London will emerge from the Covid-19 pandemic “poorer as a city” and “picking up the pieces will take a long time”. That was the stark warning from economist Vicky Pryce, as the London Chamber of Commerce & Industry unveiled full details of its latest polling highlighting the dramatic impact of the crisis on business in the capital – figures which “take your breath away”, according to chamber chief executive Richard Burge.
Firms across the city are suffering significant hits to cashflow and to domestic and overseas sales, the poll showed. The hospitality sector is the hardest hit by plummeting revenues, with 75 per cent of businesses seeing cashflow nosedive. Employment levels are also down significantly, with 42 per cent of firms reducing payroll and only one in 10 looking to recruit.
And half of all businesses – large as well as small – expect turnover and profits to continue to decline, with two-thirds expecting overall economic conditions in London to get worse, said pollster Oliver Wright from Savanta Comres, which has conducted the quarterly poll, the largest regular snapshot of business sentiment in the capital, since 2014. “The declines we see in this quarter are simply unprecedented. To see drops like this is quite astounding.”
The government must now step in to extend its furlough scheme beyond October “for sectors that remain severely depressed”, said Burge. Customs services also needed to be ready to allow efficient movement of goods and services in and out of the UK by January, he added. “Any delays will hamper the economic recovery.”
Economists had been forced to “redraw the scales” on their charts to reflect the depth of the crisis, said Pryce, with GDP down 25 per cent year on year, compounding a reining back of growth and investment following the UK decision to leave the EU.
The government’s “levelling up” agenda could mean London missing out on resources for recovery, she warned, with the capital’s public finances already suffering and transport in the city made more expensive by the terms of the Transport for London bailout.
The capital had shown signs of resilience, with its service-based economy allowing more home working, and latest figures showing retail sales up 12 per cent in May. But the threat of unemployment was high, Pryce said, echoing her comments published alongside the survey results: “The risks remain that at the end of the furlough scheme redundancies will rise sharply and many SMEs and larger companies will not exist or will emerge in a much reduced state, unless help continues.”
Figures released separately by the Chamber last week revealed two-thirds of companies with 10 or more employees had furloughed staff, with a quarter of firms participating in the furlough scheme expecting to lay off workers when it comes to an end.
City Hall analysis shows just over a million workers in the capital supported by the furlough scheme during lockdown – some three in 10 employees. Claims for unemployment-related benefits in the capital are also soaring – up 167 per cent since March, against a UK-wide increase of 126 per cent, with the largest increases among 25 to 29-year-olds and the highest rates in West Ham, Tottenham and East Ham.
Last week Mayor Khan also called for the job support scheme to be extended, warning of a “looming unemployment crisis” in the capital, particularly affecting deprived and BAME communities. According to the Centre for London think tank, 28 per cent of Londoners have struggled to “make ends meet” during the lockdown.
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I think it’s going to hit London hard, especially if any offices don’t come back and work from home becomes a new reality. That will have a massive impact on shops, cafes, bars etc… In inner and central London.
One of things about London, is how many immigrants work in hospitality. Some of the hit could be taken by them if they simply leave the capital and go home. I wouldn’t be surprised to see a significant chunk of people leaving the capital once people realise their jobs aren’t coming back. Many young people in London without family here, I’d imagine quite a few leave.