The economic impact of the coronavirus across the UK has been dramatic – and has varied significantly within the capital. Indeed, as the West End’s knowledge economy has sustained itself by operating remotely, its more spatially-fixed consumer economy, as well as its social and cultural fabric, are facing a deeper and more protracted crisis than other parts of the capital, which have held up thanks to a surge in residents shopping locally.

Consumption crash

Government guidelines to work from home where possible, avoid public transport, and shop local, brought the West End’s consumer economy to a halt during the period of lockdown. Whilst some sectors were relatively resilient (take up of the Job Retention Scheme was 21 per cent among Professional Services, compared to a UK average of 30 per cent), this was only true for those who could work remotely, and so most of the day- and night-time economy that central London workers support all but collapsed.

Domestic and international visitors, the other key West End clientele, also disappeared – between 1 April and 15 June, tourist ridership on public transport across London was only four per cent of normal levels. The absence of foreign visitors has been felt most strongly in central London: 54 per cent of international tourist spend in the UK in 2018 was in the capital, about three quarters of which was within the Cities of London and Westminster, and the Royal Borough of Kensington and Chelsea. ²

In comparison, consumption held up in smaller town centres. In April, at the height of the pandemic, credit card transactions across West End businesses were 91 per cent below the previous years level (see Figure 1) – whereas London’s smaller town centres, such as Southall and East Ham, saw transactions decline by just 67 per cent and 70 per cent respectively, as Londoners lived much more local lives.

Protracted recovery

Despite a phased reopening – of shops on 15 June, and museums, restaurants and bars on 4 July – the West End, and the rest of Central London has been the slowest part of the country to recover. Central London ranks last on the Centre for Cities high street recovery tracker, which measures city centre footfall. ³ In early August, footfall was at 28 per cent of pre-crisis levels in central London, compared to 41 per cent in Manchester, 47 per cent in Birmingham and 60 per cent in Newcastle. The difference was greatest for weekend and evening footfall, which remained particularly low in central London into August.

Insights on retail sales from Mastercard’s Recovery Insights initiative give more localised detail of how stark the downturn has been for central London in comparison to the rest of the city. While the volume of transactions had begun to recover in July, transactions in central London were still down 60 per cent compared to January 2020, but the figure was 40 per cent in Bromley and 12 per cent in Ealing Broadway, while East Ham or Southall saw increases in transaction volumes over the same period. ⁴

Central importance

The slump in central London’s consumer economy threatens permanent damage to its business ecosystem.

The West End has a large share of small businesses, many of which lack the financial means to adjust to physically distant modes of business operation. 74 per cent of businesses registered in Westminster and Camden have 0-4 employees. ⁵ A survey of the London members of the Federation of Small Businesses found that one in three (32 per cent) have faced severe difficulties in making business rent or mortgage repayments since the start of the pandemic. ⁶

Whilst the government’s Job Retention Scheme and other support schemes have been a lifeline to retail, culture and hospitality businesses nationwide, a continuing slump in central London consumption could prove fatal for many of these smaller enterprises.

These losses could have huge consequences for the West End, and for London’s economy. Indeed, accommodation and food is the second largest sector for employment in the West End, while retail is the fifth, and the arts and entertainment the sixth largest. The West End accounts for 13 per cent of London’s jobs, but 17 per cent of the capital’s employment in arts and entertainment, and 19 per cent in hospitality (Figure 1).

While some turnover of businesses is to be expected in such turbulent times, long-term or permanent damage to the city’s economy, West End workers, and the West End’s standing as a domestic and international destination is concerning. In some sectors – particularly culture and performing arts – it is less easy for new enterprises to take root and replace those that have been lost. Neither London nor the UK can afford for the West End to remain underused, and for its unique economy to falter.

Long-term uncertainty

The pandemic also brings previously underlying challenges into sharper focus. Sectors such as professional services may be safe – but will a large amount of their business continue to be conducted remotely, as demonstrated possible by the pandemic? And will this generate new growth in central London, or create the conditions for further decline?

In recent years, the advance of technology has come hand in hand with a return to urban centres, and economists have argued that people and businesses will always be jostling for space near London’s centre. ⁷ Large tech companies, such as Google and Apple, have recently chosen zone 1 locations for their head offices. ⁸ Under one scenario, central London could become more focused on face-to-face activities in the office, as employers ask workers to conduct routine, non-social tasks at home. This would resonate with workers’ expectations: we know from a recent survey that Londoners expect to work from home 10 per cent more. ⁹ Overall employee numbers could even rise, if more people come into the centre for a few days every week.

But without a fresh effort to mitigate the impact of the pandemic on the West End in the short to medium term (until a vaccine is found), workers and visitors might find that the West End they return to is very different – with less diversity in its consumer, social and cultural offering, as smaller and independent businesses, which are less resilient to a prolonged period of reduced sales, falter. This could undermine the West End’s attractiveness to workers and tourists alike, and further weaken its economic sustainability.

Climate emergency

The recovery effort must also coincide with a leap forward on decarbonisation. It is hard to imagine the West End no longer drawing in a global visitor base reliant on air travel – but a lot can be done in the day to day running of the West End, from greening the fleet of servicing and delivery vehicles to reducing the energy consumption of buildings. Of course, as a global hub for consumption, more work will be needed on the environmental sustainability of the West End’s supply chains.

The next part of this report looks at measures that could help the West End survive and thrive in a fast-changing world, while making progress towards the decarbonisation imperative.