london coronavirus economy tracker€¦ · yet the economy remains fragile, including in london....

London coronavirus economy tracker Tracking the impact of coronavirus on the capital’s economy September 2020

Amy Norman Scott Corfe

Kindly supported by

LONDON CORONAVIRUS ECONOMY TRACKER

1

FIRST PUBLISHED BY

The Social Market Foundation, September 2020 11 Tufton Street, London SW1P 3QB Copyright © The Social Market Foundation, 2020 ISBN: 978-1-910683-97-2

The moral right of the authors have been asserted. All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior written permission of both the copyright owner and the publisher of this book.

THE SOCIAL MARKET FOUNDATION

The Foundation’s main activity is to commission and publish original papers by independent academic and other experts on key topics in the economic and social fields, with a view to stimulating public discussion on the performance of markets and the social framework within which they operate. The Foundation is a registered charity and a company limited by guarantee. It is independent of any political party or group and is funded predominantly through sponsorship of research and public policy debates. The views expressed in this publication are those of the author, and these do not necessarily reflect the views of the sponsors or the Social Market Foundation.

CHAIR DIRECTOR

Mary Ann Sieghart James Kirkup

TRUSTEES

Baroness Grender MBE Tom Ebbutt Rt Hon Dame Margaret Hodge MP Peter Readman Melville Rodrigues Trevor Phillips OBE Professor Tim Bale

SOCIAL MARKET FOUNDATION

2

CONTENTS

ACKNOWLEDGEMENTS 2

ABOUT THE AUTHORS 3

CONTENTS 2

EXECUTIVE SUMMARY 4

CHAPTER 1 – INTRODUCTION 6

CHAPTER 2 – RISING UNEMPLOYMENT IN THE CAPITAL 7

CHAPTER 3 – JOB VACANCIES. OUT OF WORK, NOW WHAT? 13

CHAPTER 4 – COST OF LIVING DURNG THE CRISIS 17

ENDNOTES 19


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ACKNOWLEDGEMENTS

This report was commissioned by Peabody, and was produced independently by the Social Market Foundation, which retains full editorial independence, using publicly available information and sources. Any views expressed the report do not necessarily reflect those of Peabody.

ABOUT THE AUTHORS

Amy Norman

Amy joined the SMF research team in April 2020. Prior to joining, Amy worked at an education charity advising on the delivery of the free schools policy and challenges across the academies sector.

Amy holds a MSc in International and Social Public Policy from the London School of Economics and Political Science and a BSc Hons in Sociology and Anthropology from Oxford Brookes University, where she conducted social research on wellbeing econometrics, school choice and economic migrants.

Scott Corfe

Scott Corfe joined the Social Market Foundation in 2017 and is our Research Director. As well as managing the SMF’s research team, he authors research on a wide range of topics including consumer markets, taxation, low pay, housing and technology.

Before joining the SMF, he was Head of Macroeconomics and a Director at the economics consultancy Cebr, where he led much of the consultancy’s thought leadership and public policy research.

Scott’s expert insights are frequently sought after in publications including the Financial Times, the Guardian, the Times and the Daily Telegraph. Scott has appeared on BBC News, Sky News, Radio 4 and a range of other broadcast media.


4

EXECUTIVE SUMMARY

This report, commissioned by Peabody, examines the emerging impact of the coronavirus crisis on London’s economy. It explores the latest timely data on economic outcomes to produce an as up-to-date picture as possible. This is the second in a series of reports which we intend to update over the coming months, as the economic situation continues to develop. Our first report included unemployment data up to June 2020. This report examines how the situation has changed, looking at the latest data which extends to August.

The key findings of the research are that:

• Between June and August, the unemployment claimant account in London increased by a further 6.5%, greater than the 5.3% seen across the UK as a whole. On this measure of unemployment, this amounts to a further 29,440 individuals out of work in the capital.

• Among regions of London, unemployment increased the most in Inner East London (by 9,180), followed by Outer North & East London (6,770) and Outer West & North West London (6,590). Inner West London saw the smallest increase in unemployment, with the claimant count rising by 2,735.

• By London borough, Croydon and Hackney saw the greatest increases in unemployment between June and August. The claimant count increased by 1,540 in Croydon and 1,385 in Hackney. There are currently three London boroughs – Haringey, Barking and Dagenham, and Brent – where more than one in ten working age residents are claiming unemployment benefits.

