Spending cuts 'could spark regional brain drain'

The Government's spending cuts could trigger a damaging "brain drain" in regions outside the South East, the Work Foundation has warned.

In a new report, the think tank claimed that the North and Midlands are particularly at risk because they have high proportions of young graduates working in the public sector.

Over the long-term, it predicted a flight away from these areas towards the private sector in and around London, which would reverse over a decade of university leavers between 20 and 29 "spreading out" across the country thanks to expansion of public sector employment.

It also warned that graduate unemployment, which currently stands at 20 per cent, is likely to increase in the short term.

The study's author, Jonathan Wright, said: "High skill levels have become vital to the success of city economies. The benefits extend beyond the highly skilled: both the wages and chances of employment of low skilled people are increasingly determined by their proximity to highly skilled workers.

"Initiatives must therefore be put in place for cities previously reliant on the public sector to retain graduates. Not doing so risks exacerbating regional divides between successful cities and regions mainly located in the South East and those in the North and Midlands."

The Work Foundation report comes after the Labour Market Outlook from KPMG and the Chartered Institute for Personnel and Development showed 66 per cent of public sector employers plan to reduce the size of their workforce in the first quarter of 2011.