The Mayor of London, Sadiq Khan has reiterated on Wednesday the urgent need for further employment support once the furlough scheme ends, as new analysis from the GLA shows that London’s economy may take more than three years to recover from the pandemic.
The Mayor has warned of a ‘looming unemployment crisis’ when the Government’s furlough scheme ends at the end of October. The latest GLA macroeconomic analysis shows that employment levels in London may not recover to pre-crisis levels until as late as 2023, with employment levels in London contracting by 5.5% next year.
The size of London’s economy in terms of gross value added (GVA) is now expected to fall by 10.5% in 2020, with pre-crisis levels of GVA not projected to be reached before the end of 2022.
These projections are for a central scenario, sitting between the best and worst-case outcomes for the economy. They assume that social distancing and other forms of restrictions remain in place until later in 2021 when a vaccine might become accessible. They also assume a conventional free trade agreement comes into force with the EU in January 2021. Without it a slower recovery will see London’s economy return to pre-pandemic levels even later.
The GLA projections further highlight that it will be sectors such as hospitality, arts and entertainment that will be hardest hit. Following likely job losses this year as the furlough scheme is ended, both these sectors will see employment opportunities reduce by a further 10% in 2021. Latest ONS figures show that the UK economy grew by 6.6% in July, but output remains far below pre-pandemic levels.
The Mayor has today reiterated how these figures show the ongoing need for targeted, financial and fiscal support for London’s businesses. This includes the Government providing a targeted extension of the Coronavirus Job Retention Scheme (CJRS) for retail, hospitality, leisure, and the creative industries – where many businesses will be unable to operate on a financially sustainable level under continued social distancing requirements.
As many of these businesses make key budgeting decisions over the next few weeks, the Mayor is also urging the Government to confirm an extension to the business rates holiday for the retail, hospitality and leisure sectors, which is due to end in March. Central London businesses continue to face a ‘perfect storm’ of continued home working, restrictions on domestic and international tourism, and the requirement for continued social distancing for the foreseeable future until a viable COVID vaccine is found.
Mayor of London, Sadiq Khan said, “We face a crucial few weeks to tackle the impact of this pandemic – both an ongoing health crisis which we cannot afford to be complacent about, and also an economic crisis which could lead to major job losses unless further action is taken.
“Our new analysis confirms that the economic fallout of the virus will last until a vaccine is found. Ministers need to wake up to the looming unemployment crisis as businesses are faced with no choice but to cut jobs as low footfall and social distancing continues.
“The Government must urgently announce a comprehensive package of new financial support for those sectors hardest hit by COVID-19, and this must include an extension of the business rates holiday beyond next March as well as continued support for job retention. With so many employers on a financial knife edge making decisions for next year, time is running out.”