• August claimant count data show those in their 30s seeing the greatest increase in unemployment compared with the previous month. In contrast, in July those age 18-24 saw the largest increase. It has been suggested that the unemployment figures for those under the age of 25 are being flattered by young people increasingly seeking shelter in education, choosing to study rather than seek work in a very challenging jobs market.

• Job vacancy numbers in London remain close to 50% lower than they were in the middle of March. In contrast, in the rest of the country, job vacancies have recovered more strongly as lockdown has eased, with the number of job vacancies now about a third (34%) below its mid-March level.

• While in March London had roughly one job vacancy per jobless benefits claimant, as of September we estimate that there are about five claimants for every job vacancy. Even if those out-of-work had the skills for the available jobs in the capital, about 80% would still remain unemployed given the lack of new jobs to move into at present, unless they managed to find work outside of London.

• Analysis of the Labour Force Survey and ONS vacancy data shows that lower income Londoners are disproportionately employed in some of the sectors most affected by declining job availability. For example, 13% of social housing tenants in the capital are employed in wholesale & retail, where job vacancies across the UK over the three months to August were 23% lower than the previous quarter.

• There is likely to be a significant skills mismatch between where jobs are being lost in the economy and where job vacancies are available. Of all the job vacancies in London listed on the jobs website Adzuna (at the time of writing– 15th September


5

2020), a fifth (21%) were IT-related jobs, 9% were teaching jobs and 9% were in accounting & finance.

• Cost of living inflation for London’s social housing tenants has declined since the start of the year, but now stands slightly above that seen for the UK as a whole, at 0.4% compared with 0.2%. It is also higher than the 0.1% seen for other London households. With lower income households spending relatively less in restaurants, Eat Out to Help Out did less to curb the cost of living for social housing tenants over the summer.


6

CHAPTER 1 – INTRODUCTION

Recent months have seen UK society edge closer to normality, following the coronavirus-associated lockdown earlier in the year. Non-essential retail has reopened. And more individuals are heading back to offices to work – albeit in much reduced numbers than prior to the lockdown.

Yet the economy remains fragile, including in London. Many city and town centres are struggling as consumers shift to online rather than store-based shopping, and homeworking limits footfall. There are questions about how many furloughed employees will become unemployed at the Government’s Job Retention Scheme is wound down.

Further, a second wave of coronavirus remains a distinct possibility amid rising Covid-19 case numbers. The introduction of the “Rule of Six”, to limit large gatherings, highlights how easily we could slip into a world of increased restrictions. Such a situation could push already-struggling businesses over the edge into insolvency, without further government support.

Trends we are observing during the pandemic – most notably the rise of homeworking and an acceleration in the shift to online retail – could become permanent. This would have an associated impact on the number of city centre jobs in sectors such as retail, restaurants, bars and cafés. A key challenge for policymakers over the coming years is likely to be how to reskill workers in these sectors so they can take on new jobs elsewhere.

During this tumultuous time when much is changing rapidly, this report, sponsored by Peabody, aims to shed light on how coronavirus is impacting the economy - particularly in London. It examines the latest data on benefits claims, unemployment and job vacancies to produce an as real-time as possible picture of the changing economy during this crisis. This is the second in a series of reports which we intend to produce over the coming months, as the economic situation continues to develop.

The structure of this report is as follows:

• Chapter 2 examines the latest benefits claims data

• Chapter 3 explores trends in job vacancies in London

• Chapter 4 examines cost of living inflation for Londoners and social housing tenants in the capital.


7

CHAPTER 2 – RISING UNEMPLOYMENT IN THE CAPITAL

This chapter examines the latest data on benefits claims to explore how unemployment and incomes are being affected by the coronavirus crisis. This includes an exploration of how trends in London differ from elsewhere, and an examination of how different parts of the capital are being affected by the crisis.

Unemployment continues to rise in London

The claimant count measures the number of people claiming benefits principally for the reason of being unemployed – it is thus one measure of the level of joblessness in the economy. As the Resolution Foundation has recently noted1, claimant count statistics are potentially being distorted at the moment by the migration to Universal Credit, and in-work individuals being incorrectly registered as out-of-work. But the claimant count remains the timeliest measure of unemployment trends, and it is the only data source allowing local area analysis of joblessness – such as across local authorities in the UK. While there might be some measurement issues with the claimant count at present, we believe that it remains a useful guide of the broad trajectory of unemployment, and how different parts of the UK are faring.

Since our last report, covering claimant count data up to June, unemployment has continued to rise in London. Between June and August, the claimant count increased by 6.5%, greater than the 5.3% seen across the UK as a whole. On this measure of unemployment, this amounts to a further 29,440 individuals out of work in the capital.

