London's Economy Today

London’s Economy TodayIssue 213 | May 2020

Return to work starts amid economic gloom

By Mike Hope, Economist, and Eduardo Orellana, Economist Also in this issue On the 10th May the Prime Minister, Boris UK economic growth falls Johnson, announced an easing of the lockdown, sharply...... 2 and an encouragement for people to return to The economy is starting to work safely or work from home if possible. This pick up...... 3 is challenging for London with its reliance on the Small and medium-sized use of public transport. Prior to the lockdown enterprises are feeling it worst... 4 over 40% of Londoners used to travel to work Consumer spending has contracted significantly...... 5 on public transport. Transport for London has concluded that on the Tube, for example, they will Unemployment has risen sharply...... 6 only be able to carry 13-15% of normal passenger After the contraction there are numbers with social distancing. signs of recovery elsewhere in The challenge is most likely to be felt most acutely by workers with the Europe...... 7 lowest household incomes. In London, 44% of workers in the poorest Economic indicators...... 8 fifth of working households commute using public transport, while The people of London and over 64% cannot work from home. In contrast, over half of workers in COVID-19 ...... 14 the richest fifth of working households commute on public transport, but only 20% cannot work from home (Figure 1). This is according Our latest publications...... 18 to analysis by the Institute of Fiscal Studies (IFS) of work and travel patterns prior to the coronavirus outbreak. Datastore The main economic indicators for Analysis reported in this month’s LET supplement concludes London are available to download that it is people in the most deprived areas in London who are from the London Datastore. disproportionately likely to die from COVID-19.

actually the richest individuals who were most likely to use public transport the most before the lockdown, with 52% of workers in the top income quintile relying on it to get to work. This is likely because the highest-paying jobs in London are concentrated in the city centre and Canary Wharf, which most commuters reach by public transport.

Although those with the lowest incomes will be less affected, it remains the case that in London 44% of the poorest fifth of workers commute via public transport. Furthermore, as Figure 5 also shows, those with the lowest incomes are far less likely to be able to work from home than those with the highest incomes: 64% of workers whose incomes put them in the poorest fifth in London, and 73% of such workers in the rest of the UK, would struggle to work from home; the corresponding figures for the richest fifth are far lower (20% in London and 34% in the rest of the UK). London’s Economy Today • Issue 213 • May 2020

Figure 5. Public transport use and ability to work from home, by income quintile Figure 1: Public 80 transport use and 60 ability to work from home, by income 40 quintile 20 Source: Davenport A & Levell Share of workers (%) workers of Share 0 P (2020), Changes down the Poorest fifth 2nd fifth 3rd fifth 4th fifth Richest fifth line: Flattening the curve of public transport use, Institute Net income quintile for Fiscal Studies Briefing Commute using public transport in London Note BN287 Commute using public transport in the rest of the UK Cannot work from home in London Cannot work from home in the rest of the UK

Note: Authors’ calculations using UKHLS wave 8 and QLFS 2019; measures of whether occupations can work from home taken from J. Dingel and B. Neiman, ’How many jobs can be done at home?’, COVID Economics, Vetted and Real-Time Papers, 2020, 1, 16–24, https://cepr.org/sites/default/files/news/CovidEcon1%20final.pdf. We use the QLFS to calculate shares of workers in occupations amenable to home working at the three-digit SOC level UK(the level economic of occupation detail availablegrowth in the UKHLS) falls, and sharply then use the UKHLS to calculate how home working varies across income quintiles. Three-digit occupations are deemed amenable to Thehome LETworking indicators if at least 50% for of a mix of periods between workers could work from home (measured across all workers, not just those in thatMarch income and group) May. Public published alongside this editorial transport is defined as those travelling by bus/coach, train and metro/underground/light railway/tram. Income quintiles are defined by net monthly individual income. Calculations based on regionprovide of residence. confirmation of the range and depth of the reversal in the London economy. The number of Constraints on public transport use will also have different impactsjourneys on different on public industries. transport has collapsed, business Figure 6 shows that workers in financial and insurance services were most likely to commute via public transport, with over a third of the workforce confidencenationally taking is atpublic an all time low, and consumer transport to work (reflecting this industry’s concentration in Londonconfidence). However, has over slumped. 80% GLA Economics estimates of workers in this sector also work in occupations that can be donethat from London’s home, so economy social declined by 1.6% in 2020 distancing on public transport may be less of a problem. By contrast, fewer than 5% of workers in manufacturing and agriculture/mining commute via publicQ1 on transport the same, but quarter a year ago. equally only a third of workers in these industries can work from home. The UK economy flatlined in Q4 2019, and shrank by -2.0% in Q1 2020 according to the first estimate from the Office for National Statistics (ONS). The by far largest fall in GDP was in the last two weeks 10 © Institute for Fiscal Studies in March, as the process of lockdown came into effect. For the whole month GDP fell by 5.8%, close to the annual fall in GDP in 2008. This reflects falls in the services, production, and construction sectors. While the estimates of GDP are potentially subject to revisions at a later stage, particularly when as now the economy is changing so rapidly and the ONS has had to change its survey methods in response, this decline is comparable with that of the largest quarterly fall during the 2008 recession. The fall in demand has its parallel in a lower CPI which fell from 1.5% in March to 0.8% in April. The fall was reflected in lower energy and fuel prices. Corroborating evidence of a significant contraction in aggregate demand in the economy is that UK households and businesses hoarded cash according to figures released by the Bank of England (BoE). Sterling money holdings by private sector companies and households rose by £57.4bn in March, the biggest increase on record, and far above the previous six-month average of £9bn. The BoE published its latest forecast on 7 May, which it labelled an illustrative scenario because of the economic uncertainties. In it, it is expecting a 30% contraction quarter-on-quarter in the economy in Q2, and for the economy to contract by 14% this year on an annual basis. This is comparable with the Office for Budget Responsibility (OBR) Coronavirus Reference Scenario published last month which estimated that the economy would shrink by 13% this year. This would be the deepest recession for over 120 years.

