The UK financial services sector contributes £71.4bn to public finances

 
By Snehal Sahani, PwC Total Tax Contribution team

 

Yesterday, the City of London Corporation launched its ninth Total Tax Contribution (TTC) study for the financial services sector.  This year (2016) the study showed that the taxes paid by financial services have now exceeded the pre financial crisis level. At £71.4bn, the contribution is at its highest since the study began in 2007 and is 7.4% higher than the sector’s contribution in 2015.

For the first time this year, the report includes a sub sector analysis of banks and insurers. They both fall under the umbrella of ‘financial services’, however their tax profiles are very different as shown below.

          Total tax 2016

(Image Source: https://www.cityoflondon.gov.uk/business/economic-research-and-information/research-publications/Documents/Research%202016/total-tax-report-2016.pdf)

A key difference is that while the banks generally do not collect an indirect tax from their customers, insurers charge insurance premium tax based on customer premiums. As a consequence, taxes collected other than from wages are a much more prominent feature of the TTC for insurers than for banks.

This suggests that taxes contributed by certain businesses are more dependent on the nature of the activity than the location of their operation.

Overall, this study provides a unique insight into the financial services sector’s tax contributions and highlights their importance to public finances in the UK.

 

Download the Total Tax Contribution of UK Financial Services

 

 


A new measure of inflation

 By Robert Clear, Researcher in the City of London Research Team

 

Next year (2017) the Office for National Statistics (ONS) will change the way it measures inflation. The new method, CPIH (Consumer Price Index including Housing), will sit alongside the existing Consumer Price Index (CPI), which is now widely regarded as unsatisfactory.  What’s significant about CPIH is that it will include a measure of owner occupiers’ housing costs. These include mortgage payments, dwelling insurance, estate agents’ fees and the costs of maintenance and renovation. Many of these costs have traditionally been excluded from CPI due to difficulties in determining how to calculate them and lack of data.

The implications of switching focus from CPI to CPIH are significant. If applied to the latest data, calculations using CPIH would have resulted in a headline inflation figure of 1.2% in September, compared to 1% using CPI, according to the Financial Times.

CPIH will be published from March 2017, at which point it will become the main focus in ONS’s reporting. ONS hopes that the move will encourage other organisations to make use of the measure. At the time of the launch RPIJ, the Tax Prices index and the RPI pensioners’ indices will be discontinued.

This is not the first time that CPIH has been employed in the UK. It was introduced in March 2013 amidst hopes that it would eventually be used as a price stability benchmark for the Bank of England. But in August 2014 its status as an official National Statistic was downgraded by the UK Statistics Authority – it was to revert to experimental status while ways to improve it were explored.

In November this year (2016), with the relaunch confirmed, John Pullinger, National Statistician and CEO of ONS, acknowledged the importance of the new preferred inflation measure being of recognised National Statistic status, and noted that the organisation is working towards re-designating it. Building confidence in the new measure may take time – the Treasury has no current plans to ask the Bank of England to target CPIH. Re-designation will depend on how far it meets users’ expectations of quality, trustworthiness and value.

 

 


Talent and an innovative enabling environment: why the tech sector continues to thrive in London

 By Maxine Kennedy, Researcher in the City of London Research Team

 

Since the Brexit vote in June (23/06/16), European competitor cities have been seen to ramp up their efforts to attract London based firms to other capital cities. For instance, Berlin is currently running a campaign targeted at the tech sector, and set up an office in London in September to drum up interest.

Berlin’s campaign targeting London’s start ups

  Berlin's campaign targeting London's start ups

(image from - http://blog.crowdcube.com/2016/08/04/tech-start-ups-should-be-the-number-one-priority-post-brexit/)

 

However, it’s good to see that major tech firms are showing their commitment to London. This week (w/c 14 Nov 16),  Google announced further investment that will lead to a doubling in size of their office space in their new London’s King’s Cross headquarters.

Last month, Apple  announced its plans to lease up to 450,000 sq ft at Battersea Power Station, and HSBC announced that it is to locate its new FinTech hub in Southbank. Many have viewed these moves as a much welcomed vote of confidence in the UK, given the uncertain climate after the UK’s vote to leave the EU.