Among regions of London, unemployment increased the most in Inner East London (by 9,180), followed by Outer North & East London (6,770) and Outer West & North West London (6,590). Inner West London saw the smallest increase in unemployment, with the claimant count rising by 2,735.

Figure 1: Claimant count measure of unemployment

Source: ONS, SMF analysis

9,180

6,770 6,590

4,160

2,735

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Inner London - East Outer London - Eastand North East

Outer London -West and North

West

Outer London -South

Inner London -West

June 2020 August 2020 Change (right-hand axis)


8

Figure 2: Trends in the claimant count within London


Focus on rising unemployment shifts to those in their 30s

The latest claimant count data, for August, show rising unemployment in London has become more focused on older age groups. This is shown in the charts below.

Figure 3: Change in claimant count in London, by age group


The August data show those in their 30s seeing the greatest increase in unemployment compared with the previous month. In contrast, in July those age 18-24 saw the largest increase. It has been suggested that the unemployment figures for those under the age

020,00040,00060,00080,000

100,000120,000140,000160,000180,000

Janu

ary

2020

Febr

uary

202

0

Mar

ch 2

020

April

202

0

May

202

0

June

202

0

July

202

0

Augu

st 2

020

Inner London - East Inner London - West

Outer London - East and North East Outer London - South

Outer London - West and North West

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

16-17 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

June-July 2020 July-August 2020


9

of 25 are being flattered by young people increasingly seeking shelter in education, choosing to study rather than seek work in a very challenging jobs market.2

Figure 4: % of rise in unemployment in London accounted for by age group


The changing age profile of rising unemployment in London might also reflect a shift in the types of industries and occupations seeing redundancies taking place. Emerging data will allow us to gradually better understand the drivers of this trend.

0%

5%

10%

15%

20%

25%

30%

18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

June-July 2020 July-August 2020


10

Croydon and Hackney see the greatest increases in unemployment

By London borough, Croydon and Hackney saw the greatest increases in unemployment between June and August. The claimant count increased by 1,540 in Croydon and 1,385 in Hackney. There are currently three London boroughs – Haringey, Barking and Dagenham, and Brent – where more than one in ten working age residents are claiming unemployment benefits.

Figure 5: Change in claimant count in London, by borough, June-August 2020


35

345

380

510

550

555

560

620

635

640

690

690

780

790

845

870

950

970

1,030

1,040

1,050

1,060

1,090

1,175

1,175

1,185

1,205

1,235

1,260

1,275

1,315

1,385

1,540

0 200 400 600 800 1000 1200 1400 1600 1800

City of London

Kensington and Chelsea

Hammersmith and Fulham

Kingston upon Thames

Richmond upon Thames

Harrow

Westminster

Bexley

Camden

Sutton

Islington

Merton

Bromley

Wandsworth

Brent

Havering

Barking and Dagenham

Redbridge

Enfield

Haringey

Greenwich

Hillingdon

Hounslow

Ealing

Newham

Southwark

Lambeth

Lewisham

Tower Hamlets

Waltham Forest

Barnet

Hackney

Croydon


11

Figure 6: Claimant count, % of working age residents, August 2020


3.9

4.9

5.3

5.4

5.7

5.7

5.8

5.8

5.9

5.9

6.8

7.1

7.1

7.2

7.3

7.4

8.0

8.1

8.3

8.5

8.5

8.7

9.0

9.0

9.3

9.3

9.3

9.6

9.8

9.9

10.1

10.4

10.7

0 2 4 6 8 10 12

City of London

Richmond upon Thames

Kingston upon Thames

Westminster

Bromley

Camden

Kensington and Chelsea

Sutton

Bexley

Wandsworth

Havering

Harrow

Hillingdon

Islington

Barnet

Merton

Hammersmith and Fulham

Redbridge

Greenwich

Southwark

Tower Hamlets

Lambeth

Enfield

Hounslow

Croydon

Hackney

Lewisham

Ealing

Waltham Forest

Newham

Brent

Barking and Dagenham

Haringey


12

As the map below shows, unemployment has risen more in the East of the capital than in the West. With the East of the capital having more areas of high economic deprivation, this raises the prospect of widening inequality in London as the labour market downturn progresses.

Figure 7: Map of change in claimant count in London, by borough, June-August 2020



13

CHAPTER 3 – JOB VACANCIES. OUT OF WORK, NOW WHAT?

