The Local Divide: London; `Longest five-minute walk in the world'

A DECADE ago, the left-wing council of Hackney in the East End of London hung a banner on the town hall displaying the number of people out of work. Today the only banner advertises a local fair, but unemployment is as severe and divisive a problem as ever.

In the north of the borough one in four is out of work - the second highest rate in the country. Yet less than three miles away in the City of London and Westminster, the rate is 0.4 per cent - the lowest for any parliamentary constituency.

Three miles in a different direction stands Canary Wharf. There the contrast is obscene. The American-style complex employs 50,000 mainly skilled City workers relocated from the Square Mile. Under the tower's gaze lie East Ham (18.5 per cent jobless), West Ham (12.4 per cent), Poplar & Canning Town (9.4 per cent) and Bethnal Green and Bow (7.0 per cent).

London's history is similar to the UK's other ex-industrial areas - but with all the disasters and none of the triumphs. While the decline of heavy industry was offset by call centres, foreign car-makers and hi-tech industries, east London gained Canary Wharf.

Between 1971 and 1982, London lost 42 per cent of manufacturing jobs, from 1.1 million to 630,000. It now accounts for 280,000, according to the London Research Centre. The docks, which shut in 1981, employed 30,000 at their peak. Ken Coello, of the East London Partnership, set up by big business to alleviate local unemployment, admits no more than 10 per cent of the Wharf's workers are local.

He is urging the big banks to change their procurement and recruitment policies. "Trickle-down economics is not enough; we need some social engineering. You only need a few black or Asian kids to get jobs before the message gets out," he said.

Employers had a choice not to exclude their neighbours. "Otherwise you get a vicious circle of decline," he said.

Phil Newby, Hackney's director of regeneration, said more cash was needed to alleviate problems in education, housing, health and the skills base. "London is overlooked because of political pressure from the North. It is viewed as a rich metropolis when in fact it has huge swaths that are desperately poor."

Half of Hackney's residents live in social housing, 38 per cent receive benefits and the average annual income is pounds 10,000. In contrast, at least 1,000 City traders received a bonus of pounds 1m this year - a total of pounds 1bn, or 0.25 per cent, of total UK consumer spending.

As the super-rich push the middle class into areas such as Hackney, house prices have risen 22 per cent in the past year. The economist David Hillier of Barclays Capital said demand for purpose-built homes from financial workers pushed house prices up 19.5 per cent in Tower Hamlets despite 7.1 per cent unemployment.

Ken Livingstone, MP for Brent East where 12.7 per cent are jobless, said 2 million Londoners were trapped in bad housing and had low job prospects. "If this was a free-standing city there would be a cabinet taskforce. But because people commute through these areas from the suburbs to the City, it is not seen as a problem," he said.

Mr Coello said the "longest five-minute walk in the world" was from the City to the Bang-ladeshi area of Brick Lane.