After the Riots: the Economic Cost of London’s Mayhem

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The shocking violence that rocked some of the U.K.’s biggest cities has ebbed, but the country is still counting the costs of the destruction — not only in lives (so far, five), but to property, tourism, and the difficult work of repairing the country’s reputation. The riots came at a wretched moment for the British—plunged in the middle of a debt crisis, at the height of the tourism season and less than a year from the start of Summer Olympics, to be held in London. While Prime Minister David Cameron on Thursday told Parliament that insurers believe the cost in claims could top £200 million, the true total will be much much more.

The Physical Cost
Cameron announced that he would create a £10 million recovery fund and a £20 million scheme to help High Streets recover from the damages. The dozens of families, including 45 in Tottenham alone, who lost their homes to fire will receive immediate government assistance. Those affected by the riots will receive deferred tax breaks on both personal and business levies. And the government will help insurers pay for the cost of some of the claims, though Downing Street couldn’t say how much of the cost they are willing to absorb. The U.K. is in the midst of one of its worst debt crises, owing nearly £1 trillion, or 62% of the country’s GDP.

Some stores destroyed by looters will never be able to recover, claims the British Retail Consortium. Others will take weeks, if not months, to clean up and restart operations. A Sony warehouse north of London was burned to the ground Monday; amid the ashes were thousands of ruined DVDs, CDs and computer games. As a result at least one prominent band, the U.K.’s Arctic Monkeys, could only release their newest album online as no physical copies survived to sell. Looters stripped convenience stores of booze and cigarettes, sneakers and jump suits from JD Sports and even attacked the Ledbury, a Michelin-starred restaurant.

Some 83% of businesses believe the riots have damaged London’s reputation and another 73% think there is a heightened prospect of civil unrest during next summer’s Olympic games, according to a survey done by the London Chamber of Commerce and Industry. A quarter closed early during the riots and another quarter added security. “These figures highlight the fact that the riots could not come at a worse time for the capitol,” says the chamber’s chief executive, Colin Stanbridge. “They also show that businesses have struggled to cope with the immediate impact of the riots. At a time when the capitol’s businesses should be focusing on growth and job creation, the riots have prevented them from going about their day-to-day business.”

The Security Cost
August is usually a slow month for civil servants, many of whom leave the country, heading for France’s Cote D’Azur or Italy’s Costa Smeralda. The riots caught Britain’s leaders unawares: Cameron, the deputy prime minister Nick Clegg, the chancellor George Osborne and the mayor of London Boris Johnson were all out of the country on vacation. Also absent were thousands of police officers. Over the past week Scotland Yard has canceled all leave and summoned police from across the country to help quell the riots. “The truth is that the police have been facing a new and unique challenge with different people doing the same thing – basically looting – in different places all at the same time,” Cameron said. Police from as far as Wales and Scotland were called in and forces in London were nearly tripled from 6,000 to 16,000.

Cameron pledged that the beefed up security presence would remain in place through the weekend. But Downing Street was unable to give an estimate of how much the overtime, lost vacation pay and travel and accommodation costs for out of town security forces would amount. At the same time, Cameron was insistent that his plan to lop 20% off Scotland Yard’s budget over the next four years – furloughing as many as 16,000 cops – would remain in place. The cuts are “still achievable without a reduction in a visible police presence,” he said, adding when pressed, “I hope this doesn’t fall to a tiresome debate about resources.” Cameron also said that for big events in the future – like, say, the Olympics – the government was looking at what ways the Army might be deployed.

The Image Cost
Images of “London Burning” were broadcast all around the world. Countries such as Germany, Latvia, Sweden, Denmark and Finland issued travel advisories. “Violence has now spread to Birmingham, Bristol, Manchester and Liverpool,” tweeted Vardan Kondvikar, editor of India’s Lonely Planet Magazine. “Try to avoid travel to the U.K. this week if possible.”

“The riots have not only seriously hurt London’s image but they have also raised doubts and worries about the safety measures taken for the Olympic games,” ran one story on China’s state-run television. The British Olympic has made assurances that all necessary security measures will be in place in the run up to the event.

So far, a friendly soccer match scheduled for Wednesday between England and the Netherlands at Wembley Stadium was canceled to free up security forces. While England’s globally popular Premier League kicks off this weekend, officials postponed this weekend’s fixture between Tottenham Hotspur and Everton.

Still, central London remained as packed with tourists as ever. The lines for the London Eye snaked down the block and throngs lined the side of Westminster Abbey, eager to see the spot where Will and Kate tied the knot. June was the U.K.’s best tourist month on record, with 2.89 million visitors spending a whopping £1.7 billion. Airline and hotel groups said it’s too early to tell what kind of impact, if any, the riots have had. “London and the rest of England is very much open for business as usual. Hotels and major tourist attractions are open and unaffected,” says David Leslie, a spokesman for Visit Britain. “Most people who do travel regularly have a reality of where things are. They don’t think Westminster is being lit up, or Parliament set ablaze – that just doesn’t happen.”