London’s recovery from the Covid lockdowns has been well documented and hustle and bustle is back on our high streets: the flow of people along the pavement, the queue for the butcher, the long wait at the barber, a bit of a crowd around the fruit and veg stall.
We’re back to normal, it seems. Indeed, business activity sentiment has been upbeat since last January and other key economic indicators have been positive: there are 92,500 more workforce jobs in the first quarter of 2022 than in the previous one and public transport passenger journey numbers, that beloved bellwether, continue to edge up. And yet London’s economy is still not back to where it was before the pandemic and momentum is starting to flag.
The latest quarterly survey from the London Chamber of Commerce and Industry (LCCI), with data collected up to the end of May, casts a downbeat mood. There have been encouraging signs of a recovery in London as the number of inbound tourists from abroad has increased and office workers have made more journeys into the centre, but domestic sales have plateaued, business confidence has slumped and costs are rising sharply for London companies. James Watkins, LCCI’s head of policy and public impacts, notes that worries “over inflation, rising borrowing costs and a tight labour market are growing as well”.
Economists at the Greater London Authority too are concerned about the outlook. They find that the recovery in London’s labour market appears to be slowing and the reduction in unemployment stalling: the rate was virtually unchanged on the previous quarter and, for the first time this year, the claimant count rate for May has not fallen on the previous month. We are moving into choppy waters.
Joe Dromey, director of Central London Forward (CLF), a partnership of 12 London local authorities, agrees that the recovery in employment is tailing off and fears it could go into reverse. The cost-of-living crisis means wages are not keeping up with prices and household budgets are coming under pressure. Many families who have never felt themselves to be struggling will have to review their spending patterns. In-work poverty will grow and as families retrench discretionary spending on things like retail, hospitality and entertainment will be cut back. Jobs will be lost and some businesses forced to close.
CLF has a number of programmes designed to support those unemployed or currently inactive with improving their basic skills and getting on to training schemes, perhaps in a sector with vacancies they had not previously considered working in, such as childcare or social care.
However, for Dromey the policy response from the government will be key. Shoring up the social safety net and providing further help with offsetting rising energy prices could mitigate some of the potential harm. Clearly the current policy drift is not helping. Many of those Conservative politicians seeking to become the next Prime Minister have been indirectly addressing the cost-of-living crisis with ever more unrealistic promises of future tax cuts. But the failure to discuss how best to help families in need through this autumn and winter with energy bills et to soar again does not augur well.
Richard Derecki is an economist and governance expert who has worked for the 10 Downing Street strategy unit and the Greater London Authority. Follow Richard on Twitter.
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