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The London Economy

The London Economy. Justine Lovatt - LCCI Economist 22 May 2003. Introduction. Most government London economic data stops in 1999. Chamber runs London Economy Research Programme – NIESR London model and London Economic Review Chamber London Monitor business confidence surveys.

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The London Economy

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  1. The London Economy Justine Lovatt - LCCI Economist 22 May 2003

  2. Introduction • Most government London economic data stops in 1999. • Chamber runs London Economy Research Programme – NIESR London model and London Economic Review • Chamber London Monitor business confidence surveys

  3. Economic Growth Forecasts

  4. London’s Economic Growth • NIESR forecast 1.9% rise in London’s GDP in 2002 and 2.4% rise in 2003. • Similar to ONS UK figure of 1.8% for 2002 and NIESR forecast for UK of 2.2% for 2003. • Like the UK London has moderate growth but is not in recession.

  5. London/UK GDP 1998-2005

  6. High Growth Sectors NIESR London Model forecasts for 2003: • Construction 6% growth due to property market boom/public sector investment. • Public sector 3.5% growth forecast. • Wholesale and retail forecast to grow 3.4%, down from 4.1% in 2002.

  7. Weak Sectors NIESR London Model forecasts for 2003: • Manufacturing forecast to grow by only 0.6% in 2003 after falling 4.5% in 2002. • Finance forecast to grow by just 1.3% in 2003 after not growing in 2002, largely due to Stock Market falls.

  8. Effects of Stock Market Falls • On 12 March FTSE 100 fell to a near 8-year low to below half its 1999 peak. • 3½ years of Stock Market falls have led to City job losses and closure of many company final salary pension schemes. • Difficulty raising money via the Stock Market has contributed to low business investment.

  9. London Growth in 2003 • NIESR forecast London to grow by 2.4% in 2003, up from 1.9% in 2002. • There are risks to NIESR’s London’s growth forecast . . .

  10. Risks To The Forecasts • Risk of property price slowdown. • Equity market not increasing slowly. • Declining business confidence. • Central London issues: war/terrorism affecting tourism, Central line closure and congestion charging.

  11. 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.

  12. Tourism in London • London Tourist Board (LTB) forecast a 6% decline in tourist visits in 2003. • LTB forecast a 14% decline in tourist expenditure in 2003 – a £1.2bn fall. • Decline led by war in Iraq and terrorism fears. London’s share of all UK visits forecast to fall though still 46% in 2003.

  13. LCCI Retail Survey LCCI conducted survey of retailers in congestion zone in March. • Three quarters of retailers in zone reported downturn in year-on-year trade. • Half of these attributed this ‘all or mostly’ to congestion charge given a choice of five reasons.

  14. Unemployment in London

  15. Unemployment in London • Unemployment in London is the highest in the UK at 6.8% (ILO). • Since the mid-1990s unemployment has fallen in both the UK and London. • There are currently 248,000 unemployed people in London.

  16. Unemployment By UK Region

  17. Unemployment by Area

  18. The London Monitor

  19. 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.

  20. UK Economy Predictions Q1 2003 London Monitor Survey (conducted in March) showed business confidence for next year: • Fallen to its lowest since September 11for UK growth (balance of -51%). • Lowest for over 5 years for London growth (balance of -16%).

  21. London Economy Predictions

  22. Company Performance Q1 2003 Survey showed: • A balance of +1% said that their company’s output has risen over the past month. • A balance of +29% said their company output will rise over next 12 months.

  23. Conclusions • NIESR forecast growth of 2.4% in 2003. • Risks to this forecast include equity markets, inflated housing market, low business confidence and tourism. • 2004 growth expected to be in-line with UK at around 2.2%.

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