Over the past eight years, the technology, media and telecoms (TMT) sector has been increasingly important for London’s economy, and according to a recent report by Knight Frank, 2016 looks set to the 6th consecutive year that the TMT sector is Central London’s largest source of office demand.

So what is it about London that attracts tech firms?

Savills’ Tech City index finds that London’s biggest strength in the tech industry is its ability to attract human capital- and this matters because it is top talent that employers and entrepreneurs seek to grow their business. Considering that the UK has many universities such Oxford, Cambridge, UCL and Imperial, known for their world-leading research and for producing a stream of talented graduates, this shouldn’t be so surprising.

The index also notes that in spite of the lack of obvious tech infrastructure in the capital, London remains a top tech city because something much more intangible- that of a cultural openness to innovation which has resulted in an enabling environment for creative ideas to flourish. Other indices, such as the City Initiatives for Technology, Innovation and Entrepreneurship (CITIE) have ranked London second for innovation and entrepreneurship worldwide.

This supporting environment can be evidenced by the number of start-ups and accelerators that have moved here in recent years. Tech City notes that in London today, there are over 36 business accelerators (eg. Seedcamp, Microsoft Ventures, Future Fifty and London Stock Exchange’s Elite) as well as over 70 co-working spaces (eg. Level39, Second Home, TechHub, and We Work).

There are, of course, steps that can be made to continue to support the tech sector. For instance, there needs to be a renewed emphasis on digital connectivity. Access to broadband was noted as a concern by SMEs in the City, who were interviewed as part of our Clusters and Connectivity research report earlier this year (2016).

For now, however, many business leaders are stating their confidence that London remains the biggest tech centre in Europe and continues to attract the best talent and companies from all over the world.

 

 


Living and working in London: earnings, costs and living wages

 By Dr Laura Davison, Head of Research at the Economic Development Office, City of London Corporation

 

Last week (31/10/16) saw the publication by the Living Wage Foundation of the latest London Living Wage (LLW) figures - a recommended voluntary pay rate of £9.75 an hour in London, rising from £9.45 last year. With the annual release of ONS data on pay the previous week (the Annual Survey of Hours and Earnings - ASHE, 26/10/16), it’s a good time to look at what this new data tells us about the relationship between pay and the cost of living in London. It’s also possible to look at how the relationship between pay and the cost of living stack up relative to the rest of the UK, where the new voluntary living wage figure is £8.45 an hour - and where the main differences in cost arise.  

In addition, this year has seen a fundamental change in the way the London Living Wage is calculated, harmonising the approach with the UK methodology, looking solely at the cost of living and removing the element linked to wider incomes and the poverty threshold. This harmonised approach focuses on the income a household would to meet the cost of a so-called ‘basket of goods’ - a collection of goods and services deemed by social consensus to offer a decent standard of living that allows full participation in society. This includes elements such as rent, bills, childcare, groceries, household goods, clothes, transport, and leisure. The work that has gone into designing and recalculating this new London approach highlights some of the differences in the costs - and styles - of living in London relative to other parts of the UK.

The calculations assume that all adults in a household are in full-time employment. It is worth noting, however, that the living wage level does not guarantee that all recipients in full-time work will be able to afford the basket of goods and services calculated. This is because different household compositions will incur different costs and have differing income streams - for example, depending on the number of adults and children, children’s ages, and any entitlement to measures such as tax credits or housing benefit.

The calculations therefore look at the total income needed across seventeen different types of households (using the Minimum Income Standard budgets), calculate the pay needed to attain that income, and then weight the results according to their prevalence in the population. These weights reflect the differences in household composition between London and the rest of the UK – most strikingly the differences in single person households (weighted: 43% in London, 33% across the rest of the UK), and couples without children (weighted: 25% in London, 34% across the rest of the UK). This likely reflects the pattern of internal migration seen for London, with large influxes of people in their late teens and early twenties, and net outward migration from about thirty onwards, as shown in the chart below, plotted with data from the ONS. While slightly fewer London households contain children, the weights allow for a greater proportion of families with three or more children (weighted across categories: 6% in London, 5% across the rest of the UK).

