By Dr Laura Davison, Head of Research, City of London
I was very pleased to have been invited to give a presentation at the Bank of England this week, at their quarterly Inflation Report Briefing. In part, because we as a team always find these briefings very useful, but also because it gave me the opportunity to bring together the research that we publish looking at different aspects of London’s economy. So over the coming few weeks I’ll post about some of the topics that came up during that talk.
A primary theme emerging from our work over the last year is the relative strength of London’s economic performance, and one set of statistics that I included in my talk was headline figures for London’s jobs and growth.
Generating a fiscal surplus
Source London's Finances and Revenues, City of London, December 2012
One of the major pieces we’ve published in this area – London’s Finances and Revenues (Oxford Economics, December 2012) explores in depth London’s streams of revenues and expenditure. At the top level, in the first chart here - with revenue shown in blue and expenditure in red - you can see that London is consistently producing a net surplus for the public purse. London is expensive to finance - around 14.5% of total UK public spending - but even so has generated a net fiscal surplus almost every year. In 2010/11, for example, London generated around 18.5% of the UK’s total tax take, including 25% of corporation tax and 23% of income tax.
In the nine years before the financial crisis, London was contributing a surplus between about £10 and £20 billion, dipping below zero in 2009 / 10, before returning to surplus - about £10 billion in 2011/12. The projections going forward look positive – although funding needs are increasing, the revenue generated is increasing faster. London is not the only region to contribute a surplus towards public spending – the South East is also very significant, and until very recently, the East was also a net contributor, although, as the second chart shows, without these regions there is a continuing deficit.
Jobs and growth
Source the Economic Outlook for London, Oxford Economics for the City of London, April 2013
This initial picture of London’s recovery is reinforced looking at the most recent set of GVA figures and employment forecasts we published – The Economic Outlook for London (Oxford Economics, April 2013).
As the first chart shows, with the exception of 2009, London’s economy has grown year on year. For last year, growth was supported by a strong performance in business services, and with accommodation, food and retail boosted by the Olympics. This year is seeing slower growth, perhaps unsurprisingly in what remains an uncertain economic climate and with on-going uncertainty in Europe. In the wider European context, London’s performance is mid table with regard to GDP growth in 2012 - with cities like Stockholm, Munich and Frankfurt growing proportionally faster, and Milan, Rome, Madrid and Barcelona shrinking.
As shown in the second chart, London’s employment growth was also positive in 2012, estimated at 3%, compared with an overall UK rate of about 1.65%. Total employment is now past its 2008 pre-recession peak, which should happen for the UK in 2014. Between 2013 and 2018, there will be an estimated 374,000 new jobs created in London – around one in four of new UK jobs.
The next couple of sections in my talk looked in more detail at where these new jobs might be arising – and I’ll post about them soon, but of course if you want to look this up before then, the two reports referenced here will give you the full detail.