By Mark Britton, Senior Economist at Oxford Economics
Mark Britton of Oxford Economics comments on the outlook for London's economy. Further information can be found in the recent reports ‘The Economic Outlook for Central London’ and ‘The Economic Outlook for the City of London’ commissioned by Central London Forward and the City of London Corporation.
London’s economy has consistently outperformed the UK over the past two decades and the polarisation in economic performance has become even more apparent over the past 5 years. Between 2008 and 2013, employment in the Greater London region increased by more than 400,000 jobs, in contrast to the UK (excluding London) which experienced a fall of nearly 250,000 jobs across the same period. A similar story of diverging trends was evident in terms of economic output. The performance of the City of London’s economy following the financial crisis has been particularly noteworthy, with growth far exceeding the Greater London and UK averages, highlighting the City’s importance as a key economic driver of the national economy.
London’s economy is expected to retain its growth premium over the UK in the short term as its dominant service sector is well positioned to benefit from both improving domestic demand and the strengthening Eurozone and global economies. In the short-term, the sectoral mix of job creation in Greater London will be similar to that witnessed in recent years. Professional services are expected to account for 47,000 of the 189,000 new jobs forecast in Greater London over the next 2 years. A further 45,000 are expected in administrative services and 19,000 from information and communications.
Over the medium to long term, growth in the UK economy will become increasingly dependent on the private services sector, especially for employment. UK employment is forecast to rise by 2.5 million jobs by 2023, with almost 1.7 million of these created in financial & business services and the information & communications sector. London will benefit from continued specialisation in these sectors, helping the capital maintain its position as the UK’s, and indeed one of Europe’s, fastest growing regions. GVA and employment growth in Greater London is forecast to average 3.4% and 1.2% per annum respectively between 2014 and 2023, faster than any other UK region on either measure. London will account for 1 in 4 of the jobs created across the UK over this period.
A key feature of London’s ability to consistently outperform the UK economy stems from its ability to attract highly skilled workers. Over the coming decade, Greater London’s working-age population is projected to expand by over 620,000, reaching almost 6.4 people. By contrast, the working-age population of the UK (excluding London) is projected to decline over the same period.