London’s unemployment rate hits 11-year-high ahead of Autumn Budget

0:02Hi, I'm Charlie Duffield and welcome back to The Standard Podcast. If you're new here, hit follow and give us a rating. For all the latest news, head to standard.co.uk. Coming up later in the show, why the spotlight is on the capital when it comes to the country's jobless rate. London is a bit of an outlier to some degree. Just we do have these huge industries that London is famous for that have been particularly badly hit by tax changes over the last year. But first, as if there hasn't been enough economic doom and gloom recently, official figures have revealed that the rate of unemployment in the UK is much worse than expected and has hit 5 % for the first time since the Covid pandemic.

0:54Between July and September, almost 1.8 million people classified themselves as unemployed, according to the latest data from the Office for National Statistics. If the pandemic is excluded, unemployment has not been at 5 % for almost a decade. And London has been hit the hardest. The capital has the highest unemployment rate of any region in the UK at 6.5%, up by 0.5 % since the previous quarter. The 341 ,000 people out of work is the highest since early 2021, four years ago. Payroll jobs held by people living in London were down by 20 ,100, which is a bigger fall than any other region in both absolute and proportional terms.

1:46And it comes with less than three weeks to go until this month's autumn budget, as rumours persist that Chancellor Rachel Reeves is set to break Labour's manifesto pledge by hiking taxes. Here's what Shadow Chancellor Sir Mel Stride had to say about it last week. I think the overarching point here is that this is a Chancellor who said before coming into office we will not be putting up taxes left, right and centre. She whacked an eye-watering£40 billion worth of taxes on our economy, including most of it going on the jobs tax, which has destroyed growth. She said after the budget, that was it.

2:25It was a one-off. She was not going to be coming back for more. And what we're saying today is in the event that she does come back for more on that budget on the 26th of November, then I think her position is clearly untenable. Many business leaders have complained that the slowdown in hiring activity is due to the Chancellor's increase in minimum pay and employer national insurance contributions. Referring to the employment data, Liberal Democrat Treasury spokesperson Daisy Cooper said, Surely the writing is on the wall now for the Chancellor's jobs tax. Everyone except Rachel Reeves seems to have woken up to the fact that forcing small businesses to pay more in tax for giving people jobs would damage job opportunities.

3:11Now the proof is staring her in the face. The government must reverse their damaging national insurance hike at the budget and commit to saving the small businesses who employ millions in Britain and are at risk of collapse if they're to have any hope of reversing today's concerning trend. The Conservatives accused the Chancellor of presiding over a high-tax anti-business agenda. But back in August, during a visit to Belfast, the Chancellor defended her stewardship of the economy whilst conceding that more needs to be done to help people secure jobs. Employment, since I became Chancellor last year, is 384 ,000 higher, so 384 ,000 more jobs in the economy than there were just over a year ago when I came into office.

4:01And although the number of people who are unemployed increased slightly on the quarter, the number of people who are economically inactive actually fell by much more, I think three times more than the increase in unemployment. So some of those people who have been out of the labour market, often for long periods of time, are actually getting into work. And that's really encouraging. But the most important figure today is that there are 384 ,000 more people in work than when I became chancellor. Is there more to do? Absolutely, there is. Everybody who can work should be in work. And as a government, we're committed to helping more people back to work.

4:39There are huge opportunities in our economy. Joining us now is The Standards business editor, Jonathan Prynne. Jonathan, is this just pre-budget jitters or is there more going on here? Why exactly are businesses so reluctant to hire staff? It's more than pre-budget jitters, that's for sure. Although that is definitely part of the story. The very late timing of the budget is not helping employers to be confident in taking people on. As ever with the unemployment figures, they're quite historic. This covers the three months up to September. And they're more reflective of the extra costs that have been loaded onto employers over the past year or so, particularly higher national insurance rates for employers that came in in April.

5:23last year's budget, they've had a huge dampening effect on employers' willingness to take people on because of the extra costs of employing a worker, particularly low-paid workers. It's been particularly tough for the hospitality and retail sectors, which are huge employers in London, obviously. As a result, we've seen this trend over the past year of steadily rising unemployment. Today, this figure was particularly shocking, I think, because we haven't seen 5 % as the national rate for quite a long time. If you strip out the pandemic, we haven't had 5 % unemployment for a decade, essentially.

5:57And the rate is still heading north. So it remains to be seen where this will end up. So London now has the highest rate of unemployment in the country by some margin, doesn't it? 6.5%. And that's risen by half a percentage point in a quarter. Doesn't sound much. But in sort of statistical terms, that's a big increase. And London really is an outlier at the moment. It is worrying. I do think it's probably related to these big increase in national insurance contribution rates, particularly all hard on sectors that are very big employers in London. Hospitality in particular, there's a lot of relatively low paid staff on the national living wage, which of course has gone up sharply as well.