 

Net Migration in and out of London, year ending June 2013. Source ONS

 

 

Looking firstly at pay and living wages, in the first chart, I’ve pulled together data from ASHE looking at full and part time pay in London and the UK, mapped across percentiles to show the range of wages people earn. To this, I’ve added the three different living wages currently in play, calculated on the basis of a 37.5 hour working week (which the Living Wage definitions use).

  • The London Living Wage and UK Living Wage are both voluntary levels of pay, calculated by the Resolution Foundation and overseen by the Living Wage Commission, taking a ‘basket of goods’ approach. For more information on methodology click here.
  • The National Living Wage - which effectively replaces the National Minimum Wage for those aged 25 and over - was introduced in April this year and is a legal Government requirement, annually reviewed by the Low Pay Commission. This takes a different approach, and looks at the economic climate and likely impact on jobs. For more information on methodology click here.

 

   LLW calculations and graphs2


A couple of aspects jump out.

  • For gross full time weekly pay, the median level (the point where half the population falls above and half below) is £671 in London, versus £539 across the UK - a difference of £132 per week (24% higher).
    • For those on the lowest pay, the gap is considerably smaller - a weekly difference of £50, or 16%, with the lowest 10% of full time earners in London receiving less than £358 per week.
    • As pay gets higher, the difference exacerbates - the top 10% of earners in London take home more than £1437/wk, 36% (£380) higher than across the UK as a whole.
  • For part-time workers, gross weekly pay is much lower - and the differences between London and the rest of the UK much less marked. The median weekly pay of £185 for London workers is only £8 higher than the rest of the UK, and it’s only for part time earners on the highest rates that there’s really much difference.
  • The difference between the three living wage levels can be clearly seen (note this is a fixed rate rather than percentiles). Those on the London Living Wage would be taking home nearly £50 per week more than the UK living wage - and £96 more than the compulsory national living wage.

So, why is the London rate higher – and how does this relate to the costs of actually living in London?

Both the Resolution Foundation and the Trust for London have looked at the elements which make London significantly more expensive as a place to live – with the latter finding that household budgets were between 18% and 47% higher in London. Whilst the costs of consumables such as groceries and clothes were broadly equivalent, three elements are significantly different – housing (factored in as rental prices), transport, and childcare.

In addition, the reports highlight not only differences in costs, but associated differences in lifestyles. In London, for example, single people are more likely to live in shared accommodation (54% of single Londoners in the 2011 Census), and the minimum standard for families is viewed to be a flat rather than a house. In terms of travel, the London calculations view a car as unnecessary for transport, and factor in public transport costs instead (with travelcards split between inner and outer London). There are also more subtle lifestyle differences in costs - with Londoners tending to eat out more, partly reflecting the difficulties in entertaining at home in small or shared accommodation.    

In the second chart here, I’ve focused on housing costs, as this element accounts for the majority of the cost differential between London and the rest of the UK. Here I’ve looked at the costs of different types of private rented housing using data from the Valuation Office Agency. Whilst the living wage factors in the assumption that families with children live in the social rented sector, DCLG data reports 263 thousand households currently on the waiting list for social housing in London, so here I’ve focused on private rents.

The chart below shows monthly rents by housing type across London – with the London Living Wage mapped across overall and at a 50% level (showing what a single earning LLW household spending all and half their gross wages on housing could afford respectively).

