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The London Economy

The London Economy. Justine Lovatt - LCCI Economist 19 February 2003. LCCI Economic Research. London Economy Research Programme – NIESR econometric model forecasts and quarterly London Economic Review London Monitor business confidence surveys. London’s GDP in 2002.

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The London Economy

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  1. The London Economy Justine Lovatt - LCCI Economist 19 February 2003

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

  3. London’s GDP in 2002 • London’s GDP is forecast to have risen by 2.4% in 2002. • This is above the latest Office for National Statistics (ONS) figure for the UK economy of 1.7% for 2002. • Like the UK London has only moderate growth but is not in recession.

  4. London/UK GDP 1998-2005

  5. Effect of Stock Market Falls • The FTSE 100 fell to a 7 year low to 3,481 on 27 January – half its peak. • Over 3 years of Stock Market falls has led to extensive job losses in the City. • Companies have been affected via final salary pension schemes. • Difficulty raising money via the Stock Market has contributed to low business investment.

  6. Manufacturing Recession • London manufacturing is in recession, as in the UK, with output forecast to have fallen 4.5% in 2002 in London. • The manufacturing sector accounts for half the share of GDP as in the UK. • Therefore the recession has less overall effect on London economy.

  7. Strong Sectors of Economy (1) • Construction is forecast to have grown by 7.6% in 2002. • The sector is strong due to the property market boom. • House prices rose by 19.4% in the year to Q4 2002 according to the Halifax. They have doubled in the past 5 years.

  8. Strong Sectors of Economy (2) • Wholesale and retail is forecast to have grown by 4.1% in 2002. Consumption is high due to record low interest rates and high property prices. • Hotels and catering and public sector also performed well in 2002

  9. Unemployment in London • In the past year London unemployment has fallen joint fastest in the UK. • But unemployment in London is still the second highest in the UK. • Since the mid-1990s unemployment has fallen in both the UK and London.

  10. Change in Unemployment

  11. Unemployment By UK Region

  12. London Growth in 2003 • London is forecast to grow by 2.8% in 2003 compared to 2.4% in 2002. • But there are threats to London’s economic growth . . .

  13. Threats To The Economy • House price falls which would impact economy via reduced consumer spending. • Continued Stock Market falls again via reduced consumer spending. • War with Iraq via oil prices, uncertainty.

  14. Housing Market Fall Scenario A scenario was run to show the impact of a 20% fall in house prices by Q4 2003: • Consumption would be 0.8% lower in London than base forecast in 2003. • GDP growth in London would be 0.5% lower in 2003 and a further 0.5% lower in 2004 than the base forecast.

  15. 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.

  16. UK Economy Predictions Q4 2002 survey predictions for next year: • A balance of +12% expect UK economic growth to improve. • The balances for UK inflation (-25%), interest rates (-32%) and unemployment (-52%) are all negative (negative denotes to worsen/rise).

  17. UK Economy Predictions

  18. London Economy Today Q4 2002 survey showed economic improvement: • A balance of +22% said that their company’s output has increased over the past month. • This is up from +5% in the Q3 survey.

  19. London Economy Predictions Q4 2002 survey predicts improvement in the short to medium term: • A balance of +15% expected growth to improve in London. • A balance of +39% expected their business to improve.

  20. Conclusions • 2002 growth was moderate in London at 2.4%. Manufacturing and finance had a bad year but other sectors had strong growth. • Growth is forecast to be 2.8% in 2003. • Possible threats to the economy are housing market/Stock Market falls or a war with Iraq.

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