WHEN recession hit Hartlepool in 2008 it hit hard, says Billy Reid, the owner of a local key-cutting and engraving business. His stall in the shopping centre—an ugly grey 1970s box that dominates the centre of the town—sits between gaps where other firms have disappeared. “We lost the Woolworths, we lost Superdrug. I’ve got two staff and just this year for the first time I’ve had to cut their hours,” he says. Nobody is moving house and nobody has much money—so few people need keys cut or gifts engraved.

Britain’s economy is finally crawling out of recession. On October 8th the IMF sharply upgraded its growth forecast for 2013. But the recovery is far from evenly spread. In London and the south-east, house prices and employment are soaring. In places such as Hartlepool, a former shipbuilding and steel town in Teesside, on the north-east coast of England, there is precious little sign of improvement. The local unemployment rate is almost twice the national average, at 13%. Last year there was nobody in work in 30% of the town’s working-age households.

Partly, this reflects the extraordinary success of London and continuing deindustrialisation in the north of England. Areas such as Teesside have been struggling, on and off, since the first world war. But whereas over the past two decades England’s big cities have developed strong service-sector economies, its smaller industrial towns have continued their relative decline. Hartlepool is typical of Britain’s rust belt in that it has grown far more slowly than the region it is in. So too is Wolverhampton, a small city west of Birmingham, and Hull, a city in east Yorkshire.

In Hartlepool, 28% of shops are empty, according to the Local Data Company, a private research firm. Chain stores, widely blamed for destroying high streets in richer bits of Britain, are mostly absent. In nearby Middlesbrough, whole streets of terraced houses are boarded up—the legacy of a failed plan to renew the market by knocking down old houses and building new ones. In Hull, teenagers in baseball caps and tracksuits wander aimlessly.

The divide is likely to widen more quickly over the next decade. From around 2001 until 2010, under the Labour governments of Tony Blair and Gordon Brown, much of Britain’s growth came from higher government spending. More and better-paid government employees—and welfare recipients—provided an adrenalin shot for the private sector. Today that process has reversed, as the government tries to cut its way out of an enormous fiscal deficit. Welfare spending and council budgets are falling especially quickly in poorer small towns. In Wolverhampton, the local council has announced plans to sack 1,000 staff by 2015—around 20% of its workforce. In Hartlepool, welfare cuts are worth £712 ($1,135) a year from each working-age resident, according to researchers at Sheffield Hallam University. During the boom years, the hope was that injections of money from the national treasury, the European Union and the National Lottery could spruce up post-industrial towns and attract new businesses, easing people off welfare into work. In struggling towns all over Britain, wave-roofed new libraries, civic centres and sixth-form colleges shot up. In Hartlepool, the docks were converted into a pleasure marina. The names of these buildings reflected the edginess of the architecture. Hull’s aquarium is called “The Deep”; West Bromwich, near Wolverhampton, got a lavish arts centre named “The Public”. This made tough towns somewhat better to live in, and helped soften rough reputations. But it did little to reverse long-standing economic decline. And the slump has undone some of the progress that was made. “The Public” will shortly close: the council cannot afford to pay for its upkeep. On the edge of the marina in Hartlepool, an ugly wasteland sits behind a sign advertising “luxury sea view apartments” which were never built. In Wolverhampton, a car park ringed by empty shops marks the spot where Irish investors pulled out of building a £300m shopping centre in 2008.

To turn around, these towns will have to attract a reliable stream of outside money. In this, Wolverhampton has had the best luck recently. The i54 business park outside the city will soon be home to a new Jaguar Land Rover engine factory, which will employ 1,400 workers. Other manufacturing companies nearby may be picking up, too. David Sedgley, the founder of Roadlink International, a firm that rebuilds brake parts for trucks, says that demand has soared in the past few months.

A factory will sustain local shops. But it may not get many local people off the dole. Dan Wainwright, a journalist at the Wolverhampton Express and Star, worries that jobs at the JLR plant will go to skilled engineers who will commute in from pretty villages in Worcestershire, rather than to the unemployed in Wolverhampton. The company’s factory in Solihull, near Birmingham, draws workers from as far away as Wales.

Fully 22% of people in Wolverhampton have no qualifications—against a national figure of 9%. As in Hull and Hartlepool, while not all the local schools are bad, their overall performance is appalling. Wolverhampton at least, unlike Hull and Hartlepool, is relatively well-placed, with direct and relatively frequent trains to London and Birmingham. Teesside and east Yorkshire struggle from their geographical isolation—getting to nearby cities, yet alone London, is painfully slow.

And even with growth, the most ambitious and best-educated people will still tend to leave places like Hull. Their size, location and demographics means that they will never offer the sorts of restaurants or shops that the middle classes like. In America, cities that decline must redefine themselves, says Bruce Katz of the Brookings Institution, a Washington-based think-tank. Like a man who has lost weight, they have to get new clothes that fit—shrinking their boundaries and ambitions. Britain’s failing towns struggle on indefinitely in their old industrial shape and size.