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New study shows ‘one in ten’ Londoners to be unemployed by December

London’s unemployment total is expected to peak at 9.4% – or 464,000 economically active residents – by the end of this year, according to new forecasting commissioned by London Councils.  

The research suggests a rising tide of unemployment due to Covid-19’s impact and the end of the furlough scheme in September.

While an unemployment peak of 9.4% of economically active Londoners by December 2021 represents the ‘core scenario’, the analysis also found a ‘worst case’ scenario of unemployment hitting 11.8% (580,000) by February 2022 if the economic recovery is more sluggish than anticipated.

Boroughs say the data predicts Covid-19 leaving a “painful legacy” of job losses in the capital and are calling for an “urgent reset” of the government’s approach to unemployment support.

The report – produced by the Volterra Partners economic consultancy on behalf of the cross-party group London Councils – looks at the pandemic’s current and future impact on unemployment among Londoners and across different parts of the capital [1].

Key findings include:

1. London’s unemployment rate has historically been higher than national levels. Although this had narrowed over the past five years, the Covid-19 crisis has increased the gap again.

As of December 2020 (the latest available figures), the UK unemployment rate was 5.2% and London’s was 7.1% (352,000 unemployed Londoners) [2].

2. Central London [3] will experience the largest rise in unemployment. Unemployment in these boroughs is set to reach 169,000.

3. East London boroughs [4] will have persistently higher unemployment (peaking at 9.6%) for the longest period.

4. With a peak rate of 10.4%, west London [5] will have the highest unemployment due to the dominance of sectors especially affected by Covid-19 restrictions.

This is demonstrated by the furlough rates in this part of the capital and reflects the importance of Heathrow airport in the sub-region.

5. Londoners from ethnic minorities will experience higher unemployment than white Londoners. For example, ethnic minority residents in central London are twice as likely to be unemployed (14.9% compared to 6.9%).

6. The 16-24 age group is forecast to be hardest hit by job losses, making up around a third of unemployed Londoners.

7. Londoners with fewer qualifications (i.e. those with only NVQ1 or NVQ2 levels) are set to experience more than three times the unemployment rate compared to those with more qualifications (NVQ4+).

The industries with the highest numbers of furloughed workers – such as retail and accommodation and food – also have the highest proportions of workers with no qualifications.

London Councils is pushing for a ‘local first’ approach to unemployment support so that boroughs are better equipped to respond to their communities’ needs.

The jobcentre network is currently overseen by the Department for Work and Pensions. London Councils argues that, because local authorities provide such a variety of key services, jobcentres should be located alongside borough services to improve coordination of support.

Boroughs were disappointed that Restart – a new national support programme for unemployed people announced at the 2020 Spending Review – is also being established on a centralised model rather than devolved to local councils.

While boroughs are working with the government to make employment schemes such as Restart and Kickstart successful for their communities, an opportunity for a more integrated approach to employment, skills and other local services has been lost.

Cllr Clare Coghill, London Councils’ Executive Member for Skills & Employment, said: “The economic fallout from Covid-19 threatens a painful legacy of unemployment in the capital.

“This analysis paints a grim picture of worsening job losses. It’s hard to overstate how worried we are by these forecasts.

“Unemployment on this scale will have serious and long-lasting consequences – including widening London’s economic and social inequalities even further.

“The Covid-19 crisis has shown time and again how councils play a vital role in responding to local challenges and co-ordinating services.

“With unemployment set to be one of the key concerns of the coming months and years, we need an urgent reset of the government’s approach to tackling this issue.

“Rather than top-down, centralised structures, the government must empower local authorities to develop local solutions for helping our residents back into work.”

Ellie Evans, senior partner at Volterra Partners, said: “This work has highlighted the scale of the unemployment challenge we are likely to face here in London.

“The capital has persistently had more of its workers supported by furlough throughout the pandemic. There are boroughs and industries that are much more sensitive to international travel and tourism which may not recover as quickly as the rest of the economy.

“This underlines the need for bespoke, localised and flexible unemployment interventions aligned with residents’ requirements and businesses’ identified skills gaps.

“We also must not forget the entrenched inequalities facing certain subgroups of the population.

“Targeted support to improve access for these groups, break down barriers and widen opportunities must remain at the forefront of policy making.”