London Unemployment Surges as Retail and Hospitality Jobs Disappear

London is facing a deepening jobs slowdown as unemployment in the capital has doubled in less than two years, with employment falling faster than in any other UK region. New labour market data shows the number of payrolled employees in London declined sharply over the past year, marking the steepest contraction since the pandemic period. The downturn has been most severe in consumer facing industries that traditionally employ large numbers of Londoners, particularly retail and hospitality. Nationally, tens of thousands of roles have been lost across shops, restaurants and hotels, but the impact has been concentrated in the capital where operating costs are higher and margins tighter. Business groups warn that the pace of job losses is beginning to affect household confidence, local spending and the wider urban economy, raising concerns about London’s short term growth outlook.

The figures, based on official data from the Office for National Statistics, show that London recorded a sharper fall in payroll employment than any other region during 2025. Analysts say the trend reflects a combination of structural pressure and policy driven costs that are hitting employers at a sensitive moment. Changes announced in last year’s budget, including higher national insurance contributions and increases to the national minimum wage, have added to wage bills, particularly for younger and lower paid workers. Critics argue that these measures have accelerated cutbacks in hiring and encouraged some firms to reduce their London presence. Senior figures in the retail sector have publicly warned that rising employment costs risk pushing roles overseas rather than supporting domestic job creation.

Political scrutiny has intensified as ministers face growing questions over the employment impact of recent fiscal decisions. Chancellor Rachel Reeves has defended the measures as necessary to support living standards, but business leaders remain concerned about unintended consequences for jobs. The chief executive of electronics retailer Currys has cautioned that higher labour costs are discouraging recruitment at a time when consumer demand remains fragile. Economists note that while London’s labour market has historically rebounded quickly from downturns, the current mix of cost pressures and weak consumer spending presents a tougher challenge. With retail and hospitality forming a large share of inner-city employment, the direction of jobs data in the coming months will be closely watched by policymakers and employers alike.