Capital problems: Poverty in London and the role of business in tackling it



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This report draws attention to the extent of in-work poverty in the UK and London today, what drives it and the impact it has. It is part of a wider project – set up in partnership with Trust for London – to develop a new benchmark to help companies tackle in-work poverty.

To help London businesses that want to take action and encourage more businesses to take similar actions, we advocate the development of a new metric that can drive companies to identify and adopt better business practices, which in turn can help tackle poverty in the capital.

Poverty in the UK

  • Before the COVID-19 pandemic, an estimated 14.4 million people – including 8.5 million adults of working age and 4.5 million children – were living in poverty in the UK.
  • The 2020 and 2021 events are expected added more than 600,000 adults of working age to the poverty total.

In-work poverty in London

  • In-work poverty has become particularly acute in London, where, for example, the share of London households in poverty – where at least one adult works full-time – has increased. increased by 50% in ten years† The data shows that three quarters of children in poverty in the capital – more than half a million – live in working households.
  • This growth is due to a number of factors, including:
    • Slower wage growth for poorer workers in the capital compared to those in other parts of the country.
    • Significant numbers of London’s workforce are employed in low-paid, low-skilled occupations
    • Bad working conditionsincluding inadequate protection and limited access to additional “workplace benefits” such as adequate sick pay and pensions.
    • A high cost of living not least due to housing costs, although transport and other financial factors associated with being in London also contribute.

London-based companies care about poverty

  • 79% of London employers agree that “poverty is a problem affecting people in the capital”.
  • 39% estimate that half or more of their workforce is “directly affected” by poverty.
  • 84% say “in-work poverty (among their own employees) should be a concern for London businesses”
  • 70% say they are motivated to tackle in-work poverty in the capital by: taking voluntary measures that go beyond the legal minimums – such as paying the National Living Wage.

Why companies in the capital are concerned about poverty

For example, the motivation most cited by employers who were concerned about poverty among their own workforce and who agreed to take steps to help alleviate it was that such actions would be “doing the right thing”† However, there is abundant evidence that many of the measures companies can take to reduce poverty among their workforce can also provide multiple commercial benefits for such companies. The main ones are illustrated in diagram 1.

Chart 1: Commercial benefits of fighting in-work poverty

Source: SMF

Public opinion on how companies should treat employees

  • There is significant public support for companies that prioritize the care of their employees. For instance, 65% of the public said “bad treatment of employees” was the kind of business behavior that “worried them”
  • The same section of the audience said that: “employee benefits and benefits” should be a top priority for managers in large companies.

The Environment, Social and Governance (ESG) focus of major London employers

  • 97% of larger companies in the capital say ESG issues are “important” to their business.
  • 61% of larger London companies who said ESG is “important” report that the “environment” is a “focus of their current ESG efforts”.
  • 26% said they prioritize in-work poverty in their own workforce as a focus of their ESG activities.

The ESG focus of FTSE 100 companies

  • Analysis of the latest FTSE 100 annual reports found an even greater difference in the amount of emphasis placed on governance and the environment by the UK’s largest companies compared to poverty. Chart 2 illustrates that difference by highlighting the average number of times key ESG terms appear in the most recent annual reports of FTSE 100 companies.

Chart 2: Average Number of Entries of Key ESG Terms in FTSE 100 Annual Reports

Source: SMF

A new benchmark could incentivize London businesses to prioritize poverty

  • Two reasons why labor poverty is not a topic that many companies focus on as part of their ESG activities are:
    • The direct incentives to encourage such interest are not there.
    • The potential longer-term commercial benefits of implementing measures (which can directly help reduce in-work poverty) are not always clear and widely understood.
  • ESG standards, kitemark, codes of practice and benchmarks can help drive change in business behavior in a positive way. London-based companies recognize this, with: 68% own or adhere to at least one ESG standard, code of practice, kitemark or benchmark and 90% agree that they “add value”. The popularity of such tools among London businesses makes the development of a poverty-focused tool a potentially useful mechanism to encourage employers in the capital to help fight poverty.
  • Over time, the widespread adoption of such a tool could help shift many companies’ current ESG focus on poverty.

Towards a new benchmark

The SMF is looking for a new poverty benchmark to help companies demonstrate the measures they are taking to help reduce poverty among their own workforce, in the communities around their main London business activities and by those working in their local supply chains.

The SMF welcomes the ideas and observations of companies, relevant civil society organisations, academics, practitioners and others about this research, the wider project and its objectives. We encourage those interested in this matter to contact us at director@smf.co.uk to join this conversation.

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