GLA Economics 2 London’s Economy Today • Issue 213 • May 2020

In response to the emerging evidence of a deep economic recession the Chancellor of the Exchequer, Rishi Sunak, announced an extension of the Coronavirus Job Retention Scheme from the end of June to the end of October. By 24 May the scheme had protected 8.4m jobs and 1m businesses, although there have still been job losses and business closures. By the same date the Self-Employment Income Support Scheme had protected 2.3m jobs.

The economy is starting to pick up The ONS reports that 6% of UK inactive businesses started to trade again in the weeks 20 April to 3 May, while 20% of businesses continued to be temporarily closed or had ceased trading. This was most common in Accommodation and food services (19% of inactive businesses re-started), Construction (15%), Manufacturing (12%), and Wholesale and retail (10%). BoE agents are reporting a range of experience across sectors. Supermarkets reported that sales are slightly higher than a year earlier, and retailers of non-food goods selling online reported strong demand for electrical goods and home office equipment. Some businesses that had closed voluntarily, such as DIY stores and takeaway food outlets, have started to reopen. Banks were reported to have largely maintained the supply of credit for existing customers. Circumstances remain very challenging for other sectors. BoE agents are reporting that it is sectors that were legally obliged to close, for example, tourism, hospitality and the arts, which were concerned that they would not be able to survive a prolonged period of lockdown. Demand may remain subdued for several months due to social distancing and economic uncertainty. In addition, banks were said to be reluctant to grant new loans, and/or were applying tighter terms and conditions to new lending for businesses in retail, tourism, hospitality and leisure. In terms of the impact of COVID-19 on London it seems to be on a par with the rest of the country according to ONS survey results. Around 80% of businesses which have not closed down continue to trade, turnover for 30% of them is unaffected, and has decreased for 60% (Figure 2). Of those London businesses trading outside normal expectations 73% are exporting less, and 59% are importing less. Around 15% of all London businesses have not applied for any government initiative (see the supplement to April’s LET for more information on these initiatives). Applications for Government initiatives have been highest for the: zz Coronavirus Job Retention Scheme, 73% of businesses in London (76% across the UK) zz Deferral of business rates, 63% of businesses (59% across the UK)

GLA Economics 3 London’s Economy Today • Issue 213 • May 2020

Figure 2: Effect 90% on businesses of 80% COVID-19, London

70% and the UK, 20 April – 3 May 2020 60% Source: ONS Business impact 50% of COVID-19 survey 40%

30%

20%

10%

0% continuing to trade turnover decreased turnover unaffected not applied for any government initiative

London UK

Small and medium-sized enterprises are feeling it worst GLA City Intelligence Unit has recently commissioned a survey of London businesses. Prior to the easing of lockdown rules, 23% of small and medium-sized businesses (SMEs, with fewer than 250 employees) reckoned they would not survive another two months, while this was the case for 6% of large businesses (Figure 3). SMEs account for over 99% of London businesses. Similar proportions of SMEs and large businesses have suffered negative impacts in terms of sales, revenue and cash flow (sometimes more so for large businesses), but what distinguishes SMEs is the degree of impact. For example, for businesses that had faced a negative impact on revenue the average fall for SMEs was 53%, and for large businesses 36% (comparing January-March 2020 with the previous quarter). 33% of SMEs have furloughed staff compared with 61% of large businesses, but where this has happened in SMEs 72% of staff have been furloughed compared with 45% for large businesses.

Figure 3: Business 45% estimates of how

40% much longer they could survive under 35% lockdown prior to 30% easing, by size of

25% business, 20-30 April 2020 20% Source: YouGov London 15% COVID-19 Business Survey 10%

0% less than 2 months 3-5 months 6-12 months Over 12 months Don’t know

1-249 employees 250+ employees

GLA Economics 4 London’s Economy Today • Issue 213 • May 2020

Consumer spending has contracted significantly The volume of retail goods sales in April 2020 fell by a record 18.1%, following the strong monthly fall of 5.2% in these sales in March 2020 according to the ONS. All sectors saw a monthly decline in volume sales except for a record increase in sales for non-store retailing at 18.0% and a continued increase in sales for alcohol stores at 2.3%. The proportion spent online soared to the highest on record in April 2020 at 30.7%, which compares with the 19.1% reported in April 2019. The volume of clothing sales in April 2020 plummeted by 50.2% when compared with March 2020, and had already fallen by 34.9% in the previous month. The shift in consumer spending reflects the drop in household income, precautionary saving, and the closure of retail, hospitality and leisure facilities. Separate analysis published on the London Datastore indicates that there has been a marked drop in footfall activity across recreational activities in London (Figure 4). While there has been precautionary saving by households, the easing of the lockdown and the gradual re-opening of shops should support an increase in expenditure, and help the economy to pick up. Figure 4: Retail and roery Retail & Restaurant bookings Social venues pharmacy recreation recreational footfall activity in London, March-May 2020 Note: Vertical red lines show 100% changes in social distancing roery rules pharmacy Vertical grey bands show

Lockdown weekends and public holidays Social Distancing

Some workers returnSome workers hools ps et lose hools 50% Source: Grocery and retail metrics from Google Mobility, People with symptoms should self−isolate People Retail & social venues (bars, event recreation spaces etc) from Purple public Wifi and restaurant bookings Social venues (national) from OpenTable 0% Restaurant bookings

