He added: "We can't afford to lose that slot because New Year's Eve is a really great opportunity for the rest of the world to see how wonderful our city is - particularly during a recession we need to continue investment in our city and people coming to London."
New Year's Eve typically sees hundreds of people gather near the South Bank in London to watch a dazzling fireworks display across the River Thames.
The decision to cancel the event has been criticised as premature by some politicians, saying it run contrary to the Prime Minister insisting the UK will still be able to enjoy Christmas.
Peter Bone, the Conservative MP, said: "I thought it was a bit extraordinary that the Mayor of London has decided in September that there won’t be any fireworks on December 31, especially as Boris has said he hopes Christmas will be a normal Christmas."
Sadiq Khan has cancelled New Year's Eve celebrations in London, confirming there will be no traditional fireworks on December 31.
The Mayor of London explained that the dazzling display, which typically takes place near the London Eye, will not go ahead as "we can't afford" to have large crowds gathering amid the coronavirus pandemic.
Mr Khan said he is organising something for people to mark 2021 from the comfort of their homes instead.
"I can tell you there will not be fireworks on New Year's Eve this year like in previous years - we simply can't afford to have the numbers of people who congregate on New Year's Eve congregating," he said.
"What we're working on, we're not in a position to explain what it is yet, but what we're working on is something that people can enjoy from the comfort and safety of their living rooms on TV.
"As soon as we've managed to bottom that out I'll be letting Londoners know and people across the country."