 

  London rents by housing type and living wage2

 

Again, several trends jump out:

  • The London average is significantly more than the UK average - the median rent is over double that for England, and at the cheapest end (lower quartile), 2.3 times as much. For this lower quartile, the difference is £655 per month - £151 per week, so rather more than the London and UK Living Wage differential of £50/week.
  • The ASHE figures showed a weekly difference in average wage of £132 / week between London and the UK overall. But the average housing cost difference equates to £185 / week. So the higher salaries in London do not - for most people - compensate for the higher cost of rent.
  • The cost of renting does vary significantly across housing type - but spending half of the London Living Wage gross pay rate for a full-time worker would only put them within reach of shared rooms or the cheapest studios.
  • This would obviously pose significant problems for families if dependent on the private rented sector. The living wage calculations assume they have access to social housing – but even here, the latest English Housing Survey report shows London’s social rented sector weekly costs as 36% higher than across the rest of England (£120 vs £88 per week).
  • Full time workers on the median London salary would receive around £2900 / month before tax. The median London rent of £1452 would take up half of this. For the lowest quartile of pay (£2071 /month) and rents (£1150 / month), this would be 56%.  
  • There are, of course, significant differences in London boroughs (not shown on this chart). Kensington and Chelsea sees the highest median rent (£2492 / month), and Havering the lowest (£1000 / month).

So, looking across the data here on earnings and rental prices, while full-time salaries in London are significantly higher than across the UK, rented accommodation is a very significant cost and proportion of wages - and the higher salaries earned in London do not fully cover this differential. Those on the London Living Wage with families are assumed to be in the social rented sector; if not, only the smallest and cheapest types of private rented accommodation would be realistically affordable. Housing pressures and costs continue, then, to be one of the most significant challenges for London and Londoners.

 

 

 

 


Cyber crime: a growing threat to business?

By Saif Ullah, Researcher in the City of London Research Team 

 

Earlier this month, the Government started this year's cyber security breaches survey. The survey annually tracks how UK businesses are approaching cyber security and the impact of cyber attacks over the past year.

Last year’s survey provided some worrying insights into the impact of cyber crime on businesses. Nearly two-thirds of large businesses (i.e. those with 250+ employees) had experienced a cyber breach or attack in the previous 12 months, with a quarter of those firms experiencing a breach at least once a month.  More concerning was the relative impact of firms that experienced a successful cyber breach: the average cost of a breach to a large business was £36,500, while the costliest breach identified in the survey amounted to £3 million.

Indications are that cyber threats to companies are increasing rather than decreasing. PwC’s Information Security Breaches survey found a growing number of small and large organisations had experienced a security breach in 2015– 90% of large firms were hit by a cyber attack compared to 81% the previous year, while 74% of small businesses experienced a cyber breach, up from 60% a year earlier. Similarly, the cost of breaches to firms is on the rise, from between £1.46m - £3.14m for large companies (up from £600k - £1.15m a year earlier) and £75k-£311k for small businesses (up from £65k - £115k the previous year).

Are businesses becoming more vulnerable to cyber attacks?

Several reasons have been cited for the growing number of cyber breaches on businesses. One factor is the increased availability of hacking tools, making it easier for criminals to commit cyber attacks. Increased use of mobile devices by companies, such as tablets and smartphones, have resulted in firms being more susceptible to malicious software – a Norton Security Report found that people were much less concerned about installing anti-virus software on mobile platforms in contrast to their desktop computers.

Data breaches via third party companies are also becoming a growing issue for businesses, as cyber criminals target the less sophisticated security measures of partners to gain access to a company’s systems. A high profile attack on US company Target in 2013 saw approximately 110 million customers’ personal data stolen, after one of its suppliers – a refrigeration company – was compromised.

Another reason cited for the increased number of reported cyber attacks is that firms are becoming more transparent about incidents which they have suffered, giving the appearance of more cyber-related incidents taking place.

Protection

Most businesses are able to protect themselves sufficiently through low-cost measures, such as installing and keeping up to date anti-virus and firewall software, using complex passwords for IT systems, computers and mobile devices, and keeping data important to your business secure. Yet, cyber security remains relatively under-prioritised at boardroom level, resulting in some businesses using outdated software with increased vulnerabilities. 

Additionally, employees clicking an email containing a malicious link can often be the greater threat to cyber security for a business. Companies should ensure that they regularly communicate and educate their staff about protecting their work devices from cyber threats.