02 Mar 16 Mar 30 Mar 13 Apr 27 Apr 11 May 25 May

GLA Economics 5 London’s Economy Today • Issue 213 • May 2020

Unemployment has risen sharply The majority of the ONS labour market indicators published in May are for March. For this month the London employment rate rose to a record high of 76.9%, and for the second consecutive month the estimate was higher than the UK employment rate. Analysis conducted by the ONS would suggest that there was more of an impact in late March on hours worked (including furloughing) than loss of employment. In the final week of March, the total number of hours worked in the UK was around 25% fewer than in other weeks within the quarter. However, early estimates for April from the HMRC Real Time Information system indicate that the number of paid UK employees fell by 1.6% in April compared with March. Median monthly pay fell by 0.9% compared with April 2019. This corresponds to a large rise in unemployment. April’s LET reported that there had been over 1.5m claims for Universal Credit (UC) over the period 1 March to 12 April. Data published this month reveals that the number of UC recipients in April in Great Britain rose by 1.2m, and by 145,000 in London over the previous month. This is an increase of 40% for Great Britain, and 33% for London. Recipients can be in or out-of- work. Less positively for London the increase in numbers on the claimant count (a measure of being out-of- work) has been 80% of the monthly rise in UC numbers, while for Great Britain it is 70% (Figure 5). Figure 5: Universal 600,000 5,000,000 Credit recipients and 540,000 4,500,000 the Claimant count, 480,000 4,000,000 London and Great 420,000 3,500,000 Britain, January 360,000 3,000,000 2014-April 2020 300,000 2,500,000

London Source: ONS and DWP 240,000 2,000,000 Great Britain 180,000 1,500,000

120,000 1,000,000

60,000 500,000

0 0

UC London claimant count London UC Great Britain claimant count Great Britain

It is likely that without the Coronavirus Business Retention Scheme that unemployment would be far higher. It is also worth noting that the claimant count at 2.1m in Great Britain, and 305,000 in London remains well below where it was in the 1980s at over 3m in Great Britain, and over 400,000 in London. At the same time the latest figures are consistent with the view that the unemployment rate has increased markedly. The Chancellor of the Exchequer has said that he would expect the unemployment rate to be in double figures by the end of the year.

GLA Economics 6 London’s Economy Today • Issue 213 • May 2020

The impact of rising worklessness, as with other aspects of COVID-19, is unlikely to be the same across income groups. The Resolution Foundation has found that it is the lowest paid employees who are most likely to have been furloughed, faced reduced hours, or lost their jobs. Across the UK a third of what were the lowest fifth of paid employees are in this position, compared with 16% of the highest fifth of earners (in an online survey conducted 5-11 May).

After the contraction there are signs of recovery elsewhere in Europe

Economies across Europe have been contracting, ranging in Table 1 for 2020 Q1 from -2.2% for Germany to -5.8% for France. The degree of contraction will depend both on the lockdown imposed, and the timing of onset of COVID-19. Onset was later in the UK than Europe, and so the largest fall in UK GDP is expected in 2020 Q2.

Country or area Change in GDP Table 1: Change in EU27 -3.3% quarter-on-quarter Euro Area -3.8% GDP 2020 Q1, main France -5.8% European economies Germany -2.2% Source: Eurostat Italy -4.7% Spain -5.2%

Further afield, dismal economic news is emerging from the United States. The Bureau of Economic Affairs reported that year-on-year GDP fell by 4.8% in 2020 Q1. In April, non-farm payroll employment fell by 20.5m, and the unemployment rate increased by 10.3 percentage points to 14.7% according to the Bureau of Labor Statistics. In response, the US federal spending on COVID-19 relief will be up to $3tn. At the same time, there continues to be positive signs of countries emerging from lockdown. The Bundesbank has felt confident enough to say, “a recovery is under way” in Germany. Consumer confidence across the EU recovered slightly in May to -19.5% from -22.0% in April reports the European Commission. As well as a number of countries easing lockdown restrictions the Baltic states have created a “travel bubble” allowing for free movement between Estonia, Latvia and Lithuania. Greece will re-open on 15 June to tourists from a group of 20 countries “with a good track record” of containing the pandemic. There are thus some signs of recovery in some affected countries but the long-term prospects for the economy remain uncertain. This is also the case for the capital’s economy. In June GLA Economics will release the next London’s Economic Outlook which will provide our views on the prospects for the coming few years.

GLA Economics 7 London’s Economy Today • Issue 213 • May 2020 Indicator 1: TfL passenger journeys

Title Passenger journeys in London reached a historic low in April because of the lockdown Economicrestrictions indicators Passenger journeys in London reached a historic low in April because of the lockdown restrictions zz OnlyBullets 19.6 million• Onlypassenger 19.6 millionjourneys passenger were registered journeys in wereApril, registered 163.9 million in April, less than163.9 in millionMarch whenless the lockdown in London began thanand 251.8in March million when less the than lockdown the February in London period began which and had 251.8 no lockdown million less restrictions. than The April the February period – which had no lockdown restrictions -. The April figures figures show the largest drop since data were registered. 5.0 million of all journeys were Underground journeys show the largest drop since data were registered. and 14.6 million were bus journeys. • 5.0 million of all journeys were Underground journeys and 14.6 million were bus zz The 13-period-moving average in the total number of passenger journeys reduced from 265.8 million to 247.0 journeys. million. • The 13-period-moving average in the total number of passenger journeys zz The methodologyreduced used to fromcalculate 265.8 the million number to 247.0of bus million. passenger journeys was changed by TfL on 1 April 2007. For a detailed explanation, please see LET issue 58 (June 2007). • The methodology used to calculate the number of bus passenger journeys was Source: Transport for Londonchanged by TfL on 1 April 2007. For a detailed explanation, please see LET issue Latest release: May 2020,58 Next(June release: 2007). June 2020

Chart Passenger journeys by mode of transport (adjusted for odd days) 200

150

100

0 Passenger journeys, millions journeys, Passenger 1993/94 1997/98 2001/02 2005/06 2009/10 2013/14 2017/18

LUSeries1 Series2 Bus Series3 LUSeries4- moving average Series5 Bus - moving averageSeries6

