The City and wider central London has played an increasingly important role in London’s economy in recent decades, leading growth in the good times and weathering the bad. Our new research for the City of London Corporation, the Future of the City of London's Economy, looks at what the City’s future prospects look like, and pulls out four main messages:
The City will see strong increases in output, employment and productivity
Our projections indicate that the City’s economy will feature strong increases in output, employment and productivity by 2025. The City is projected to generate an additional £16 billion in output by 2025, an increase which is equivalent to the total current size of the Cambridgeshire economy. This additional economic activity is expected to generate 39,000 new jobs (a 10% increase) by 2025, while productivity is projected to rise from £114,000 per job to £141,000 per job – almost three times the UK average productivity level.
City growth will be driven by highly productive service industries
The City’s economy is largely comprised of financial and professional services firms that are highly productive and employ highly skilled workers. While these traditional City industries will maintain their central role to the City’s economic performance, recent growth in Media, IT and Communications indicates the growing role of this sector in creating economic success in the City. In terms of figures, the City’s expansion is expected to be driven by robust average output growth in Finance and Insurance (3.3% per year), while Media, IT and Communications also exhibits strong gains (3.2%), as do Legal and Accounting services (1.1%). Together these three sectors account for almost 90% of the expected output gains (and almost 70% of the employment growth) for the City of London over the 2015 to 2025 period.
The City’s economy will improve relative to the rest of Central London
Over the 2005 to 2015 period, the City’s average growth rate was the fifth highest of all the Central London boroughs at 2% per annum, compared to a Central London average of 3.1% per annum. Looking at the picture for Central London over the next decade, the City is expected to grow faster at 2.6% per annum than the majority of the Central London boroughs. Only Islington is projected to grow at a faster annual rate, at 2.9%.
But all this is dependent on infrastructure
Our research also considers potential constraints on growth, many of which are infrastructure-based. Firstly, the housing supply will need to grow, both within and outside of London, in line with the labour market and London’s population. This will require provision of the necessary transport needed to enable workers to travel to and from work without overloading an already capacity-constrained transport infrastructure. Also, increasing aviation capacity is important for London’s future growth prospects and competitiveness, through maintaining and increasing connectivity to established international trading partners and emerging markets. These infrastructural issues, which are widely recognised but pose political challenges, must be addressed in order for the City to maintain its projected growth path.