- In the second quarter of 2021, London’s GDP almost recovered to pre-pandemic 2019 levels, after falling nearly 20% in 2020
- By November 2021, workplace mobility in Inner London was still one third below its pre-pandemic level, and one fifth in the case of retail mobility
- When the furlough scheme ended in September 2021, the proportion of eligible employees furloughed was > 50% higher in London (6%) than rest of England (3.7%)
- By the end of the Self-Employed Income Support Scheme (SEISS) in September 2021
50% of the eligible population were benefitting from the scheme (around 310,000 Londoners)
- By January 2021, the 20% most deprived constituencies in London had an average furlough rate of 19% against 15% in the least deprived constituencies
- In the first year of the pandemic, the employment rate in London fell more steeply than in England overall and at the end of 2021 it still stood below pre-pandemic levels
- The employment gap in between current and pre-pandemic levels in London is linked to an increase in the unemployment rate whereas in England it is due to a big increase in economic inactivity rates
- Between January 2020 and January 2022, the increase in unemployment benefit claimants was
> 3 x higher in the most deprived communities than in the least
- Women’s unemployment almost doubled in the first year of the pandemic, staying 50% above pre- pandemic levels at the end of 2021; meanwhile, men’s unemployment fully recovered
- Those aged 16 to 24 saw the largest absolute rise in unemployment rate. In relative terms the rise was
largest for those aged 50 to 64 (now the group with the 2nd highest unemployment rate)
Overall levels of economic activity in London, which fell as a result of the pandemic, began to increase as restrictions were eased. Despite Government support unemployment rose in London, where it still remains above pre-pandemic levels. Crucially, this rise in unemployment has been felt unevenly, falling disproportionately on those least able to shoulder the burden.
As a result of the pandemic and the restrictions put in place to stop the spread of the virus, there was a significant reduction in economic activity in the initial stages of the pandemic. By the second quarter of 2020 (April to June) GDP in London was almost 20% smaller than in the last quarter of 2019. This reduction in economic activity in the capital has been less intense than in England as a whole, and London has also seen a quicker recovery, so that by the second quarter of 2021 GDP had almost reached pre-pandemic levels (25).
Figure 12: Quarterly GDP based on GVA (Gross Value Added): 2019 Q2 - 2021 Q2 (2019 Q2 - 2021 Q2)
Mobility data produced by Google offers a more up-to-date picture of changes in economic activity, assessing changes in the number of people visiting different categories of places compared to the pre- pandemic baseline period (January 3rd to February 6th). Focusing on workplaces and retail reveals that Inner London has seen the largest reduction in mobility at almost all points of the pandemic compared to Outer London, other major English cities and the rest of England.
Workplace and retail mobility has been increasing since the summer of 2021, which suggests that the positive trend in terms of GDP growth is likely to have continued for the rest of the 2021 quarters. Nevertheless, by November 2021, before the tightening of restrictions during the Christmas period, workplace mobility in Inner London was still one third below its pre-pandemic level, and one fifth below in the case of retail mobility (26).
Figure 13: Average change in workplace mobility compared to pre-pandemic baseline: February 2020 - January 2022 (February 2020 - January 2022)
Figure 14: Average change in retail mobility compared to pre-pandemic baseline: February 2020 - January 2022 (February 2020 - January 2022)
While restrictions were in place, Government support protected many jobs
Where industries had their activities restricted, or where working from home was not an option, the Government’s furlough scheme was used to retain employees through the pandemic. At the peak of the scheme, in July 2020, more than 1 in 5 eligible employees – well over one million Londoners – were furloughed. By the end of January 2021, 712,200 jobs in London were furloughed; 17% of all eligible positions. London has seen a particularly high rate of furlough take-up, with furlough rates consistently above those seen in the rest of England. When the furlough scheme ended in September 2021, the proportion of eligible employees that were furloughed was more than 50% higher in London (6%) than in the rest of England (3.7%) (27).
Figure 15: Furlough take up rate over time by region: July 2020 - September 2021 (July 2020 - September 2021)
Overall, in January 2021, 25 of London’s boroughs had furlough rates that were above the average in the rest of England (15.5%), albeit with significant differences between them. For instance, the furlough rate in Newham (22%) was 50% higher than in Wandsworth (14%), a difference that by the end of the scheme (September 2021) had doubled (the rates being 8% and 4%, respectively). (28)
Self-employed Londoners have also been protected by the Government’s Self-Employed Income Support Scheme (SEISS). At its peak, when SEISS was introduced, there were 499,000 Londoners (77% of the eligible population) enrolled in the scheme. In the fifth tranche of the scheme (July 29 - September 30, 2021), the proportion of self-employed reduced to half (50%) of the eligible population, and 310,000 Londoners were benefitting from the scheme. (29)
Figure 16a: Total furlough take up rate (July 2020)
Figure 16b: Total furlough take up rate (January 2021)
Figure 16c: Total furlough take up rate (September 2021)
But not all jobs were protected and, despite its recent recovery, employment is still below pre-pandemic levels
While the Government’s schemes protected many jobs, the scale of the economic impact of the pandemic has still led to significant fall in employment in the capital. The employment rate in London fell from 76.7% to 74.1% in the first year of the pandemic (between December 2019 - February 2020 in November 2020 - January 2021), and it has increased since, reaching 75.9% in the last quarter of 2021 - just 0.8 percentage points below pre-pandemic levels.30 London saw a larger fall in employment than England as a whole, but it has also experienced a more intense recovery. This has meant that whereas before the pandemic London had a lower employment rate than England, by the end of 2021 the gap had been closed and their employment rates were the same.
