- New London First report drawing on analysis from Bain & Company highlights social and economic fallout of pandemic with call for levelling up to focus on communities rather than regions
- Investment in promoting the capital, transport and skills could reap £8bn-£12bn tax boost by 2023
- New Recovery Minister should be appointed to drive forward agenda for capital and UK
London First is today (Friday) calling on the Government to throw its weight behind London’s recovery with a clear plan of action to ensure the capital can play its role in accelerating the UK’s economic revival, while addressing its own levelling up challenges.
In a comprehensive report, Renew London: how central government can accelerate London’s role as a driver of recovery, drawing on analysis from global consultancy Bain & Company, the capital’s leading business group sets out a costed plan which could yield £8-12 bn in additional tax receipts by 2023 if a series of no-regret actions are adopted, including appointing a senior Recovery Minister, on a similar footing to Nadhim Zahawi’s role as Vaccines Minister, to drive this forward. These include:
- A vigorous, large scale campaign to bring people back to central London (costing approximately £170m in incremental spend over three years);
- Investment in public transport that supports the return to growth, including a long-term sustainable funding solution for Transport for London (approximately £1.2-1.5bn in forgone savings / revenue over three years); and
- A business-led reskilling programme (£10m incremental cost over three years), to support those whose jobs have been displaced by the pandemic, including a new London Careers Service.
These interventions could yield a benefit of £25-35bn in GVA between 2021-2023, paying for themselves many times over.
John Dickie, Interim Chief Executive of London First, said:
“Rebuilding the UK economy needs a vibrant growing capital.
“Central London has been the part of the UK hit hardest by the pandemic and we need a clear plan to accelerate its recovery.
“We’re calling for a major promotional push to attract people back to the capital, funding to keep our transport network operating at full strength and a reskilling programme to get Londoners into work. The Government need to apply the same laser-like focus to economic recovery as it so successfully placed on the vaccine roll out.
“Concerted action from the Government now will reap significant benefits for the whole of the UK with a sizeable tax surplus up for grabs. Simply hoping London will just bounce back is not enough – hope is not a plan.”
The report also looks in detail at the economic and social fall out of the pandemic, including how London has fared compared with other UK and global cities; the substantial levels of poverty facing some of the capital’s communities; and London’s role in the UK recovery and levelling up agenda.
On how London has weathered Covid compared with other UK cities and international counterparts, the report reveals the capital has been worst affected on unemployment, SME concentration, footfall in its city centre and its transport system’s revenues.
- London’s unemployment rate is at around 7%, which is higher than any other region in the UK;
- London has the highest density of SMEs in the UK, accounting for 99% of all businesses (c. one million pre-Covid) and employing more than half of all workers. By June 2020, c. 7% of SMEs in London had closed, with c. 40% fearing permanent closure;
- London’s Central Activities Zone (CAZ) saw a higher drop in footfall than other UK and global cities, leading to a 60% decline in retail transactions in the area between January and July 2020;
- Transport for London’s heavy reliance on fares meant the fall in passenger traffic of around 95% at its peak ,had a bigger impact compared to other global cities.
Highlighting how existing inequalities have been exacerbated by the pandemic, London First calls for the Government’s levelling up agenda to be focussed on families and communities in need, rather than along regional lines. Key findings here include:
- The already stark level of unemployment is worse for the city’s ethnic minority communities, who face unemployment levels in the Central London Forward  subregion of 14.9%;
- Significant levels of disadvantage and poverty exist in the capital, driven partly by high living, particularly housing, costs – London has the highest proportion of Universal Credit claimants as a % of population (16.9%), and higher poverty rates versus the national average (28% v 22%);
- London poverty rates are particularly high among children, with 37% of children living in poverty, the highest regional level in the UK.
Looking at London’s role in driving the UK’s recovery and supporting levelling up, the report argues that promoting the capital’s recovery alongside that of other cities and regions could generate a fiscal surplus to support government investment in vulnerable communities, given that in normal times:
- London represents c. 13% of UK population, but it accounts for c. 23% of GDP, suggesting its recovery is critical to UK as a whole;
- London’s net fiscal surplus per person is UK’s highest at £4.3K, followed by South East & East of England (£2.4K, £0.7K respectively);
- In contrast, all other counties and regions in the UK are generating a deficit, resulting in an overall deficit of £0.6K per person in the UK.
Against this backdrop, London First’s recovery recommendations on promoting the capital and investing in transport and skills, will make a tangible difference in accelerating London’s recovery, paying for themselves many times over. Looking at each area in more detail:
On bringing people back, the report calls for a scale, properly funded campaign to bring people ‘back to (central) London’, gradually staged by type of audience: local ‘commuters’ and businesses, domestic visitors, European visitors, other international visitors. London & Partners is currently coordinating a campaign through a grant from the GLA of £6M in addition to its recent budget of c. £17M. Significantly increasing this for three years, in line with the report’s recommendations, could have a dramatic impact on domestic and international footfall, helping to avoid the worst-case economic scenario.
On transport, the report sets out the funding needed to support Transport for London to ensure it can maintain bus and underground service levels in 2021-23, to encourage people back onto the network and into central London. For rail, the report costs incentivising first use and then regularity of use via short-term discounts. On international travel, a stable and transparent framework for restrictions is key. It is essential that the Government delivers on its commitment to work bilaterally and multilaterally to reach agreements on reopening and common standards for covid certification.
On skills, the report makes the case for a business-led reskilling programme supported by specific funding enhancements. As the long-term picture takes shape, additional funding may be needed but a set of no-regrets actions should be implemented now. These include: the creation of a London Careers Service; support for employees from sectors that have suffered the most due to COVID-19 or automation via a London Adult Retraining Scheme; ambitious UK skills devolution programme overseen and coordinated by regional employer-led skills commissioning boards; and a London Apprenticeship Fund targeted at small firms and sectors affected by Covid-19 to re-start apprenticeship growth in the capital.
The report sets out in more detail how each of these interventions should be funded and how they support the avoidance of the GLA’s worst case scenario.