Economic output from Greater London is expected to have dropped by £44 billion or 9.5% by the end of this financial year as the result of the pandemic according to a projection report by Greater London Authority economists, prompting further calls by Sadiq Khan and London business leaders for additional government support for key sectors.
Asking for an extension of the current Business Rates holiday to beyond March, the abandonment of plans to end VAT-free shopping, and for support for jobs beyond what Chancellor Rishi Sunak announced last week, the Mayor warned that the government “cannot afford to take for granted London’s economy firing on all cylinders” and underlined the capital’s huge tax contribution to the Treasury’s coffers.
The report by GLA Economics, City Hall’s economics unit, anticipates the capital’s growth rate recovering in 2021/22 and 2022/23 but that the number of workforce jobs will shrink by around 350,000 or over 5% next year along with falls in household income and expenditure.
It describes the Covid-19 crisis as “a major negative economic shock unlike anything seen in at least the last 120 years” but says “strong growth” at national level “would mostly offset the output losses in 2020” with a vaccine assisting “a gradual return to normality next year”.
Some of London’s largest economic sectors, notably financial services, property, professional and technical work and information and communications, are described as having been “hit less severely by lockdown restrictions” and as having “a relative greater proportion of workers being able to work from home,” the report says.
At the same time it warns that “these positive effects might be offset by other features, such as the high reliance of London workers on public transport – which will be very limited in capacity for a long time – and a very negative shock in terms of tourism and international students in the capital. There may also be a large and persistent negative shock for certain sectors such as accommodation and food services, arts, entertainment and recreation, education, and other services”.
Richard Burge, chief executive of the London Chamber of Commerce and Industry (LCCI), pointed to a “huge loss of both tourist and commuter revenue” resulting in the capital experiencing the “most job losses of any region due to Covid-19”. He underlined the call of the LCCI and the Central London Alliance, of which it is a member, for more “targeted support” for London.
Jasmine Whitbread, chief executive of London First, Echoed Mayor Khan’s points about Business Rates and VAT and specified the need for help for “those firms that cannot trade normally, particularly in culture, leisure, retail and hospitality”.
The wide-ranging GLA Economics report says that the future trading relationship between the UK and the European Union continues to be the greatest risk to the UK economy beyond the Covid crisis, with the uncertainty surrounding it potentially affecting their forecasts.
“As the EU receives the highest amount of London exports, the UK’s future relationship with the block will have a significant impact on London’s economic outlook,’ the report says. “The conclusion of the transition period at the end of December is likely to bring disruption because of a lack of preparedness on the part of both business and government.”
London’s economy has been producing around £450 billion a year by the gross value added measure and generating taxes spent in other parts of the UK up to £40 billion annually.
Photograph: Boxpark Croydon.
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