London has ‘hidden army’ of involuntarily economically inactive people, Centre for Cities data show

7th February 2023

The think tank says the problem is more acute in the north of the country, but the numbers in the capital affected are very large

CHARLES WRIGHT

Official unemployment figures for the capital could be failing to count large numbers of working-age people who are “involuntarily economically inactive”, according to the latest Cities Outlook research from the Centre for Cities think tank.

The centre’s annual snapshot of the economic performance of the UK’s 63 largest cities and towns highlights the growing numbers of working-age people neither in work nor looking for a job due to circumstances beyond their control, such as ill-health or lack of suitable opportunities – a “hidden army” some three million strong.

This concealed unemployment rate generally affects northern towns and cities more acutely, but other areas including London are not immune.

“The rate of forced inactivity is lower in the greater south east, but the numbers are still very large, which is sometimes missed,” said Centre for Cities research director Paul Swinney. “One point one million are in forced inactivity across the region, the majority in the capital.”

The centre’s data show that while there is a shortage of jobs in many areas, in others, including London, a more buoyant jobs market should have more capacity to accommodate those currently inactive.

“The jobs are there, but how do we connect people to those jobs?” said Swinney. “The problem is smaller but there is definitely a problem to think about.”

The capital has consistently had higher unemployment rates than elsewhere and at 4.3 per cent its official rate is the second highest of any UK region. It remains an economic powerhouse, however, according to the centre – consistently at or near the top of the league on productivity, business start-ups and jobs growth and on its number of “new economy” companies, skills and education levels and salaries.

But behind the headlines lie significant inequalities and, according to Swinney, as well as tackling the poor health and low skills keeping a sizeable number of working-age Londoners out of the jobs market, the city needs to deal with what he called the “costs of growth” such as the increasing unaffordability of housing, as well as the perhaps surprising fact  that London has more days of poor air quality than anywhere else in the UK – 36 of them in 2021/22.

The average house price in the capital last year was £694,700, the highest in the country, and 14.2 times the average wage, the centre finds, while the of new homes being built continues to fall short of the demand for them.

The homelessness charity Shelter last month reported that nearly 150,000 people in London are living in temporary accommodation, accounting for more than half the England total, and Sadiq Khan used a committee appearance in Parliament to call on government to “wake up” to a growing housing crisis.

The Mayor argued that with private rents in the capital up 16 per cent over the past 12 months, reaching an average of £2,343 a month, City Hall should be granted the power to freeze them for two years, “stabilising” the market and saving renters some £3,000.

Separately, a new survey of global cities by the London Property Alliance has highlighted “warning signs” about the capital’s economic growth, including faltering new homes delivery.

Slides illustrating the cities outlook 2023 findings are here.