The Government offers various resources that can help business improve their protection measures. The Cyber Essentials scheme allows SMEs and larger businesses to measure their level of protection against common cyber threats. Businesses can also attain a Cyber Essentials Badge to advertise the fact that it adheres to a government endorsed standard.

Companies can also gain further practical advice on protection using GCHQ’s 10 Steps to Cyber Security guidance, while the Government’s Cyber Aware website is a useful portal for information on both protection and response to cyber attacks.

The City of London Police (COLP)  plays a vital role providing guidance to individuals and businesses here in the City on protection against cyber threats  (COLP hosts a webpage with Get Safe Online where visitors can access information on protection measures and learn about online safety in the City). The City of London Police also host Action Fraud, the UK’s national fraud and cyber crime reporting centre and providing training on cyber crime through their internationally renowned training academy.

Cyber crime presents an immense challenge to businesses all over the world, potentially resulting in millions of pounds worth of losses unless vulnerabilities are addressed. Ensuring cyber security remains a high business priority and protection measures are regularly updated can go a long way to prevent future cyber attacks. 

 

 

 


London’s housing supply crisis

By Robert Clear, Researcher in the City of London Research Team

 

The Greater London Authority estimates that the capital needs 48,841 new homes per year up to 2034/5 to keep up with the demands of a growing population. Around half that number are being built. Of the 48,841 homes required annually, the GLA estimates that 48% need to be market rate, 20% intermediate (homes for sale and rent provided at a cost above social rent, but below market levels) and 32% social or affordable rent.

Not only are too few houses being built, but the pattern of house completion does not reflect the pattern of need. Of the 23,640 house completions in 2013/14:

 

  • 74.5% (17,600) were market housing, compared to the 48% (23,217) that will be required each year, according to the GLA.
  • 15.9% (3,750) were social rent and 540 were affordable rent, compared to the 32% (15,722) required.
  • 10.2% (2,400) were intermediate, compared to the 20% (9,902) required.

 

Net conventional housing completions by tenure, London 2004/05 to 2013/14

Net conventional housing completions by tenure, London 2004.05-to-2013.14

 

The heavy bias towards market housing is accompanied by a longstanding reliance on the private sector to deliver the bulk of supply – a reliance that has increased over the past forty years. Throughout the 60s and 70s local authorities were responsible for the greater part of housing construction. This trend, however, changed from the 1980s, and since then the overwhelming majority of London’s housing construction has been carried out by the private sector, with a significant (though minority) share undertaken by housing associations.

Of the 24,363 dwellings were completed in London in 2015:

  • 67.6% (16,464) were built by the private sector.
  • 31.8% (7,759) were built by housing associations.
  • 0.5% (130) were built by local authorities.

The relationship between London’s population and its housing supply has changed significantly over time. Between 1961 and 1991 the capital’s population shrank by over 1.6 million, but during that period the number of homes increased by over half a million. Between 1991 and 1998, supply increased at less than 1 percentage point above population growth, and real house prices were stable, rising at an annual rate of about 1%.

Between 1998 and 2014, however, the rate of housing supply growth fell well below population increases. In this period London’s population grew by 21.1%, but dwelling stock grew by just 12.7%, with house prices increasing by 9% per year. There is also a longstanding trend for the conversion of houses to flats (as well as the conversion of other types of building to residential use), which has driven up London’s population density – the GLA predicts it will increase by 19.5% by 2041.

 

Percentage change in number of jobs, people and homes in London, 2009–14

Percentage change in number of jobs, people and homes in London, 2009-14

 

In recent years the disparity between the increase in jobs, people and houses has become acute. 698,000 jobs  were created in London between 2009 and 2014 - 14% increase, and the population grew by 596,000 (over 7%). But during that time only 120,000 homes were added - a less than 4% increase.

These figures illustrate the scale of the challenge facing policymakers. Business leaders must also engage with this challenge as London’s supply crisis threatens to overburden workers with ever increasing housing costs and erode the capital’s competitive advantages.

