Mayor warns London businesses are on a ‘financial knife edge’ and urges Government to delay imminent reductions in the furlough scheme

By July 27, 2020NEWS

The Mayor urges ministers to delay changes from 1st August which will require employers to pay national insurance and pension contributions

Concern that the reduction in Government support will lead to significant job losses

New stats show the number of workers furloughed in the capital is up 20 per cent in last month to 1.29m – and the biggest increases are in already deprived areas

The Mayor of London, Sadiq Khan, has reiterated his call for the Government to extend the current furlough scheme for struggling sectors of the economy to help save jobs ahead of changes from Saturday which will see government support reduce and businesses having to pick up a greater proportion of the costs of the scheme.

From 1st August, employers will have to once again pay national insurance and pension contributions for the hours their employees are on furlough, but for many businesses in sectors such as hospitality and London’s cultural sector, it will be impossible to meet the additional financial cost.

New figures released by HMRC show that the number of employees requiring government assistance is increasing. In June, the number of furloughed employees in London rose by 20 per cent (216,700), bringing the total number of furloughed employees in London to 1.29million. This represents 30 per cent of the capital’s eligible workforce. The increase in need is also reflected in the number claiming the Government’s self-employed (SEISS) scheme which increased by 51,000 in June – the most of any region in the country.

The figures show that it is the most deprived areas of London that have seen the largest increase in furloughed workers last month – these are also areas which have seen the biggest rise in unemployment in recent months. This includes West Ham, Feltham and Heston, and Tottenham.

If the furlough scheme is not fully extended in key sectors, the Mayor is concerned about a sudden surge in unemployment as employers simply don’t have the resources to retain their workers. Alongside a host of retailers already announcing plans for redundancies, many restaurants, pubs and cultural venues are not able to operate at full capacity due to continuing social distancing rules, meaning significantly reduced revenues for the foreseeable future.

In areas such as retail, culture and hospitality the Mayor is today urging Ministers to delay forcing employers to pick up the cost of paying national insurance and pension contributions. He is also calling on Government to maintain its 80 per cent contributions to the furlough scheme overall until people are returning to venues in much greater numbers. It is far better for the Government to intervene now, in order to prevent a sudden surge in unemployment and the devastating poverty and homelessness this could cause, along with the huge associated costs.

The Mayor of London, Sadiq Khan, said:

“We want to do everything we possibly can to get our businesses and venues in London thriving once again, but many are on a financial knife-edge with social distancing rules meaning a return to normality is still a long way off. The current financial challenges for business in central London and the West End remain particularly acute.

“For sectors such as creative industries and hospitality it is still too early for many businesses to pick up the cost of national insurance and pension contributions – I am deeply concerned this will simply accelerate a surge in unemployment in businesses already struggling to cover their costs.

“These extremely concerning new figures show the scale of the potential impact, including on Londoners in the most deprived parts of the capital who are most reliant on furlough, and most at risk of now being made unemployed. The Government must continue to invest in the furlough scheme now, or I fear we will see the tragic social and economic consequences of further unemployment.”

Philippa Childs, head of Bectu (Broadcasting, Entertainment, Communications and Theatre Union) said: 

“Bectu wholeheartedly endorses the Mayor’s call. London’s vibrant cultural sector is an essential part of our city and our economy but it is struggling desperately to survive. Theatres and live entertainment venues in particular are unable to operate profitably under the current social distancing measures and will be unable to do so for some time. Thousands of our members are already facing layoffs and redundancies.

“It is essential that support is maintained. If the mayor’s call goes unheeded it could cause tens of thousands of job losses and substantial damage to London’s cultural sector.”

Beverley Whitrick, Strategic Director of the Music Venue Trust said:

“Protecting grassroots music venues include protecting the people who operate them; these vital cultural spaces are run by small passionate teams. Until the venues can open fully we need as much support as possible to retain the talent that fuels London’s amazing music venues.”

Notes to editors

Since March 2020, the number of claims for unemployment-related benefits by residents aged 16+ in the capital has gone up by 148 per cent (274,790), reaching a total of 459,840 claims. This was the third-highest regional proportional increase. London, Scotland and Northern Ireland were the only UK regions in to see an increase in the number of claims between May and June this year.

Full information – https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/employmentintheuk/june2020

City Hall analysis has shown that it is the areas in London with the highest increase in the number of furloughed workers that has seen the biggest rise in unemployment-related benefits in recent months. Between May and June 2020, the biggest increase in the number of furloughed workers (CRJS scheme) was as follows:

West Ham – 5,900 additional workers on furlough

Feltham and Heston – 5,400 additional workers on furlough

Tottenham – 4,900 additional workers on furlough

East Ham – 4,700 additional workers on furlough

Hayes and Harlington – 4,500 additional workers on furlough

Full information – https://data.london.gov.uk/dataset/gla-economics-covid-19-labour-market-analysis

In London, the accommodation and food sectors have the highest take-up rate in the furlough (CRJS) scheme (71 per cent), followed by Arts and entertainment (63 per cent) and construction (55 per cent). This largely follows the rest of the UK, where the same industries also have the highest take-up rate.

The Mayor has committed to doing all he can to support London businesses of all sizes and sectors through these unprecedented times. In April, Sadiq launched Pay It Forward London, a scheme enabling Londoners to support their favourite businesses and which has so far helped more than 170 businesses raise at least £250,000 with the help of more than 4,000 Londoners.

He has also allocated £1 million to grow City Hall’s business support through the London Growth Hub and £2.3 million for a Culture at Risk fund to help some of London’s most imperilled creative and night-time businesses, such as cinemas and music venues.

Sadiq has also allocated £11 million to help the city’s skills providers shift to online learning and training, including specific measures designed to reach Londoners who are currently less able to access online courses.

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