London experiences weaker recovery and jobs decline than the rest of the UK – leading macroeconomic influencers

20 November 2020 (Last Updated November 20th, 2020 08:59)

London experiences weaker recovery and jobs decline than the rest of the UK – leading macroeconomic influencers
Credit: Andrii Yalanskyi, Shutterstock.com.

The coronavirus pandemic has led to a record exodus of migrant workers from the UK, with  London’s workforce having almost shrunk by hundreds of thousands. Experts believe that if foreign-born workers do not return, labour and skills shortage will further strain its recovery.

Jonathan Portes

Jonathan Portes, a professor of economics at the King’s College London, re-tweeted an article that discusses the impact of the coronavirus pandemic on London’s economy and its labour market. According to the London Intelligence report, although London experienced some recovery over the summer, its recovery was much weaker than the rest of the UK. Its labour market particularly suffered with a sharp decline in jobs and no job creation.

The pandemic has also affected inner and outer London differently, the article detailed. For instance, Central London witnessed the deepest and longest drop in the consumer economy, while workers located in outer London remain most impacted by the drop in economic activity. Private rents in outer London have also risen continually during the pandemic, the article highlighted.

Additionally, London has witnessed a sharp and steeper increase in unemployment benefits since the start of the pandemic and at the end of October. For instance, the London Intelligence data found that the 300,000 new unemployment claims had been requested for in October, 170% higher than the same period in the previous year. The rise was again steeper compared to the rest of the UK, where claims rose by 120% for the same period, the data found.

Experts believe that although the claimant count dropped since the first lockdown, it is most likely to increase with a second phase of the virus and related restrictions, and due to uncertainties around the coronavirus job retention scheme that covers wage costs for furloughed employees.

Stephany Griffith-Jones

Stephany Griffith-Jones, an economist specialising on financial crises, re-tweeted on why the world needed a bigger response to tackle the coronavirus pandemic. She proposes options along with her collaborators, such as the need for a debt relief for green and inclusive recovery, greater support for emerging and developing economies, and strengthening the global financial safety net (GFSN) to manage the economic effects of Covid-19.

In the view of economists, low- and middle-income countries with unsustainable debt burden should receive substantial debt relief by creditors to provide the fiscal space for bigger investments in Covid-related response efforts, both social and health, greener strategies and climate emergency.

The other important aspect to address is emergency financing to developing and emerging economies, who are hard hit by the crashing commodity prices and depreciation of their currencies. Experts believe that there is an urgent need to reform and expand the GFSN in response to the Covid-19 health crisis.

Though meetings with the IMF and the World Bank in April this year called for the doubling of emergency facilities and the creation of short-term liquidity line to balance external shocks, the measures have been inadequate experts opine.

Dr Arvind Virmani

Dr Arvind Virmani, an economist, forecasts the gross domestic product (GDP) of India to remain unchanged since May 2020 at -5%, while others forecasted it to be as low as -10% initially and now have begun to raise it. This implies a lack of understanding of lockdowns and its impact on the economy.

He further shares a revised chart on India’s GDP. According to the chart, India’s GDP is estimated to contract by 10.6% in the fiscal year 2021 compared to an earlier forecasted contraction of 11.5%. Likewise, GDP growth is estimated to be 10.8% for the fiscal year 2022 compared to an earlier projection of 10.6%.