IndicatorSource 2:Transport Annual growthfor London in TfL passenger journeys The moving average annual change in passenger journeys in London reached a new historic low Latest May 2020 in AprilTitle The moving average annual change in passenger journeys in London reached a new release zz The moving averagehistoric annual low in growthApril rate in the total number of passenger journeys was -10.9% in April, 7.0 percentageNext pointsJune down2020 from March. Bullets zz Therelease moving average• The annual moving growth average rate annual of bus growth journeys rate decreased in the total from number -4.5% of to passenger -11.3% injourneys the same period, a decline of 6.7 percentagewas -10.9% points. in April, 7.0 percentage points down from March. zz Likewise,File the Worksheetmoving• The average moving 1 in Y: ofaverage\ 0Underground Y Drive annual 2016 growth passenger\1 Macro rate \journeys LETof bus\Data journeys went\LET down Charts.xlsxdecreased from -3.0% from -to4.5% -10.3% to in the last period,location a decline of-11.3% 7.0 percentage in the same points. period , a decline of 6.7 percentage points. • Likewise, the moving average of Underground passenger journeys went down Source: Transport for Londonfrom -3.0% to -10.3% in the last period, a decline of 7.0 percentage points. Latest release: May 2020, Next release: June 2020 Chart Annual change in passenger journeys by mode of transport (adjusted for odd days) 12% 9% 6% 3% 0% -3% -6% -9%

Annual percentage change -12% 1995/96 1999/00 2003/04 2007/08 2011/12 2015/16 2019/20

LU - moving average Bus - moving average Total - moving average

GLA EconomicsSource Transport for London 8

Latest May 2020 release

Next June 2020 release

File Worksheet 2 in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx location

London’s Economy Today • Issue 213 • May 2020

Indicator 3: Unemployment rates in London and the UK

Title In the first quarter of the year, London’s unemployment rate rose from 4.3% to In the first quarter4.7% of the year, London’s unemployment rate rose from 4.3% to 4.7% zz AroundBullets 239,350 • residentsAround 21639 years,350 andresidents over were16 year unemployeds and over in were London unemployed in the period in London Jan 2020 in - March 2020. zz The unemploymentthe rate period in London January was 20 4.7%20 - Marchin that 20period,20. 0.4 percentage points higher than the same rate in the last quarter• Tofhe 2019. unemploymen Unemploymentt rate inonly London started was to rise4.7 %in thein th lastat periodtwo weeks, 0.4 ofpercentage March because of the COVID-19 outbreak.points higher than the same rate in the last quarter of 2019. Unemployment zz The UK’s unemploymentonly started rate rose to rise by 0.1in the percentage last two pointsweeks fromof March the historic because record of the low COVID of 3.8%-19 in Q4 2019 to 3.9% in Q1 2020. outbreak. • The UK’s unemployment rate rose by 0.1 percentage points from the historic Source: ONS Labour Forcerecord Survey low of 3.8% in Q4 2019 to 3.9% in Q1 2020. Latest release: May 2020, Next release: June 2020 Chart Unemployment rate (16 years and over, resident basis) 15%

12%

3% Unemployment rateUnemployment 0%

London UK

SourceIndicator ONS 4: Labour Real GVA Force growth Survey in London and the UK London’s economy fell by 1.6% in the first quarter of the year compared to the same quarter in 2019Latest Title May London’s2020 economy fell by 1.6% in the first quarter of the year compared to the same zz London’srelease annual realquarter GVA in growth 2019 rate notably decreased from 2.5% in Q4 2019 to -1.6% in the first quarter of 2020, based on GLA Economics estimates. This implies a reduction of output by 4.1 percentage points in only one Next BulletsJune • 2020London’s annual real GVA growth rate notably decreased from 2.5% in Q4 2019 quarter, the largest quarter-on-quarter fall in output since the 2008-2009 financial crisis. release to -1.6% in the first quarter of 2020, based on GLA Economics estimates. This zz Likewise, the UK outputimplies annual a reduction growth of rate output for Q1by 4.12020 percentage was -1.6% points - also in only the one lowest quarter, quarterly the rate since 2009 and largest quarter-on-quarter fall in output since the 2008-2009 financial crisis. 2.7File percentage Worksheet points below 3 in Q4 Y: \2019.0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx zz London’s real GVA •quarterly Likewise, estimates UK output for annual both growth the period rate for Q1 Q1 1999 2020 wasto Q4 -1.6% 2012 - also and the the lowest two most recent quarters location quarterly rate since 2009 and 2.7 percentage points below Q4 2019 -. have been produced by GLA Economics. Estimates for the intervening period are outturn data from the ONS, • London’s real GVA quarterly estimates for both the period Q1 1999 to Q4 2012 which does not publish quarterly estimates for London´s real GVA prior to 2013. and the two most recent quarters have been produced by GLA Economics. Source: ONS and GLA EconomicsEstimates calculations for the intervening period are outturn data from the ONS, which does not publish quarterly estimates for London´s real GVA prior to 2013. Latest release: May 2020, Next release: July 2020 Chart Annual percentage change in real GVA 10% 8% 6% 4% 2% 0% -2% -4% -6% Annual percentageAnnual change -8% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

London UK

GLA EconomicsSource ONS and GLA Economics calculations 9

Latest May 2020 release

Next July 2020 release

File Worksheet 4 in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx locatio n

London’s Economy Today • Issue 213 • May 2020

London’s annualIndicator employment 5: Employment growth rates in rate London was and highthe UK in Q1 2020, before the COVID-19 outbreak zz Around 4.88 million London residents over 16 years old were in employment during the three-month period Title London’s annual employment growth rate was high in Q1 2020, before the COVID- January 2020 – March 192020. outbreak zz The rate of annual employment growth in the capital was 4.4% in that period, 2.7 percentage points above the Bullets • Around 4.88 million London residents over 16 years old were in employment previous period (Q4 2019).during This the big three increase-month periodin employment January 2020 during – March the2020. quarter - 138,000 persons - started to contract in the last two• weeks The rate of ofMarch annual because employment of growththe COVID-19 in the capital outbreak. was 4.4% in that period, zz In the three-month period2.7 January percentage 2020 points – March above 2020,from the the previous UK employment period (Q4 20 rate20). Thisgrew big annually at a rate of 1.4%, increase in employment during the quarter - 138,000 persons - started to 0.4 percentage points abovecontract the insame the last rate two in weeks the oflast March quarter because of of 2019. the COVID -19 outbreak. Source: ONS Labour Force Survey• In the three-month period January 2020 – March 2020, the UK employment rate grew annually at a rate of 1.4%, 0.4 percentage points above the same rate in Latest release: May 2020, Next release:the last quarterJune 2020 of 2019.

