Kick-starting the London economy is a vital step in UK-wide recovery

Kick-starting the London economy is a vital step in UK-wide recovery


As shops, bars, restaurants and cultural attractions reopened in the last few weeks, Central London has slowly begun to see visitors from across the city and country come back to its streets. This is of course a very welcome sight for all of us who have worked to support our businesses throughout the pandemic. We hope that the summer will provide a much needed respite to all of the business owners who fought hard over consecutive lockdowns to keep their business afloat. However, we should not expect an immediate return to the vibrant tourist-filled streets and shopping areas that London once enjoyed.

There are fewer shops, cafes and restaurants reopening, despite the furlough and business grant schemes that the Chancellor put in place. Retailers and hospitality owners, trying to plan for the future, are looking at their long term fixed costs and they see high business rates returning much quicker than high footfall. For years, this tax has chipped away at the competitiveness of bricks and mortar retail, and now the pandemic has significantly accelerated the shift online. The result has been job losses across the board.

On nearly every economic measure, London fared worse than other UK cities during the pandemic. Nearly one in three workers in central London have been furloughed, while the capital has seen a staggering 161% increase in the unemployment claimant rate.  The latest figures show that 2.5 million Londoners are now living in poverty.

With global vaccination efforts a long way behind the UK, we are probably a year away from a return to high tourist numbers. More important now is to persuade the millions of commuters that once flocked to central London on a daily basis that it is safe to return to their place of work. London ranks almost last on the Centre for Cities high street recovery tracker, which measures city centre footfall. At the end of February 2021, London’s footfall was at 15% of pre-pandemic levels. It is too early to tell the extent to which the pandemic has changed the working patterns of London commuters for good.

Before the pandemic, it was only because London was so successful that the Government could contemplate a levelling up agenda which involved capturing so much of London’s wealth and redistributing it to less prosperous areas in the Midlands and North. After the pandemic, the Government will have to think again, and fully understand the devastating impact that lockdowns have had on our city before deciding its priorities.

We need to move to away from a simplistic public discourse which pitches the South against the North in a battle for resources, toward the recognition that we are interdependent. When London was thriving, its businesses made a surplus investment to other regional economies across the UK of over £125 billion through the purchase of goods and services.  We sink or swim together. An economically resurgent central London is essential if all parts of the economy are to be rebuilt and revitalised.

From food and drink in London restaurants and hotels, to the tarmac on our roads, to the clothes in our shops, the merchandise in our museums and sports grounds, and the technology in our homes and offices, much of these are supplied to London from outside. The trade and supply chains linkages between London and the rest of the UK economy mean that for every pound of consumption or investment in London, 24p of production is generated elsewhere in the UK. Without a London recovery, this investment – vital to regional economies across the country – will be lost.

London has got to be seen as the starter motor of the engine driving levelling up – not as a handbrake to it.  It is a city whose people possess an indomitable, enterprising spirit.  Central and local government must now do their bit to support business – be that by reforming the business rates system, by equipping people with new skills for new jobs, or by replacing the sclerotic EU State subsidy scheme with a more dynamic British alternative.

The national support schemes that came to the rescue of business at the start of the pandemic could be replaced by tailored local support schemes for the recovery phase. Supporting London’s commerce, restaurants, museums, galleries and theatres this summer will transform the state of the Midlands Engine and Northern Powerhouse. It will happen because we have an interdependent economy which promotes millions of nationwide transactions each day – not on account of a central government bureaucrat in Whitehall or Leeds redirecting diminishing tax receipts.

Councillor Elizabeth Campbell is Leader of Royal Borough of Kensington and Chelsea and Chair of Central London Forward – 03.06.2021

This article was originally published by CBI