Andy Burnham was urged not to ignore London with his plans to boost economic growth across Britain as official figures showed the capital has the highest unemployment in the country.
Business chiefs warned of a “hugely challenging jobs market” in the city with young people “being hit especially hard by difficult hiring conditions”.
Latest figures showed the unemployment rate in London at 6.5% in the three months to June, down by 0.8 percentage points since the first three months of the year.
For young Londoners, aged 16 to 24, unemployment was at 19.6%, in the rolling year April 2025 to March 2026, the highest for 11 years outside the Covid pandemic, according to the data from the Office for National Statistics.
The overall jobless level in the capital was significantly higher than any other region, with the West Midlands on 5.6%, Yorkshire and the Humber 5.5%, North East 5.4%, East Midands 5.1%, North West 5%, South East 4.1% and the Eastern region 3.5%.
The different levels of unemployment in the UK highlight that while London has huge wealth it also has many deprived communities with hundreds of thousands of people struggling in the ongoing cost-of-living crisis.
Thousands of Whitehall jobs could also be lost in the capital as Mr Burnham’s government seeks to deliver the biggest “devolution of power in modern times”.
Karim Fatehi, chief executive of the London Chamber of Commerce and Industry, told The Standard: "The latest labour market figures are a timely reminder not to take London's economy for granted.
“The capital is a hotbed of innovation and growth, but with the highest unemployment rate in the country, London's status as the UK's economic engine is now under serious threat.
“Rising tax burdens and legislative requirements have stifled hiring in the capital, harming business confidence and discouraging firms from investing in the next generation of young talent.”
Matthew Fell, competitiveness director at BusinessLDN, stressed: “Londoners are facing a hugely challenging jobs market, with the capital’s young people being hit especially hard by difficult hiring conditions.
“The Prime Minister has rightly announced plans to give the Mayor and other local leaders more powers to drive growth. Better joining up training and employment support so that fewer people fall through the cracks will be crucial.
“The Government must also look at bringing down the cost of doing business which is holding firms back from hiring.”
Vacancies in the UK jobs market have fallen back again while wage growth in the private sector has hit a near six-year low, the ONS figures showed.
There were around 6,000 fewer vacancies between May and July, compared with February to April.
This brings the level of vacancies down to 707,000, the lowest in more than five years or, outside of the Covid pandemic years, since 2014.
Vacancies slumped earlier in the year in a sign that firms were pulling back hiring in the face of economic uncertainty and higher wage costs.
The latest ONS survey found that small firms may not be recruiting because of increased labour costs and other business expenses.
The data also revealed that regular average wage growth in the UK’s private sector fell to 2.8% in the three months to June, the lowest level since the three months to October 2020.
This is despite overall regular wage growth rising to 3.5% in the same period, from 3.4% in the three months to April, driven by a 6.1% increase across the public sector as a result of NHS pay awards.
The UK’s overall unemployment rate was 4.9% in the three months to June, while the number of workers on payrolls fell by 13,000 between May and June.
Work and Pensions Secretary Pat McFadden said: “We’ve already put in places reforms to get Britain working again.
“We've rebalanced Universal Credit to remove barriers that held people back from employment, and we're investing £3.5 billion in tailored employment support to help people with health conditions and disabilities move into work.
“We're also supporting businesses to hire young people through our Youth Jobs Grant.”
But shadow business secretary Andrew Griffith said:"These figures show a jobs market that's ground to a halt.
"Businesses are still absorbing the cost of Labour's disastrous Employment Rights Act and tax rises and the worst is still to come.”
