The Mayor of London Sadiq Khan has made his official submission to the Government’s Comprehensive Spending Review (CSR) with a warning to ministers that without further measures to support London’s economy it will hamper the entire UK’s recovery from coronavirus.
With the Prime Minister announcing further restrictions to stop the spread of COVID-19 that are likely to last at least six months, Sadiq is calling for an ‘urgent’ new package of financial support for the retail, hospitality, leisure and cultural sectors hardest hit by the pandemic, alongside a further extension of the business rates holiday. The Mayor reiterated that these measures are essential to prevent further unemployment in these key sectors, despite the support offered by the Government’s new Jobs Support Scheme.
City Hall’s submission to the Comprehensive Spending Review (CSR) lays bare the centrality of London’s key economic sectors to the UK’s prosperity. The capital’s economy accounts for a quarter of the UK’s total economic output and contributes a net £38.7 billion to the Treasury, with London’s creative industries generating £58.4 billion for the UK economy alone.
For every £1 spent on the London Underground investment alone, 55p is paid to workforces located outside London, with TfL contracts contributing around £6.4bn to the economy overall. London’s economic output is twice the size of the economies of Scotland and Wales put together.
The CSR submission makes clear the threat to these key economic sectors in the capital and therefore the UK’s recovery without further Government support. In the cultural sector 152,500 jobs are now at risk – the majority of which are in London. And with footfall in the West End currently standing at around 30 per cent of normal levels, there is a predicted loss of more than £5 billion in retail sales within London’s central district this year alone.
The Mayor further criticised the Government’s approach of excluding London from many of their recent spending announcements. Last month ministers announced £900M new investment in 300 ‘shovel-ready’ projects for new housing and infrastructure in England, but London only received a £22M share.
The Mayor of London, Sadiq Khan told LondonLovesBusiness, “For years London has been the powerhouse of the UK economy – and ministers need to realise that it will be London’s recovery that will power the UK’s economic recovery through this pandemic.
“In the short term our world-famous retail, hospitality and cultural industries which contribute billions to the UK every year face an acute financial crisis. That’s why more targeted financial support in these sectors is needed so urgently to prevent further unemployment across the capital.
“But more longer term, with London accounting for a quarter of the UK’s economic output, the Government’s approach of starving the capital of investment will do nothing more than hamper the UK’s economic recovery from COVID as a whole.
“As I have outlined in my submission to Government, whether investment in transport, housing or our creative industries, London’s success has a direct economic benefit creating jobs all across the UK, while contributing a net £38.7 billion to the Treasury. Instead of knocking London, the Government should be investing in the city so that it continues to fire on all cylinders. The fact is the country needs a successful London. Put simply, there can be no national recovery without a London recovery.”
The Greater London Authority Group faces a forecast £493m budget shortfall over the next two years as a result of an unprecedented loss of business rates and council tax income, caused by Covid-19.
Separately, TfL needs at least £5.65 billion over the next 18 months because of lower public transport use during the pandemic and costs to complete the Crossrail project. Since the Comprehensive Spending Review in 2015, TfL has become more reliant on fares income than any other major transport authority across the world. But this source of income fell by around 90 per cent as a result of lockdown, and will be nowhere near returning to normal levels as long as social distancing measures are in place.
Prior to the pandemic, TfL had made huge strides to improve its financial resilience. During the last four years, it had made almost £1 billion of savings across the organisation and had built up cash reserves of more than £2 billion. As recently as March 2020, TfL was on track to reduce its like-for-like operating deficit for the fourth consecutive year, with a plan to turn this into an operating surplus during 2022/23.