The London Economy

1
The London Economy

• Justine Lovatt - LCCI Economist
• November 2002

2
LCCI Economic Research

• London Economy Research Programme NIESR
  econometric model forecasts and quarterly London
  Economic Review
• London Monitor business confidence surveys

3
Londons GDP in 2002

• Londons GDP is forecast to rise by only 1.5 in
  2002.
• This is above NIESRs forecast for the UK economy
  of 1 for 2002.
• London is suffering from an economic downturn but
  is not in recession.

4
London/UK GDP 1998-2005
5
Londons Economic Downturn

• Unemployment in London is now the highest in the
  UK at 7.5.
• The only sector to have increased employment in
  the last 12 months is the public sector.
• The City has been hit by Stock Market falls.
  Finance output forecast to fall 0.6 in 2002.
• Manufacturing is in recession as in the UK with
  output forecast to fall 3.8 in 2002.

6
Unemployment By UK Region
7
Unemployment in London

• London unemployment is now 40 higher than UK
  unemployment.
• Unemployment has been higher in London than the
  UK over the past decade. Recently unemployment
  has risen faster in London than the UK.
• Since 1995 unemployment has fallen in both the UK
  and London.

8
London/UK Unemployment 1997-2002
9
A Two-Speed Economy

• The London economy, like the UK, is operating at
  two-speed with service sector growth much higher
  than industrial production.
• In 2001 and 2002 the industrial production sector
  has been in recession whilst the service sector
  has recorded healthy growth.

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A Two-Speed Economy
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London Growth To Improve

• The London Model forecasts that growth will pick
  up from 2003.
• London is forecast to grow by 2.8 in 2003
  compared to 1.5 in 2002.
• But there are threats to Londons economic growth
  . . .

12
Threats To The Economy

• More Stock Market falls or housing market crash
  both will reduce consumer spending.
• War with Iraq oil price etc
• Public sector wage demands e.g. firefighters
  strike for 40 rise

13
The London Monitor

• The London Monitor is an LCCI monthly survey of
  business confidence.
• Quarterly surveys are conducted in conjunction
  with the British Chamber of Commerce.
• Balances show of respondents expecting an
  improvement less expecting things to worsen.

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UK Economy Predictions

• Q3 2002 Survey predictions for next year
• A balance of 5 expect UK economic growth to
  improve.
• The balances for UK inflation (-23), interest
  rates (-12) and unemployment (-44) are all
  negative (negative denotes to worsen/rise).

15
UK Economy Predictions
16
London Economy Today

• Q3 2002 Survey showed economic downturn
• A balance of only 5 said that their companys
  output has increased over the past month.
• This is the worst result since the November 2001
  survey.

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London Economy Predictions

• Q3 2002 Survey predicts improvement in the short
  to medium term
• A balance of 27 expected growth to improve in
  London.
• A balance of 59 expected their business to
  improve.

18
London Business on Politics

• In our October LM survey 77 of businesses rated
  Blairs leadership skills highly.
• Only 15 rated Iain Duncan-Smith highly.
• Even Red Ken had a higher rating at 35.
• Bush was rated highly by 44 of businesses.
• 66 supported an attack on Iraq, most only with
  UN approval.

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Conclusions

• Economic growth is weak in London at 1.5 in
  2002. Manufacturing and finance are currently in
  recession.
• Economic growth should now improve.
• Possible threats to this are housing market/Stock
  Market falls, war with Iraq and public sector
  strikes.