.

Click here to see 'Two-speed Britain in: winners and losers' graphic

London, Cambridge, Edinburgh and Aberdeen are bucking the trend because of their high skill levels and large numbers of jobs in private companies.

The Centre for Cities think-tank report shows that although unemployment has risen in every major city in the UK, the rate at which dole queues are lengthening is varying dramatically.

The Centre says the difference between unemployment in Hull and Cambridge has almost doubled since early 2008. And there are six times as many claimants in the most deprived parts of Rochdale than in the poorest areas of Cambridge.

Its annual report into 64 major centres of population, Cities Outlook, says that places with relatively few private sector jobs will find it harder to recover, citing Doncaster, Newport and Grimsby as facing a "challenging" future – particularly as austerity bites. Cities with large numbers of workers in heavy industry – mainly in the Midlands and the North – are also finding it hard to ride out the economic storm.

The report reveals there is a broad North-South division in how successfully different cities are coping with the downturn. But the division is not clear cut, with Edinburgh, Aberdeen and York relatively resilient.

The report shows seven cities – six in the North of England and one in Scotland – lost population in the last decade. They are Birkenhead, Burnley, Sunderland, Rochdale, Liverpool, Grimsby and Dundee.The fastest-growing was Milton Keynes, whose population rose more than 15 per cent, followed by Cambridge and York.

Alexandra Jones, chief executive of Centre for Cities, said: "The year ahead is going to be tough for all UK cities, but Cities Outlook 2012 shows that some cities are well-placed to kick-start economic growth.."

She urged the Coalition Government to afford all cities in the UK greater freedom, by giving them "the financial and political powers they need to make the right decisions for growth".