 

 

 

 

 


Talent and innovation keep London at the top: the Capital and competitiveness indices

By Maxine Kennedy, Researcher in the City of London Research Team

 

Over the past few weeks the Research Team have been looking into global competitiveness indices. They are useful to look at because they can give us a good understanding of the various factors that are used to measure city competitiveness.

Indices such as PwC’s Cities of Opportunity, A.T. Kearney’s Global Cities and JLL’s City Momentum Index are published regularly and track a range of cities around the world on different indicators. This means that we can see over time how different cities are performing across specific measurements.

Some indices are very comprehensive and look at a variety of aspects of competitiveness. For example PwC’s recently published Cities of Opportunity 7 looks at 30 cities and takes into account 67 variables, from ‘ease of starting a business’, to ‘mobile broadband speed’ and ‘proportion of public space’.

Others are more specific, for instance the Economist Intelligence Unit’s Global Liveability Ranking 2016 which looks at 140 cities across 30 indicators. This index only looks at components of living conditions, so for example takes into account ‘Quality of Public Healthcare’, and ‘Availability of Consumer Goods and Services’, but not others, such as the ‘Number of Registered Patents’ – which would be used to measure innovation.

 

Focusing on London

Our primary focus has been to assess how London fares in comparison to other major global cities, looking at where the capital needs to build its strength to maintain its competitive offer. 

The first thing that jumps out is that London sits (and has done for many years) at the top in most of the comprehensive indices.

JLL, The City Momentum Index 2016

JLL, The City Momentum Index 2016

 

Economist Intelligence Unit, Hotspots 2025, 2013

Economist Intelligence Unit Hotspots 2025, 2013

 

London’s strengths and areas for improvement

For this blog, I’ve chosen to look at just one of the indices we’re studying – PwC’s Cities of Opportunity 7 - because the report’s website includes a handy modeler in which you can choose areas of interest and compare cities along the same indicators.

Looking at all indicators just for London, the modular shows that on the whole, the capital scores highly in the ‘Intellectual Capital and Innovation’ category across indicators such as ‘Entrepreneurial Environment’ and ‘World University Rankings’. Similarly, London also performs highly in the ‘Economic Clout’ and the ‘Ease of Doing Business’ categories.

 

Ease of Doing Business category

Ease of Doing Business Category

 

London performs less well in ‘Transport and Infrastructure’ category, particularly around the ‘Affordability of Public Transport’ indicator, but scores highly in ‘Major Construction Activity’.

Transportation and infrastructure category

Transportation and Infrastructure category

The modular can also be used to compare London to other cities. For instance, London is renowned for its vast swathes of green space areas and this is reflected well in the ‘Public Park Space’ indicator, where the capital is doing well compared to its competitors.

Public Park Space indicator

Public Park Space indicator

Yet, in terms of ‘Air Pollution’, London is falling behind compared to other cities, particularly relative to Amsterdam and Berlin. But knowing this helps to support work to tackle this issue, and reinforces the policy priority of the Mayor of London and the City of London Corporation  to improve air quality in the City.

Public Park Space indicator (air pollution)

 

London’s way forward

While the implications of Brexit remain unclear, we do know that London today is doing exceptionally well across many indicators. Comparative indices are a useful way of highlighting where London is performing particularly well, as well as how the capital can improve its competitive offer. 

 

 

 

 

 


Brexit and the City

Blog by guest writer Ben Jones, Principal Economist (Surveys and Economic Analysis) at the CBI

 

Three months on from the referendum on the UK’s EU membership, economists are still getting to grips with the impact on the UK economy. The message from the initial data—including from the CBI’s business surveys of manufacturing, retail and services —is that although activity has probably slowed relative to the first half of the year, it has held up better in the immediate aftermath of the vote than many had expected.

To complete this initial snapshot of the post-referendum environment, we’ve now published the results of the latest quarterly CBI/PwC Financial Services Survey. The findings suggest that demand for financial services remained reasonably solid in the quarter to September, mirroring the picture in the wider economy.

