Capital Set For Largest Decline In Employment This Year, Says New Report
A new economic study predicts London has the most to fear from the impact of lockdown and Brexit. Lawyers argue that the findings mean the government’s levelling up agenda can’t be too simplistic when assessing the north-south divide and the wider needs of the nation.
The latest UK Powerhouse report by law firm Irwin Mitchell and the Centre for Economics and Business Research (Cebr), reveals that London will witness the largest decline in employment in Q4 2021 of any of the 50 locations in the study* and a fragile return to economic growth.
At the end of last year, London was in the bottom 20 cities for GVA** growth. Inner London was on -7.1% GVA; while it was similar picture for year on year employment, with Outer London the worst performing city in the report, on -8.4%.
By the end of Q4 2021, the economic outlook improves slightly, but Outer London is set to remain among the 20 worst performing, on 6.2% GVA. The overall picture in terms of employment is disappointing, with London in the bottom five of all 50 UK cities surveyed.
Thanks to its large accommodation and food services sector making liberal use of the furlough scheme, Outer London is expected to witness a 5.4% fall in employment when the scheme ends.
HMRC data shows 56% of employees in this sector using the furlough scheme and coupled with the same percentage on furlough in London’s arts, entertainment and recreational industries, the capital is expected to see many jobs at risk of redundancy when the furlough scheme ends.
UK Powerhouse makes several recommendations to tackle the difficulties business face coming out of lockdown. These include the need to take advantage of policies to encourage investment and improve skills and local government having bespoke plans in place to support job creation.
The UK Government also needs to prioritise implementation of the TCA with as little disruption as possible to businesses and negotiating a smoother trading relationship with the EU post Brexit.
Expert Opinion“Only 36% of cities in the report are expected to increase employment levels in Q4 2021 but London’s figures make chilling reading and suggest the capital may be the hardest hit by the twin challenges of lockdown and Brexit.
“London also boasts the second highest share of businesses that export to the EU, making up a quarter of the total and while an advantage, this does leave the capital vulnerable to negative impact from Brexit in terms of trade in both products and services.
“Foreign Direct Investment is also going to form an important part of any recovery but with Financial Services by far the biggest recipient of FDI in the UK, this also represents both an opportunity and a threat to London, given its position as a centre for global financial services.
“While a levelling up agenda is necessary, the report suggests it may not be as simple as London and the South East versus the rest of the UK. London clearly has its fair share of problems and on paper, has more to lose than other UK cities from the after effects of lockdown and Brexit.
“There is a case to be made for levelling up but also for a nuanced approach that recognises it’s less about north versus south but the unique needs of individual cities in given regions.
“In some cases, bespoke solutions will be required rather than a one size fits all approach and the more business have the tools and backing to implement targeted change, the better placed UK cities and regions will be to face the diverse economic and social challenges ahead.” Victoria Brackett - Group Chief Commercial Officer