Chart

Annual percentage change in employment (16 years and over, resident basis) 6%

-2% Annual percentage change

-4% Mar-MayMar-MayMar-MayMar-MayMar-MayMar-MayMar-MayMar-MayMar-May 1993 1996 1999 2002 2005 2008 2011 2014 2017

London UK Indicator 6: House prices in London and the UK

Source ONS Labour Force Survey Title London house prices increased by 4.6% in annual terms in March London house pricesLatest increasedMay 2020 by 4.6% in annual terms in March zz In March 2020, releasethe average house price in London was £489,762 while for the UK it was £232,744. Bullets • In March 2020, the average house price in London was £489,762 while for the zz The annual growthNextUK itrate wasJune in £2average 202032 ,744 house. prices in London was 4.6% in March 2020, up from 3.0% in February 2020. This is therelease highest annual growth since December 2016. • The annual growth rate in average house prices in London was 4.6% in March zz Average house pricesFile2020, inupWorksheet the from UK 3.05rose in %Y: by\ in0 Y 2.0% FebruaryDrive 2016in annual\ 12020 Macro terms. \ThisLET\ Datalastis the \March,LET highest Charts.xlsx the annualsame rate growth as in February.since locatio Source: Land RegistrynDec and ember ONS 2016. Latest release: May• 2020,Average Next houserelease: prices June 2020 in the UK rose by 2.0% in annual terms last March, same rate as in February.

Chart Annual percentage change in average house prices (seasonally adjusted) 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Annual percentageAnnual change

London UK

GLA EconomicsSource Land Registry and ONS 10 Latest May 2020 release

Next June 2020 release

File Worksheet 6 in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx locatio n

Indicator 7: PMI Business Activity Index for London and theLondon’s UK Economy Today • Issue 213 • May 2020

Title London business activity plunges to a historic low in April

Bullets • Business activity index at London private firms fell dramatically from 56.0 in London businessFebruary activity to plunges 31.5 in Marchto a historic and to 13.4low in AprilApril. This the lowest level and the zz The business activitylargest index fall ofat theLondon historic private series. firms fell dramatically from 56.0 in February to 31.5 in March and to 13.4 in April. This the lowest level and the largest fall of the historic series. • Similarly, the UK index fell from 53.0 in February to 13.8 in April. zz Similarly, the UK index fell from 53.0 in February to 13.8 in April. zz The Purchasing• The Managers’ Purchasing Index Managers’(PMI) survey Index shows (PMI) the monthly survey business shows thetrends monthly at private business sector firms. Index readings above trends50.0 suggest at private a month-on-month sector firms. Index increase readings in activity above on 50.0 average suggest across a firms,month -whileon- readings below indicate a decrease.month increase in activity on average across firms, while readings below Source: IHS Markit indicate a decrease. Latest release: May 2020, Next release: June 2020 Chart PMI Business Activity Index (50 indicates no change on previous month) 70 60 change

- 50 40 30 20 Index, 50 = no 50 =Index, 10 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

London UK Indicator 8: PMI New Business Index for London and the UK

Source IHS Markit NewTitle business New activity business in activityLondon in reached London reacheda historic a historic low in low April in April zzLatestThe PMI NewMay Business 2020 Index went down to its lowest point in the recorded series (14.9) in London in April, from Bullets release33.5 in March,• Theand 54.2PMI inNew February. Business Index went down to its lowest point in the recorded zz Equally for the seriesUK, the (14.9 level) ofin thisLondon index in in April April, wasfrom 15.7, 33.5 down in March from, 35.3 and in54.2 March, in February and 52.3. in February. zzNextAn index reading•June Equally 2020 above f 50.0or the indicates UK, the an level increase of this in newindex orders in April from was the 15.7 previous, down month. from 35.3 in release March, and 52.3 in February. Source: IHS Markit An index reading above 50.0 indicates an increase in new orders from the Latest release: May• 2020, Next release: June 2020 File Worksheetprevious 7 month.in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx location Chart PMI New Business Index (50 indicates no change on previous month) 70 60 change

London UK

GLASource Economics IHS Markit 11

Latest May 2020 release

Next June 2020 release

File Worksheet 8 in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx location

London’s Economy Today • Issue 213 • May 2020

Indicator 9: PMI Employment Index for London and the UK

In April,Title the PMIIn April,Employment the PMI E mploymentIndex fell Index to a fellrecord to a recordlow low zz The Employment Index for London was 23.6 in April, down from 41.7 in March and from 52.9 in February. This is theBullets deepest registered• The Employment monthly drop Index of the for series. London was 23.6 in April, down from 41.7 in March zz The index also felland for thefrom UK 52.9 from in 52.9Febr uaryin February. This is tothe 23.6 deepest in April. registered monthly drop of the series. zz The PMI Employment Index shows the net balance of private sector firms of the monthly change in employment. • The index also fell for the UK from 52.9 in February to 23.6 in April. Readings above 50.0 suggests an increase, whereas a reading below indicates a decrease in employment from the • The PMI Employment Index shows the net balance of private sector firms of previous month. the monthly change in employment. Readings above 50.0 suggests an increase, Source: IHS Markit whereas a reading below indicates a decrease in employment from the previous Latest release: May 2020,month. Next release: June 2020

Chart PMI Employment Index (50 indicates no change on previous month) 65 60 55 change