 

Activity held up reasonably well…

The survey suggests that volumes of business rose in most subsectors—though not “finance houses” (specialist lenders, such as those offering car finance or business mortgages). Overall profitability in financial services also improved a little, although this comes on the back of a sharp slowdown in profits growth over the past year, with incomes under pressure from a combination of factors, such as low-interest rates/yields, disruptive technology and regulatory pressures, to name a few.

The survey merits a closer look for two additional reasons. First, given the role financial services play in supporting household consumption and helping businesses to grow, the survey can act as a bellwether for the wider economy. Second, as one of the UK’s most globally connected sectors—in terms of trade, capital and labour flows—Brexit creates a host of commercial, legal, regulatory and operational challenges to which firms must adapt in the years ahead. So what have we learnt?

 

… but sentiment has deteriorated

Despite improved business performance over the last quarter, optimism among financial services firms fell for a third consecutive quarter in the three months to September. This could be significant for what it says about the broader outlook—in the past we have found a reasonably strong correlation between changes in optimism in financial services and GDP growth six months later.

Looking ahead, financial services firms see growth in business volumes and profitability slowing in the three months to December. These trends are particularly marked in the three lending sectors—banks, building societies and finance houses—which have become much more cautious over their outlook.

 

FSoptimism - oct16

 

Firms are still deciding how to respond to Brexit vote…

Overall, the survey suggests that the impact of the EU referendum so far has been limited. In the first of three special questions assessing the short- and longer-term effects of the vote, we asked financial services to assess the initial impact on various aspects of their business.

Just over half of all FS firms pointed to a negative "general impact" on their business following the referendum result, with a further third saying the vote has had no impact. Only one in ten firms reported a positive impact. The main source of concern was market volatility, with over 70% pointing to a negative impact via that route. Others were concerned about the negative impact on balance sheets, revenues and funding costs.

 

Initial-commercial-oct-16

 

Another question asked what actions firms had taken, or plan to take, in response to the EU referendum result. The results show that firms have also begun to assess the fall-out, though fewer than half have begun to review their strategies for dealing with the economic impact, capital management, geographical or legal implications. And in many sectors, a majority of firms have yet to decide whether to initiate a new project to deal the fall-out from the Brexit vote.

 

Actions-oct16

 

… and they see risks from Brexit outweighing opportunities

A third Brexit-question asked firms to rank the top three risks and opportunities facing their business over the medium term (for ease of presentation, we’ve converted these ranks to scores). The results show that the top risk by far is the “impact on the UK economy” (58% of the maximum score).

All in all, the survey is telling us that while the fall-out from the referendum has been limited so far, it’s still early days. It is not just economists who are getting to grips with the impact of the vote.

Risksandopps - oct16

 

 


Employment growth in the City

by Dr Laura Davison, Head of Research

 

This week saw the latest annual release of the Business Register and Employment Survey (BRES) figures, which give a detailed breakdown of the workforce for an area by sector - allowing us to look at where employment has grown or shrunk. This data is published with a year’s lag - so the figures published are for 2015 - but we use it as the basis for our official reporting, because it’s the most extensive survey of UK VAT and PAYE registered businesses, and informs the Government’s Inter-Departmental Business Register.

Looking at the new figures for 2015, a couple of statistics immediately jump out. The City of London has seen very strong jobs growth across 12 months, going from 414K (2014) to 455K (2015) – a 10% increase, with 41K new jobs created.

City employment has traditionally been concentrated in the four biggest sectors – finance and insurance; professional; business administration; and information and communication. This year’s data is no exception, with these four areas together accounting for 83% of City jobs – and 85% of the new jobs created.

As the following chart shows, with the exception of 2013, every year since 2010 has seen an increase in City jobs, with this latest period being the most substantial growth yet.

 

Laura - sept 30-16

The strongest growth was seen in ‘business administration and support services’, which saw over 18K new jobs and grew by 47%. While this is a wide ranging category - spanning travel agencies and security services, through to landscaping and window cleaning - for the City, almost all this growth was in temporary employment agencies (14.5K). Professional services had the second highest number of new jobs - 11K - largely accounted for by new jobs in business and management consultancy (6K) and head offices (3K). Both financial services (2.5K) and information and communication (2.5K) saw jobs growth - the latter particularly notable, as the tech sector has flourished in the City in recent years, rising from 24K in 2010 to 37K in 2015 - a 55% increase.