With unemployment elevated and likely to rise further as the Government’s Job Retention Scheme comes to an end, many individuals will be looking for a new job. The latest job vacancies data suggest that this is likely to be challenging for many of the newly unemployed.

London’s job market has been more affected by the coronavirus economic downturn than other parts of the country. Job vacancy numbers remain close to 50% lower than they were in the middle of March. In contrast, in the rest of the country, job vacancies have recovered more strongly as lockdown has eased, with the number of job vacancies now about a third (34%) below its mid-March level.

Figure 8: Job vacancy numbers

Source: Adzuna, SMF analysis

Figure 9: % change in job vacancies, 15th March 2020 – 14th September 2020


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

15/0

3/20

20

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20

29/0

3/20

20

05/0

4/20

20

12/0

4/20

20

19/0

4/20

20

26/0

4/20

20

03/0

5/20

20

10/0

5/20

20

17/0

5/20

20

24/0

5/20

20

31/0

5/20

20

07/0

6/20

20

14/0

6/2

020

21/0

6/2

020

28/0

6/20

20

05/0

7/20

20

12/0

7/20

20

19/0

7/20

20

26/0

7/20

20

02/0

8/20

20

09/0

8/20

20

16/0

8/20

20

23/0

8/20

20

30/0

8/20

20

06/0

9/20

20

13/0

9/20

20

UK London UK (exc London)

-37.6%-33.9%

-49.3%

-60%

-50%

-40%

-30%

-20%

-10%

0%

UK UK (exc London) London


14

While in March London had roughly one job vacancy per jobless benefits claimant, as of September we estimate that there are about five claimants for every job vacancy. Even if those out-of-work had the skills for the available jobs in the capital, about 80% would still remain unemployed given the lack of new jobs to move into at present, unless they managed to find work outside of London.

As the Figure below shows, the number of out-of-work benefits claimants per job vacancy remains lower in London than other parts of the country. Part of the reason London has seen a more significant fall in job vacancies than elsewhere might be the relative strength of the capital’s economy just prior to the lockdown; compared with elsewhere the number of job vacancies was quite high relative to the number of unemployed individuals.

Figure 10: Number claiming out-of-work benefits per job vacancy, March 2020 versus September 2020


Where are the available jobs?

In addition to the number out-of-work and available job vacancies it is also important to consider the industries and occupations in which vacancies are available. If job vacancies do not align with the skills of out-of-work individuals, unemployment is set to remain higher for longer.

Unfortunately, the data suggest that there is likely to be a significant skills mismatch between where jobs are being lost in the economy and where job vacancies are available. Of all the job vacancies in London listed on the jobs website Adzuna (at the time of writing– 15th September 2020), a fifth (21%) were IT-related jobs, 9% were teaching jobs and 9% were in accounting & finance.

1.71.5

1

5.4 5.34.9

0

1

2

3

4

5

6

UK (excluding London) UK London

March September (estimate - using August claimant count data, September job vacancy data)


15

Figure 11: Top 10 job vacancy categories in London, as of 15th September 2020

Source: Adzuna

Analysis of the Labour Force Survey and ONS vacancy data shows that lower income Londoners are disproportionately employed in some of the sectors most affected by declining job availability. For example, 13% of social housing tenants in the capital are employed in wholesale & retail, where job vacancies across the UK over the three months to August were 23% lower than the previous quarter. While hospitality job vacancies have increased slightly across the UK as whole over this time period, this is unlikely to be true in much of Central London, where footfall remains low as homeworking has reduced the number of commuters going into the city. For example, 300 of sandwich chain Pret a Manger’s 400 stores were in London. 3 The company has recently decided to shut stores and axe 2,800 jobs. 4

2,970

4,010

4,083

5,297

6,330

7,576

9,219

9,538

9,624

21,418

0 5,000 10,000 15,000 20,000 25,000

Legal

Hospitality & Catering

PR, Advertising & Marketing

Engineering

Sales

Healthcare & Nursing

Trade & Construction

Accounting & Finance

Teaching

IT


16

Table 1: Change in job vacancies compared with workforce composition, by sector

Sector

UK job vacancies, %

change compared with three

months ago (three months

to August 2020)

% of UK workers in

industry (2019)

% of London workers in

industry (2019)

% of London social

housing tenant

workers in industry (2019)