- 50 45 40 35 30 25 Index, 50 = no 50 =Index, 20 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

Indicator 10: RICS house prices for London andLondon EnglandUK and Wales

TitleSource MarkedIHS Markit fall in the net balance of house prices in the three months to April Marked fall in the net balance of house prices in the three months to April zz InBullets Latestthe three months• MayIn the2020 to April,three themonths net balance to April of, the property net balance surveyors of property reporting surveyors a rise in housereporting prices a was -25 – down fromrelease 15 in Marchrise -, thein house lowest price figures was since -25 November– down from 2019. 15 in March -, the lowest figure since zz For England and NovemberWales, the 2019.RICS house prices net balance index also decreased from 9 in the first quarter of the Next June 2020 year to -21 in• theFor period England February and Wales – April, t 2020.he RICS house prices net balance index also decreased release zz The net balance fromindex 9measures in the f itherst proportionquarter of ofthe property year to surveyors -21 in the reporting period aFebruary rise in prices – April minus those 2020. reportingFile a decline.Worksheet 9 in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx • The net balance index measures the proportion of property surveyors reporting Source:location Royal Institution a riseof Chartered in prices Surveyors minus those reporting a decline. Latest release: May 2020, Next release: June 2020 Chart RICS house prices net balance (change in prices during next three months, seasonally adjusted) 100 80 60 40 20 0 -20

Net balance -40 -60 -80 -100 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

London England and Wales

GLASource Economics RICS Residential Market Survey 12

Latest May 2020 release

Next June 2020 release

File Worksheet 10 in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx location

London’s Economy Today • Issue 213 • May 2020

Indicator 11: RICS house price expectations for London and England and Wales

NetTitle expectations Expectations of house of hpriceouse risesprice risesin London in London remain remain at at historic historic lows zz Between February and April, surveyors reported that net expectations of London house price rises (-83) remained Bulletsvery low. This• levelBetween had already February fallen and to April-86 in, stheurveyors three monthsreported to another March. big contraction in the zz Sentiment in Englandexpectation and Wales of London was -72 housin April,e price slightly rises up (- from83). This-83 in level March. had already fallen to zz The net balance -index86 in measuresthe three the months proportion to March of property. surveyors reporting a rise in prices minus those reporting a decline.• Sentiment in England and Wales was -72 in April, slightly up from -83 in March. Source: Royal Institution• The of netChartered balance Surveyors index measures the proportion of property surveyors reporting Latest release: May 2020,a rise Next in pricesrelease: minus June 2020 those reporting a decline. Chart RICS house prices expectations net balance (change in prices during next three months, seasonally adjusted) 100 80 60 40 20 0 -20

Net balance -40 -60 -80 -100 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20

London England and Wales Indicator 12: Consumer confidence in London and the UK

Source RICS Residential Market Survey ConsumerTitle confidenceConsumer in confidenceLondon remainedin London remained sunk in sunk May in May zz LatestThe consumer May confidence 2020 index in London was at -24 in May after having registered its sharpest fall ever in April releaseBullets • The consumer confidence index in London was at -24 in May after having (-22) from 2 in March.registered May level its representssharpest fall the ever lowest in April level (in-22) more from than 2 sevenin March years.. May level zz Similarly, sentiment representfor the UKs the remained lowest levelat -34. in moreThe UK than has seven not shownyears. a positive index score since January 2016. zz NextThe GfK indexJune of consumer2020 confidence reflects people’s views on their financial position and the general economy release • Similarly, sentiment for the UK remained at -34. The UK has not shown a over the past year andpositive in the index next score 12 months. since January A score 2016. above zero suggests positive opinions; a score below zero indicates negative sentiment. File Worksheet• The 11GfK in indexY:\0 Yof Drive consumer 2016 \confidence1 Macro\ LETreflects\Data people’s\LET Charts.xlsx views on their Source: GfK NOP on behalffinancial of the European position Commissionand the general economy over the past year and in the next location 12 months. A score above zero suggests positive opinions; a score below zero Latest release: April 2020, Next release: May 2020 indicates negative sentiment.

Chart Consumer confidence barometer 30 20 10 0 -10 Index -20 -30 -40 -50

London UK

GLA EconomicsSource GfK NOP on behalf of the European Commission 13 Latest April 2020 release

Next May 2020 release

File Worksheet 12 in Y:\0 Y Drive 2016\1 Macro\LET\Data\LET Charts.xlsx location

London’s Economy Today • Issue 213 • May 2020

The people of London and COVID-19 By Rachel Leeser, Senior Research & Statistical Analyst

London emerged as an epicentre of the pandemic early in its spread across the UK. Prior to lockdown on 23rd March 40% of England’s confirmed cases were in London (3,517). As of 19th May, there were just over 26,500 confirmed cases in London, with eligibility for tests extended. London now represents less than 19% of total confirmed cases in England. The rate of confirmed cases is now higher in Wales, the North East and the North West of England, but different testing regimes at different points through the pandemic means it is not possible to say with certainty how the proportion of the population infected compares. The daily increase in the number of confirmed cases across London has dropped below 100 and probably below 50 for the last few days. Within the capital, Croydon and Brent are the boroughs with the highest number of confirmed cases, with over 1,400 in each borough. Brent and Harrow are the boroughs with the highest proportion of lab-confirmed cases of COVID-19, with over 400 for every 100,000 residents. Up to 8th May 7,576 London residents were registered as having died with COVID-19 mentioned on their death certificate, measured by ONS weekly deaths estimates. In London, the peak week for COVID-19 related deaths occurred during the week ending 10th April, with 1,921 in a single week (a week later than the peak for cases). In the week to 8th May, the number of deaths was 352. Of the total COVID-19 related deaths recorded, 75% of London deaths occurred in hospitals, 15% in care homes, 7% at home and 2% elsewhere, which includes other establishments such as hospices and prisons. Nationally, a higher proportion of deaths have been in care homes (27%), and fewer in hospitals (66%). Based on the ten weeks between 29th February and 8th May, Brent recorded more COVID-19 related deaths than any other borough. Of the total of 4,950 deaths in London, 446 were in Brent, with 422 in Croydon and 420 in Barnet. This represents 54% of all deaths in Brent over that period, but just 43 and 44% of deaths in the other two boroughs (see Figure A1). More than half of the deaths in Harrow and Haringey in this period were also recorded as being related to COVID-19. The lowest number of deaths recorded in this period in any London local authority from the pandemic, apart from the City of London, was 110 deaths in Kingston upon Thames. This was 29% of all deaths in the borough. These compare with 42% of all deaths in London occurring during the same ten week period as a whole being registered as related to COVID-19.