More broadly, London also saw jobs growth across this period - 180K new jobs created, with growth of 3.7% bringing London’s total jobs to 5.04 million. The City of London is the largest component of these new jobs (41K), followed by Westminster (22.5K), Hounslow (22K), and Tower Hamlets (17K). Six London boroughs saw negative growth, with Hillingdon reporting by far the largest drop (-21K).

As with the City, business support services (56K) and professional and technical (52.5K) have primarily driven this growth, alongside sectors such as property (22K), health (17K), and those linked to leisure – such as retail (17.5K) and accommodation. Sectors seeing notable falls in jobs were construction (-6K), wholesale (-4K), and public administration (-4K).       

The data also reinforces London’s position as a driver of jobs and growth in the UK economy, which saw overall growth of 576K jobs (2%) across England, Scotland and Wales. London accounted for 31% of these new jobs, followed by the South East (21%) – and 17% of the workforce.

These figures demonstrate that the City of London underpins London’s jobs growth – illustrating its role as a key contributor to the capital’s economy, and its continuing importance to the UK.


London’s international workforce

By Robert Clear, Researcher

 

London’s workforce is one of the most international in the world, reflecting the fact that the city receives the lion’s share of immigrants who settle in the UK. According to the most recent census data, over a third (37%) of the capital’s workplace population was born abroad. Moreover, of those born outside the UK, nearly 60% hold British passports, meaning they have citizen rights of work and residency that are independent of international agreements. This group, foreign-born British passport holders, comprise almost a quarter (22%) of the workers in London.

The international make-up of London’s workforce has been conditioned by years of large-scale migration. Between 1975 and 2012, an average of 160,000 people moved to London annually from elsewhere in the United Kingdom.  The number of Londoners leaving the capital and moving to other parts of UK, however, exceeded this considerably – averaging 220,000 yearly. On top of this a further 100,000 Londoners moved abroad each year. Many of those moving to and from London are students and young workers. What has stopped London from being a net exporter of people is the annual average intake of 170,000 international immigrants. Their contribution to the population means that, despite the large number of existing London residents moving away, immigration from abroad (and higher birth rates to non-UK born mothers - 58% of all live births in London) tips the scales in favour of an annual population gain for the capital.

Though these figures illustrate the ebb and flow of people in the context of domestic and international migration, they do not take into account where people were born. When we look to the Census to explore the data that takes into account country of birth, we can see that in the decade between 2001 and 2011 (when the latest census was carried out) the capital’s UK-born resident population decreased by 1%, whilst the non-UK resident population increased by 54%.

Drilling further down into the workforce figures is revealing: in 2012 58% of all people employed in London were born in the UK, whilst 12% were born in EEA (European Economic Area) and 29% came from elsewhere in the world. Those born in the EEA had the highest levels of employment, at 74.4%, compared to 71.1% for UK-born and 63.1% for non-EEA-born.  Over a third of London’s residents in 2012 (38% – or 1.4 million) were employed in low-skill occupations. Of these, 47% were non–UK born, but only 14% of those in low-skilled occupations were EEA-born.

Looking at these workforce statistics, the makeup of London’s workforce poses a number of significant challenges for London policy-makers as they plan for the future, managing Brexit and wider priorities, to ensure that London remains a preeminent global centre for business.

 

 

 

[Figures taken from  GLA Economics – Trends in the demand for labour and skills across London as a whole (May 2016); GLA Economics – Migrant employment in low-skill work (March 2014); The Migration Observatory – Briefing, London: Census Profile (May 2013); GLA Economic – Draft Economic Evidence Base 2016; National insurance number registration in Greater London 2002-2015 (DWP); London Datastore – National Insurance Number Registrations of Overseas Nationals, Borough and MSOA; City of London Corporation – The Future of the City of London’s Economy (July 2015); Centre for London – Continental Capital – London’s Links with Europe (June 2016)]