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The Mayor of London said this was “in the interests of public safety”.
The event was due to take place in the popular London hotspot with a maximum capacity of 6,500 people.
Sadiq Khan on Monday evening: “With infections of Covid-19 at record levels across our city and the UK, I’m determined to work closely with partners in our city to do everything we possibly can to slow the spread of the new variant and ensure our NHS services are not overwhelmed this winter.
“This means that we will no longer be hosting a celebration event for 6,500 people on Trafalgar Square this New Year’s Eve. This will be very disappointing for many Londoners, but we must take the right steps to reduce the spread of the virus.”
Due to the surge in Covid cases, we've taken the difficult decision to cancel our NYE event in Trafalgar Square. The safety of Londoners must come first.
A spectacular NYE celebration showcasing our city will still be shown on midnight on BBC1 - I urge all Londoners to tune in. pic.twitter.com/a9tOJ7f9td
— Sadiq Khan (@SadiqKhan) December 20, 2021
Instead, he said a “live broadcast spectacular celebrating our city and highlighting the most defining moments of 2021 will still be the centrepiece of London’s New Year’s Eve celebrations”.
Mr Khan urged people to stay home and watch it live on BBC One and BBC iPlayer because it will not be visible from the ground or key locations in the capital.
For the first time ever, Trafalgar Square was set to host the ticketed celebration event as a replacement to the fireworks display usually held on the River Thames.
The change in location was due to the uncertainty caused by the pandemic, particularly around mass gatherings.
The event included live music, stage performers, food stalls and a large screen showing the live broadcast.
Last year’s celebrations were also muted as the capital was under stringent measures which warned Londoners to stay at home.
This meant the city’s famous riverside fireworks display was not open to the public but broadcast on TV like usual.
He said: “Our world-renowned retail, hospitality, tourism, nightlife and cultural businesses are already suffering from the imapct of the latest wave of Covid cases during what is usually their busiest time of the year.
“I continue to urge the Chancellor to step up with a package of support to help businesses through this difficult time and to ensure they will be able to survive and help drive our economy forward again next year.”