GLA Economics 14 London’s Economy Today • Issue 213 • May 2020

Figure A1: COVID-19 0 10 20 30 40 50 60 related deaths as Brent a proportion of All Harrow Haringey deaths between 29th Newham February and 8th May, Hammersmith and Fulham London Boroughs and Southwark Tower Hamlets selected other local Kensington and Chelsea authorities Ealing Hackney Source: Death registrations Lewisham and occurrences by local Lambeth authority and health board, Croydon ONS (as published 19 May Westminster 2020) Barnet Hertsmere Waltham Forest Enfield Camden Hounslow Redbridge Hillingdon Salford Wandsworth Merton Islington Watford Barking and Dagenham Greenwich Tewkesbury Birmingham Bromley Middlesbrough Liverpool Manchester Sutton Havering Bexley Kingston upon Thames City of London

The different population sizes and structures of London boroughs mean that these figures are difficult to interpret, as it is well known that people in older age groups have higher mortality rates from COVID-19. The figures comparing the COVID-19 related deaths to deaths from all causes mitigate this to some extent. It has been recognised from early in the pandemic that urban areas have been hit harder than rural areas both in the UK and globally. The numbers of COVID-19 related deaths up to 8th May are higher in some of the very large local authorities, such as Birmingham, Leeds, Liverpool and County Durham than in individual London boroughs, but the number in Birmingham is still just 13.5% of the deaths seen in London overall, and is 35% of total deaths from 29th February to 8th May, which covers the ten weeks from the start of the pandemic in the UK to the most recent data available up to the 22 May. Taking the same proportion over the same time period for all local authorities in England shows that there is no local authority outside London with a higher proportion of deaths being registered as related to COVID-19 than the London average. Hertsmere, which borders on to Harrow, Barnet and Enfield is the only English local authority outside London in the top 20, ranked by proportion of all deaths in this ten week period that mention COVID-19. Salford, Watford and Tewkesbury are the only others outside London in the top 30 on this measure. City local authorities that rank in the top 50 include Reading, Cheltenham, Birmingham, Middlesbrough, Derby and Liverpool.

GLA Economics 15 Source: Death registrations and occurrences by local authority and health board, ONS (as published 19 May 2020)

An alternative way to compare the numbers of deaths is through looking at excess deaths, by comparing the total number of deaths in a given periodLondon’s to the Economy“usual” Today number • Issue of 213 deaths • May in2020 that same period in other years. This method incorporates not only deaths attributed to Covid-19, butAn also alternative deaths way that to comparehave occurred the numbers that of may deaths have is through been due looking to theat excess disease deaths, but by were comparing not recordedthe total asnumber such, of pl deathsus any in deathsa given perioddue to to other the “usual” reasons, number which of deaths would in thatinclude same deaths period in among other peopleyears. notThis beingmethod treated incorporates for othernot only conditions deaths attributed and any to COVID-19, unusual patternsbut also deaths in deaths that have for occurredother reasons.that may Using have beenthis duemethod, to the theredisease have but were been not in recorded the region as such, of plus54,000 any deathsexcess due deaths to other in reasons,the UK which would include deaths among people not being treated for other conditions and any unusual patterns over the period of the pandemic, with 9,300 of those occurring in London. in deaths for other reasons. Using this method, there have been in the region of 54,000 excess deaths in the UK over the period of the pandemic, with 9,300 of those occurring in London. The Financial Times1 has used this measure of excess deaths to compare major world cities. As of The20th Financial May, this Times show1 hass usedthat this London, measure with of excess a population deaths to comparearound major9 million, world cities.has recorded As of 20th 1 May,42 per centthis excess shows thatdeaths, London, compared with a population with 108 around per cent 9 million, (11 ,has000 recorded) excess 142% deaths excess for deaths, Ile de comparedFrance, with a populationwith 108% (11,000) of 12.2 excess million, deaths incorporating for Ile de France, Paris. with Madrid a population (12,000 of 12.2 excess million, deaths, incorporating population Paris. 6.6 million)Madrid and (12,000 Bergamo excess deaths,province population in Italy 6.6 (5,000 million) excess and Bergamo deaths, province population in Italy 1.1 (5,000 million) excess show deaths, even higherpopulation proportions 1.1 million) of showsexcess even deaths. higher Meanwhile, proportions of New excess York deaths. City Meanwhile, with a population New York City similar with ato that 2 of populationLondon is similar recorded to that in of the London FT report is recorded2 as havingin the FT 20,7 report00 asexc havingess deaths, 20,700 excess nearly deaths, 400 pernearly cent more400% than more normal. than normal. The TheNew New York York metro metro area, area, hashas seen seen more more than than 30,000 30,000 excess excess deaths. deaths. Figure A2: Mortality rates have soared in urban areas wordwide with overall excess deaths much higher than reported COVID-19 counts

