London is bearing the brunt of the UK’s jobs slowdown as a combination of tax rises, elevated wage costs and weak consumer spending force the city’s business to cut payrolls faster than in the rest of the country.
The capital has shed almost 45,000 payrolls since October when the Labour government announced a £26 billion (US$35 billion or RM147.7 billion) hike in employers’ national insurance — a payroll tax — and a new higher minimum wage, according to tax data.
It means one in four of all job losses across the country have come in the UK’s most productive region. Combined with the surrounding South East region, the rate rises to nearly four in 10 lost jobs.
Retail and hospitality are among the worst-affected sectors, according to figures published by the Office for National Statistics earlier in the week, and a large share of these roles are based in London — business group UKHospitality says about a third of jobs in its sector are in the capital.
Keeping pubs and restaurants going is increasingly difficult, according to Kate Nicholls, UKHospitality’s CEO. She said London was the least competitive city in Europe in terms of taxes and other costs and has lost around 30,000 hospitality jobs over the last year.
“The rent is higher, the business rates are higher, the wage costs are higher, and we are not seeing enough money coming through the front door to be able to cover those costs and for businesses to remain viable,” Nicholls said during a phone interview.
Separate data from Indeed — a jobs website — confirmed that vacancies in London have dropped faster than the national average since October. Retail and hospitality job ads in the capital fell almost 40% over that period, compared with declines of 26% and 9%, respectively, recorded across the country.
Public vs private
GDP data on Thursday showed the UK growing at a faster rate than other Group-of-Seven countries, but most of the boost came from government spending, while consumers are still reluctant to splash out. This could be benefitting areas of the country that rely more on the public sector than London does, according to Anna Leach, chief economist at the Institute of Directors.
“It’s a logical extrapolation that in an environment where you’ve got stronger government spending and weaker private sector spending and growth, similar trends in headcount follow,” Leach said. “You would see stronger growth in those areas of the country which have got bigger public sectors and consequently slower growth in parts which are more dominated by the private sector.”
While a higher minimum wage can put pressure on roles at the lower end of pay scales, such as those in shops and bars, London’s relatively high salaries also mean that some companies will look toward their employees in the city when trying to cut costs. White-collar roles in sectors such as IT, communications and science were hit by cuts, the ONS data showed.
The tech sector has been paring back recruitment after quickly expanding during the pandemic and Jonathan Steenberg, UK economist at credit insurer Coface, said insolvencies in the IT and communications industries are up by almost one-third from a year ago.
AI may also be playing a role, as it replaces some roles in finance, marketing and management consulting, while some international employers with London headquarters are freezing recruitment in the face of heightened geopolitical tensions.
In the retail sector, meanwhile, further job losses are expected as the fear of tax hikes weighs on consumer spending.
“Employers are concerned about relatively low demand, they’re concerned about low consumer confidence, and they’re really concerned about what lies ahead in the next budget,” said Andrew Goodacre, chief executive officer at British Independent Retailers Association.
Source: theedgemalaysia