Figure 17: Changes in the employment rate during the pandemic in England and London: October-December 2019 to October-December 2021 (October-December 2019 to October-December 2021)
The gap in employment rate in relation to pre-pandemic levels also shows the different impacts of the pandemic on the labour force in England, where it has been associated with a large increase in economic inactivity rates, and London, which has seen a rise in the unemployment rate. During the first year of the pandemic, London saw a larger increase in the unemployment rate than England as a whole. Although the recovery has been more intense in the capital, by the end of 2021 London’s unemployment rate was still 1 percentage point above its pre-crisis level, whereas in England it was only 0.3 percentage points higher. Economic inactivity, in turn, has decreased in London by more than 1 percentage point between December 2019-February 2020 and October 2021-December 2021, whereas in England it has increased by almost 1 percentage point. (31)
Figure 18: Changes the unemployment rate during the pandemic in England and London: October-December 2019 to October-December 2021 (October-December 2019 to October-December 2021)
Figure 19: Changes in the economic inactivity rate during the pandemic in England and London: October-December 2019 to October-December 2021 (October-December 2019 to October-December 2021)
Despite a smaller recovery of employment, other English regions have seen the number of vacancies increase to higher levels than at any other point since 2018, indicating a tighter labour market as a result of the increase in economic inactivity rates. In London, on the other hand, vacancies have recovered to the pre-pandemic levels without reaching similar highs, while the unemployment rate remains above its pre- pandemic level. (32)
Figure 20: Index of the number of vacancies: February 2018 - January 2022 (February 2018 - January 2022)
The impact of the pandemic on employment has been felt very unevenly, often falling disproportionately on those least able to shoulder the burden
Different occupations and sectors were able to adapt to social distancing measures in different ways, with many roles in relatively poorly paid sectors presenting more barriers to work from home. For instance, while 70% of people in professional occupations nationally say that they were able to work from home in April 2020, the figure for those in caring, leisure and other service occupations was 15%33. This has meant that the impact of the pandemic on employment has been uneven, often disproportionately affecting the most deprived communities.
For example, more deprived areas had higher furlough rates than less deprived areas. The 20% most deprived constituencies in London had an average furlough rate of 20% in January 2021, compared to 16% average for the least deprived constituencies.34 The relationship between deprivation and furlough take up, however, was less strong at the end of the scheme.
Figure 21: Average furlough take-up rate by constituency deprivation quintile in London: July 2020, January 2021, September 2021 (July 2020, January 2021, September 2021)
A similar picture can also be seen for the self-employed, where claims for SEISS were higher in more deprived areas. By the end of the scheme, 51% of eligible self-employed people in the most deprived areas were still benefiting from the scheme, whereas in the less deprived areas this proportion was 40%. (35)
Figure 22: Average SEISS take-up rate by constituency deprivation quintile in London: 2020/21 (2020/21)
Unemployment increased more in the most deprived areas. Between January 2020 and January 2022, the increase in unemployment benefit claimants, measured as a proportion of the working age population, was more than three times higher in the most deprived communities (3.7%) than in the least deprived ones (1.1%). Overall, this means that 27% of the total increase in unemployment benefit claims seen in the capital have been in the most deprived 20% of neighbourhoods. (36)
Figure 23: Change in unemployment benefit claim rate, by neighbourhood deprivation quintiles: January 2020 - January 2022 (January 2020 - January 2022)
Because different demographic groups are overrepresented in some sectors and occupations, their unemployment rates have also evolved differently. For instance, whereas the unemployment rate for women almost doubled between December 2019 - February 2020 (4.1%) and November 2020 - January 2021 (8.1%), for men it increased by 50% (from 4.8% to 7.2%). Additionally, by the end of 2021 men’s unemployment rate had fallen back to pre-pandemic levels, while for women it remained almost 50% higher (at 6%). (37)
Figure 24: Unemployment rate for men and women during the pandemic: October-December 2019 to October-December 2021 (October-December 2019 to October-December 2021)
Looking at different age groups, the largest increase in the unemployment rate was among those aged 16 to 24, for whom the unemployment rate rose from 15.3% in October 2018 - September 2019 to 20.2% in the same period two years later. In relative terms, however, the highest increase was for those aged 50 to 64, which is now the age group with the second highest unemployment rate. (38)
Figure 25: Unemployment rate by age before and during the pandemic: October 2018 - September 2019, October 2020 - September 2021 (October 2018 - September 2019, October 2020 - September 2021)
28. Labour Force Survey, ON
33. Trust for London (2021) London’s Poverty Profile 2021: Covid-19 and poverty in London, p. 24.
34. Coronavirus Job Retention Scheme statistics (December 2021), HMRC; Indices of deprivation (2019), House of Commons Library
35. Self-Employment Income Support Scheme statistics: December 2021, HMRC; Indices of deprivation (2019), House of Commons Library
36. Claimant count, ONS via NOMIS; English Indices of Multiple Deprivation (2019), MHCLG
37. Labour Force Survey, ONS