Note: Italian data are a representative sample of 86% of the country. Source: FT analysis of national mortality data. Figures for Jakarta refer to burials. Data updated May 20. FT graphic: John Burn-Murdoch / @jburnmurdoch The© FTCovid-19 outbreak in the UK has had unequal impacts on different groups of the population.The COVID-19 It quickly outbreak became in the UK well has- hadestablished unequal impacts that ol onder different people, groups men, of andthe population. people who It have underlyingquickly became health well-established conditions (particularlythat older people, diabetes, men, and obesity, people whoheart have disease underlying and healthchronic conditions lung conditions)(particularly were diabetes, at disproportionate obesity, heart disease risk and of chronic developing lung conditions) a severe were infection at disproportionate and dying. riskHowever, of andeveloping increasing a severebody infectionof evidence and dying. has merged However, to an show increasing how body Black of evidenceand Minority has emerged Ethnic to (BAME) show how Black and Minority Ethnic (BAME) groups are over-represented both among the patients who are being hospitalised with serious cases of COVID-19 and also in relation to deaths. 1 https://www.ft.com/content/a26fbf7e-48f8-11ea-aeb3-955839e06441 2 https://www.ft.com/content/a26fbf7e-48f8-11ea-aeb3-955839e06441 2 https://www.ft.com/content/a26fbf7e-48f8-11ea-aeb3-955839e06441 3 https://www.ft.com/content/a26fbf7e-48f8-11ea-aeb3-955839e06441

GLA Economics 16 London’s Economy Today • Issue 213 • May 2020

Analysis published on 7 May by the Office for National Statistics (ONS) shows that the mortality rates for Black, Indian, Pakistani, Bangladeshi and Other ethnic groups are several times higher than for the White ethnic group. These differences in mortality still exist once differences were controlled for by a large range of factors including the different age, sex, region, rural-urban structures of the population, and also socioeconomic factors such as area-based deprivation, household composition, highest qualification and socioeconomic class. After controlling for all these factors, they found Black men still had a mortality rate almost double that of White men (1.9 times), and mortality rates were almost as high for Bangladeshi/Pakistani men. There was a similar picture for women. This difference is not yet totally understood but reflects a complex picture of structural inequality. But it is not yet clear that it can be explained by health and wider socioeconomic inequalities alone. Occupations of workers make a difference to exposure to COVID-19 with some people still working in occupations that bring them into close contact with many people but with no special protection. Deaths relating to COVID-19 of people in some of these occupations have been much higher than in the general population, most notably security guards, taxi and bus drivers, chefs and shop workers. COVID-19 related deaths among care workers are also higher than average, but not among healthcare workers, including doctors and nurses. Occupational differences between ethnic groups may contribute to some of the differences in the hospitalisation and mortality rates seen above. A study of infection rates carried out by ONS, published on 21st May shows that at any given time between 4th May and 17th May, an average of 0.25% of the community population in England, that is excluding people in hospitals, care homes and other institutional settings had COVID-19. The figure is likely to be lower in London as the number of new cases being confirmed is lower than the rest of England, but regional figures from the infection study are not available. There was no evidence that the rate of infection varied for any groups considered – by sex, age or between people working in patient-facing healthcare or resident-facing social care roles, and not working in such roles, whereas the previous release had found the infection rate was nearly five times as high as the average among those in patient-facing roles.

GLA Economics 17 London’s Economy Today • Issue 213 • May 2020

WeOur publish regularlylatest on the state publications of London’s economy, providing the latest economic data for London and interpret how this may affect policy. This includes analysis of recent developments in London’s economy and forecasts for the next couple of years. We provide analysis on sectors of the economy including tourism, retail, housing, health, science, technology and more. We analyse recent developments in London’s labour market, by sector and borough. View all the GLA Economics publications on our website.

The Evidence Base for London’s Local Industrial Strategy - Final report This is the final report on the evidence base that is informing and supporting the development of London’s Local Industrial Strategy, following on from the interim report published in August 2019. It presents clear, robust and comprehensive evidence on London’s economy with a view to supporting the overall objective of achieving inclusive growth in London. It reports on London’s strengths, key constraints, issues and risks for the five foundations of productivity introduced by the Industrial Strategy White Paper (Business Environment, People, Infrastructure, Ideas and Place), while also highlighting the linkages between the economy of London and the rest of the UK. Download the full publication.

Transport expenditure in London This current issues note looks at the case for continuing transport expenditure in London. London spills over its administrative boundaries, and there are 2 million more people in it every day than its 8.8 million residents. The city relies on public transport, and so public investment – 58% of all journeys on public transport in Britain are at least in part in London. People make far more use of public transport than elsewhere in the country, and increasingly so. Download the full publication.

London’s Economic Outlook: Autumn 2019 GLA Economics’ 35th London forecast suggests that: zz London’s GVA growth rate is forecast to be 1.8% in 2019. The growth rate is expected to decrease to 1.1% in 2020, before increasing to 1.8% in 2021. zz London is forecast to see increases in the number of workforce jobs in 2019, 2020 and 2021. zz London’s household income and spending are both forecast to increase over the next three years. Download the full publication.

GLA Economics 18 City Hall The Queen’s Walk London SE1 2AA

Email [email protected] Internet www.london.gov.uk

ISSN 1740-9136 (print) ISSN 1740-9195 (online) ISSN 1740-9144 (email)

London’s Economy Today is published towards the end of every month. It provides an overview of the current state of the London economy, and a selection of the most up-to-date data available. It tracks cyclical economic conditions to ensure they are not moving outside the parameters of the underlying assumptions of the GLA group.

Subscribe Subscribe online at https://www.london.gov.uk/what-we-do/research-and-analysis/join-our-mailing-list- research-and-analysis

Disclaimer GLA Economics uses a wide range of information and data sourced from third party suppliers within its analysis and reports. GLA Economics cannot be held responsible for the accuracy or timeliness of this information and data.

GLA Economics, Transport for London and the Greater London Authority will not be liable for any losses suffered or liabilities incurred by a party as a result of that party relying in any way on the information contained in this publication.

About GLA Economics GLA Economics provides expert advice and analysis on London’s economy and the economic issues facing the capital. Data and analysis from GLA Economics provide a sound basis for the policy and investment decisions facing the Mayor of London and the GLA group. The unit was set up in May 2002.