Tuesday 23 June 2020 6:00 am

Khan calls for London furlough extension as he warns of ‘looming unemployment crisis’

Mayor of London Sadiq Khan has urged the chancellor to extend the furlough scheme in London’s most deprived areas, as he warned of a “looming unemployment crisis” in the UK. 

Khan today called on Rishi Sunak to extend the Coronavirus Job Retention Scheme beyond the end of the lockdown to avoid a sudden surge in unemployment later in the summer, which he said could result in poverty and homelessness in the poorest areas of the capital.

“The Covid-19 pandemic has already had an enormous impact on the economy and its impact will be long-lasting and far-reaching. It has highlighted many of the inequalities in our economy and society in sharp relief,” the mayor said. 

He added: “Ministers must urgently extend the help on offer to avoid the looming unemployment crisis which will hit the most disadvantaged and BAME Londoners hardest.”

More than 1m London workers have now been furloughed during the pandemic, accounting for more than 12 per cent of the national total, the latest government data showed.

The top five UK constituencies for the number of furloughed workers are all in London, and represent some of the poorest areas of the capital. West Ham has seen the highest rate of furloughed workers in the UK, with more than 29,300 residents placed on the government’s job retention scheme. Tottenham has the second highest rate with 25,400, followed by East Ham, Feltham & Heston and Brent Central.

“These new figures clearly show that the parts of London where unemployment and deprivation are most prevalent are also the areas with the highest proportion of furloughed workers,” said Khan. 

The mayor added that he was “deeply concerned” that without ongoing support many Londoners on low wages and from minority ethnic backgrounds would be hardest hit by redundancies.  “In the longer term, we will need more devolved skills funding and new job creation schemes to ensure these communities are not left behind by the recovery.”

The chancellor’s furlough scheme, which has allowed those not able to work due to coronavirus to claim 80 per cent of their normal wage up to £2,500 a month, is set to wrap up at the end of October. From September, employers will only be able to claim 70 per cent of staff wages.

MPs have warned that the capital’s poorest areas will be hardest hit by further unemployment when the furlough scheme winds down, as small businesses will be unable to pay employees returning to work.

Rokhsana Fiaz, mayor of East Ham’s Newham council, said: “As mayor of one of the worst affected areas in the country, I welcome the mayor of London’s call for extra financial support for those in most need.”

“Too many Newham residents are in low wage, insecure jobs, and this is another example of the disproportionate impact that Covid-19 is having on our community… We need the Government act now and back its promises with funding.”

It comes as the UK faces economic turmoil, after the Office for National Statistics last week revealed that Britain’s economy shrank by a record 20.4 per cent in April, just one month into the lockdown. The chancellor warned that the UK now faces a “significant recession”, and officials have raised concerns that further financial damage will deepen existing inequality in the country.

Research released yesterday by the Resolution Foundation found that lower-income households are twice as likely as better-off households to have increased their debts during the crisis. One in four of the poorest households in the UK have increased their debt during the pandemic, compared to just one in eight of high income households.

“Pre-coronavirus Britain was marked by soaring wealth and damaging wealth gaps between households,” said George Bangham, economist at the Resolution Foundation. “These wealth divides have been exposed by the crisis. While higher-income households have built up their savings, many lower-income households have run theirs down and had to turn to high-interest credit.”

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