Arts, entertainment & recreation -58.3% 2.7% 4.0% 2.7%

Mining & quarrying -55.6% 0.4% 0.2% 0.0%

Financial & insurance activities -27.9% 3.9% 7.2% 1.4%

Real estate activities -25.8% 1.2% 1.5% 1.4%

Water supply, sewerage, waste & remediation activities

-23.3% 0.7% 0.4% 1.1%

Wholesale & retail trade; repair of motor vehicles and motor cycles

-22.9% 12.4% 8.9% 13.4%

Administrative & support service activities -22.6% 4.7% 6.0% 7.7%

Information & communication -18.1% 4.3% 8.0% 2.9%

Other service activities -12.0% 2.9% 2.9% 2.7%

Manufacturing -10.6% 9.2% 3.1% 2.4%

Professional scientific & technical activities -9.6% 7.7% 12.5% 5.5%

Education -3.2% 10.5% 10.2% 11.8%

Human health & social work activities -2.3% 13.5% 11.6% 18.4%

Accommodation & food service activities 1.1% 5.4% 5.6% 7.9%

Public admin & defence 5.0% 6.5% 5.6% 4.6%

Electricity, gas, steam & air conditioning supply 8.7% 0.6% 0.2% 0.0%

Transport & storage 15.0% 4.8% 4.5% 8.9%

Construction 32.0% 7.2% 6.6% 5.9%



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CHAPTER 4 – COST OF LIVING DURNG THE CRISIS

Finally, this chapter presents the findings of analysis of living costs in London, particularly with respect to relatively lower income residents living in social housing. This analysis is based on analysis of a wide range of datasets, including the ONS Living Costs and Food Survey, ONS Family Resources Survey, ONS labour market and inflation statistics, DWP benefits caseload statistics and rental data from the Greater London Authority.

Cost of living during the crisis

Cost of living inflation has fallen across the UK as a whole since the start of 2020, as the economic crisis associated with coronavirus has curbed price growth. In addition, a fall in global oil prices has filtered through into lower transport costs. While in January, inflation on the CPI measure stood at 1.8%, in August inflation stood at just 0.2%.

The August inflation rate is sharply down from the 1.0% seen in July, as the Government’s Eat Out to Help Out scheme, offering discounted restaurant meals, brought down the cost of living. With the scheme now over, inflation could start to pick up again.

While we estimate that cost of living inflation for London’s social housing tenants has also declined since the start of the year, it now stands slightly above that seen for the UK as a whole, at 0.4%. It is also higher than the 0.1% seen for other London households. With lower income households spending relatively less in restaurants, Eat Out to Help Out did less to curb the cost of living for social housing tenants over the summer.

Figure 12: Estimated cost of living inflation, London social housing tenants versus UK CPI, %


-0.5

0.5

1.5

2.5

3.5

4.5

5.5

6.5

Aug-

08

Feb-

09

Aug-

09

Feb-

10

Aug-

10

Feb-

11

Aug-

11

Feb-

12

Aug-

12

Feb-

13

Aug-

13

Feb-

14

Aug-

14

Feb-

15

Aug-

15

Feb-

16

Aug-

16

Feb-

17

Aug-

17

Feb-

18

Aug-

18

Feb-

19

Aug-

19

Feb-

20

Aug-

20

CPI - social housing tenants in London Overall UK CPI CPI - other London households


18

Figure 13: Annual change in consumer prices, January 2020 and August 2020


-4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0

Restaurants and hotels

Clothing and footwear

Transport

Housing, water, electricity, gas and other fuels

CPI (overall index)

Food and non-alcoholic beverages

Furniture, household equipment and maintenance

Miscellaneous goods and services

Alcoholic beverages and tobacco

Health

Education

Recreation and culture

Communication

Aug-20 Jan-20


19

ENDNOTES

1 https://www.resolutionfoundation.org/publications/the-truth-will-out/ 2 https://www.employment-studies.co.uk/system/files/resources/files/IES%20briefing%20-%20Labour%20Market%20Statistics%20September%202020.pdf 3 https://www.wired.co.uk/article/pret-barista-subscription-future 4 https://www.standard.co.uk/business/pret-a-manger-cuts-2800-jobs-a4534856.html

https://www.resolutionfoundation.org/publications/the-truth-will-out/

https://www.employment-studies.co.uk/system/files/resources/files/IES%20briefing%20-%20Labour%20Market%20Statistics%20September%202020.pdf

https://www.employment-studies.co.uk/system/files/resources/files/IES%20briefing%20-%20Labour%20Market%20Statistics%20September%202020.pdf

https://www.wired.co.uk/article/pret-barista-subscription-future

https://www.standard.co.uk/business/pret-a-manger-cuts-2800-jobs-a4534856.html

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