London suffers most job losses after Labour’s tax hikes

LONDON – London is bearing the brunt of Britain’s jobs slowdown as a combination of tax rises, elevated wage costs and weak consumer spending force the city’s businesses to cut payrolls faster than in the rest of the country.

The capital has shed almost 45,000 jobs since October 2024 when the Labour government announced a £26 billion (S$45.2 billion) hike in employers’ national insurance – a payroll tax – and a higher minimum wage, according to tax data.

It means one in four of all job losses across the country has come from Britain’s most productive region. When 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 Ms Kate Nicholls, UKHospitality’s chief executive.

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,” Ms 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 advertisements in the capital fell almost 40 per cent over that period, compared with declines of 26 per cent and 9 per cent, respectively, recorded across the country.

Data on Aug 14 showed Britain 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 benefiting areas of the country that rely more on the public sector than London does, according to Ms Anna Leach, chief economist at the Institute of Directors.

The tech sector has been paring back recruitment after quickly expanding during the pandemic, and Mr Jonathan Steenberg, UK economist at credit insurer Coface, said insolvencies in the information technology and communications industries are up by almost one-third from a year ago.

Artificial intelligence 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 Mr Andrew Goodacre, chief executive officer at British Independent Retailers Association. BLOOMBERG