6:39Working in London's huge sort of hospitality sector, the bars, the restaurants, the hotels, but also London has this massive retail sector You think of the West End. And retail is another industry that employs a lot of relatively low paid workers. And retail employers also have complained that they are seeing a huge increase in costs, not just from the national insurance contributions, other factors such as business rates and rents. It's a tough time for the high streets. Unemployment figures can sometimes be tricky to interpret. It means that we're talking about the number of people who are actively looking for a job.

7:17Is that right? Yeah, that's right. I mean, it can be a bit confusing because you think unemployment 5 % or 6.5 % in London, that doesn't sound all that much. And indeed, it's only a small proportion. But to be classified as unemployed, you do have to be actively seeking employment. There's huge numbers, about 20 % of the working age population roughly, who do not work and most of them choose not to work for other reasons, long-term sickness, long-term disability, their carers, all sorts of other reasons. And that's been a big problem for the British economy as well, that we've seen that inactivity level, particularly in relation to long term disability and sickness, rise quite dramatically since the pandemic and not go down again.

8:04And that makes Britain unusual because in most other developed countries, that proportion of the population did go up, but it came down again after the effects of the pandemic sort of ebbed away. But in the UK, disability and sickness related worklessness has stayed at very elevated levels. And it's a bit of a mystery. It's one that the government needs to get on top of because it has huge implications for the welfare bill as well. let's go to an ad break stay tuned to hear more from Jonathan as we unpack what Chancellor Rachel Reeves might do next we'll see you back here in just a moment

8:49welcome back Jonathan looking ahead to the budget you've said an interest rate cut from the Bank of England is now a certainty. And Reeves is also widely expected to raise taxes to plug the budget black hole. How will this hit jobs and growth? The Bank of England's rate cut should be helpful, particularly smaller businesses that are saddled with high levels of debt. Any little ball in the cost of borrowing is very helpful and could at the margin encourage them to take on more workers. I don't think it's an absolute game changer in itself, but it's helpful. The budget is clearly going to be focused much more on individual taxpayers like you and me this time than it is on business.

9:33The Chancellor loaded tens of billions of pounds of about 25 billion in total of extra costs on the business sector through the national insurance contribution rise that came into effect in April. And I think in the Treasury, they now recognize that that was a mistake. At the same time, the impact of the new Employment Act is another burden on business. So she really can't afford to increase the burden on business anymore. In fact, I think she'll probably take it away in some respects with reform of business rates and so on. So unfortunately, that leaves you and me and the rest of the working population to shoulder the extra money that she needs to raise to plug this black hole that people have been talking about.

10:13And that is likely, not certain, but likely to come in the form of higher income tax rates at the basic rate, probably 2p on the basic rate seems to be likely. So, try and balance that with reductions in national insurance rates for lower paid workers, but there's no hiding place for most workers are going to see more taxes coming out of their pay packets from next April. So, tell me a bit more about this Employment Rights Bill. So the employment rights bill will give extra security to workers. It will sort of end zero hours contracts, give employees far greater protection to sort of unfair dismissal during the early period of when they start a new job.

10:59At the moment, they have very little protection from dismissal. It changes the balance of power between employees and employers. I think the worry for employers is that it's coming at exactly the wrong time when already there are extra costs and burdens on taking on new workers. And I think employers will see this as yet another reason not to take extra staff on. And that could just contribute to this ever increasing rise in unemployment that we've been talking about. So I think among employers, there is a lot of worry about the impacts of this new legislation. And what's the reaction been so far to this news?

11:35Not surprisingly, there's been a strong political reaction from these figures, which were definitely worse than expected. Gareth Bacon, for example, the shadow London minister, the Tory MP for Orpington, has described today's increase as a direct consequence of Labour's economically illiterate decision to raise national assurance. And, you know, unfortunately, the government is exposed on this. We've had a long, long period of very low unemployment, notwithstanding the slight spike during the pandemic. And 5 % feels like a line in the sand. The next big landmark will be if unemployment goes above 2 million.

12:14There's two ways of measuring it. You can measure it as a rate, but you can also measure it as numbers of people that are unemployed. We're now up to about 1.8 million. 2 million is not that far away. And that's going to be a terrible headline for Labour as well if we do go through the 2 million unemployed mark. Finally, how do these figures in the UK compare to other countries? Although these figures are bad for the UK and the trend is looking ominous, the unemployment rate in Britain is not that bad by international standards. There are some countries where unemployment is much lower, Singapore, for example, Japan, Switzerland, Saudi Arabia.

12:50But most of the big economies of Europe have a far higher rate of unemployment. If you look at the euro area as a whole, it's 6.3 % compared with our 5%. Germany is 6.3%. France is higher still at 7.5%. Spain has always had high levels of unemployment, still around 10%. The US is slightly lower than us at 4.3%. So we're kind of middle of the pack. But I think it's the direction of travel that will worry Rachel Reeves and employers generally and the people who follow the economy generally. It does look like we are now on a sharp upward track and that is worrying.

13:35And that's The Standard. For all the latest news, head to standard.co.uk. If you'd like to get in touch, please do drop us a line at podcasts at standard.co.uk. We'll be back here tomorrow morning. We'll see you then.