London Lags Rest of the U.K. in Creating Post-Pandemic Jobs

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London’s economy is lagging the rest of the U.K. in generating jobs as rules to control Covid-19 keep tourists and office workers out of the capital.

Europe’s biggest city had 3.2% fewer payrolled employees in June than before the virus hit the U.K. in February 2020, data from the Office for National Statistics showed on Thursday. Some regions, such as those in northern England, have created more jobs than they had before the pandemic.

The figures indicate the depth of the wounds London is nursing after 16 months of restrictions that prompted people to work from home, avoid shops and quit traveling. London lost at least 230,000 payrolled jobs during the pandemic, many of them in restaurants and bars that have been blighted by periodic shutdowns. While most restrictions are due to lift on Monday, the city is far from a recovery.

“Activity remains further below normal in central London,” Michael Saunders, a Bank of England policy maker, said in a speech on Thursday. “These large shifts in the composition of activity partly reflect the uneven effects of Covid-related restrictions, which have directly impacted some sectors far more heavily than others.”

For decades, London has been the engine of U.K. economic growth, leading the nation in job creation and prosperity. Prime Minister Boris Johnson’s government is focusing on “leveling up” those other regions to spur growth outside the capital. In a speech on Thursday, he said those policies would not hurt the city.

London remains vulnerable to potentially permanent changes in behavior including the decision of many firms to allow employees to work from home more often than they did before the pandemic.

Those shifts “disproportionately affects London and other big cities,” according to Xiaowei Xu, a senior research economist at the Institute for Fiscal Studies. “Some of those effects are enduring even as the rest of the economy recovers. It’s very unlikely to be entirely transitory.”

The statistics released Thursday don’t capture the level of migration out of London, said economist at the Resolution Foundation Hannah Slaughter. She estimates 500,000 people have left the U.K. during the pandemic, many of them foreigners returning to their home nation as jobs dried up.

“It’s likely that there will be a permanent shock to migration,” said Slaughter. “It’s likely also that international travel will take much longer to open up fully then everything else.”

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