Counting the cost of London’s latest lockdown

As the capital prepares for Tier 2 lockdown, what can the fate of other cities and regions tell us about prospects for London’s businesses?

London's Tier 2 status means pubs and other hospitality venues will suffer another hit to trade, but fail to qualify for financial support Credit: The Telegraph

A pub brawl could be in the offing. Not in the pub, of course - it is hard to get a crowd in one these days.

But outside parliament on Monday angry pub workers will gather to protest the patchwork of lockdown measures trashing their takings with little support to keep them afloat.

Waiters will be there, along with restaurateurs, cooks and chefs. 

Some are travelling from regions already hit by local lockdowns. Others will be Londoners in the first days of the capital’s ‘Tier 2’ status.

So a political melee, at least, awaits MPs: instead of serving customers, the workless employees will bash their pots and pans at Parliament.

Covid rules have achieved remarkable levels of compliance, but this is a sign that patience for some is running short.

To see why the industry is reaching boiling point now, consider the divergent fates of different sectors so far, and what awaits hospitality in the coming months, particularly in the capital.

Take financial services, for instance. About half of the industry is in London, and it has adapted better than most to working from home. By August, output in business services and finance was down by less than 8pc compared with February’s level. This is less severe than the drop of almost 12pc for the economy as a whole.

Yet the City of London serves the wider economy, and as the recovery overall is hit by lockdowns, the professions will suffer.

Catherine McGuinness, policy chair of the City of London Corporation, warns of the impact: “We really do need to remember that livelihoods are really important besides lives. We are very worried about the impact on the economy from the virus in general, and of any further restrictions on people's ability to work in Covid-secure workplaces.”

Industries that rely on the physical presence of customers have long been struggling to rebound, particularly in the capital.

Nationally, travel levels have returned to something like normal with ONS data showing car traffic at about 90pc of 2019 levels.

However, London is extremely reliant on public transport. The rise of working from home combined with discouragement from using trains and buses means public transport use is still down by half, according to data from  Citymapper.

Visits to retail destinations nationally last week were down just over 30pc compared with the same period last year, according to Springboard.

Retailers in regional cities had just over half of their usual number of visitors, but central London was 59pc lower - a figure set to worsen with the new Tier 2 restrictions.

Real estate adviser Altus Group estimates more than 3,600 pubs and 7,500 restaurants will be affected.

Hotels, too, are facing a battle, frustrated by chaotic rules that are rarely backed up with any scientific explanation.

“Businesses and consumers are at a loss to understand the triggers to move into or out of the Government’s tiers and as a consequence are unable to plan for the future,” says Tony Matharu, chief executive of the Blue Orchid Hotels Group and director of business group the Central London Alliance.

Crunch time will come at the end of this month, says Kate Nicholls, chief executive of UK Hospitality, when the furlough scheme expires. She predicts at least 175,000 jobs are at risk in the West End, the City and the South Bank - all areas heavily dependent on tourist spending and commuters.

By contrast businesses in Tier 3 cities such as Liverpool and potentially Manchester will be ordered to close and so at least get some funds from the Government.

“I’m less concerned about Manchester, because at least some of those businesses which had been bleeding cash will get some support,” she says.

“You have a squeezed middle in Tier 2 who have maximum legal restrictions on capacity, occupancy, hours and a hit on demand because of no household mixing, and they get no support. They are allowed to open, but all they have got is furlough until 1 November. After that it looks as though they are going to have nothing.”

The new Job Support Scheme, for instance, only works for firms that can pay at least 55pc of normal wages.

Pubs and restaurants in London, and other Tier 2 regions, will now miss the vital Christmas trade that generates the cash needed to help them through the rest of the year.

Under the new rules only people in the same household can eat or drink together inside, undermining city centres reliant on workers buying drinks.

“We’ve done the analysis of what happened in Birmingham and in the North East with no mixing households, and it shaves another 15pc off revenues. So in central London the decision is easy - if there is no extra support, you will see businesses close and people made redundant,” she says.

“It is going to be catastrophic. If the Government is serious about avoiding mass redundancies in hospitality, we need an urgent rethink to the support that is attached to the restrictions in each tier.”