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Economic update on the City of London – by John North, Corporate Department
The Economic Research Office of The City of London Corporation has just released the latest report by Oxford Ecomomics. The report is available here but here are the highlights from our perspective:
- Estimate for GDP growth in London in 2011 is just 0.8%, which is much weaker than previously expected. In the medium term the forecast is for output growth to regain momentum in 2012-13 and then stabilise at just below 4% per year over 2014-15
- The forecast is for London’s financial services output to contract by 4.3% in 2011, with business services growing by just 0.5%.
- London’s employment is now forecast to show no growth in 2011, with the City of London borough underperforming dramatically. But growth is forecast to pick up in 2013
- London’s house prices returned to growth in the first half of 2011.
- After the very strong performance of London’s commercial property market in the second half of 2010, the level of activity in first half of 2011 was substantially weaker. A report by Savills concludes that take-up in central London has been much lower in the first six months of 2011, although the availability of office space continues to fall. The shortage of prime office space, in particular, has been driving the rents up in central London.
- The 2012 London Olympic and Paralympic Games are expected to attract around 5.3m visitors to the UK. Recent analysis by Oxford Economics estimated that in 2012 the Olympic Games would generate £469mn of additional spending in London (in 2011 prices) by foreign and domestic tourists.
- After a recession that was longer and more severe than for most comparable cities across Europe, London’s recovery in 2010 was overall on par with its peers. GDP growth of 1.3% was significantly higher than that of the Spanish cities but slow compared to Frankfurt and Munich. As financial and business services return to growth in 2012, London’s ranking is expected to move up to fourth in the table, behind Munich, Stockholm and Brussels. It is especially worth noting that London’s GDP growth from 2012 onwards is expected to outpace that of Frankfurt