UK GDP growth was flat in April

The UK economy did not grow in April according to new data published by the Office for National Statistics (ONS). The data showed that monthly GDP grew by 0% in April 2024 (Figure 1). This followed on from growth of 0.4% in March. Nevertheless, the ONS estimates that in the three months to April output increased by 0.7% compared to the previous three months to January 2024.

Figure 1:

Of the main components of GDP only services saw growth in April with output in the sector increasing by 0.2% in the month. Output in the production sector declined by 0.9% and in construction output fell by 1.4%. Looking at the contributors to monthly growth in the services sector, a sector of particular importance to London, the ONS observed that the largest contribution to the sector’s growth “came from information and communication, which rose by 2.3% in the month. This was driven by growth of 3.2% in computer programming, consultancy and related activities, as well as growth of 1.7% in telecommunications and 4.9% in publishing activities”.

UK inflation drops to 2%

The ONS also published new data on consumer Prices Index (CPI) inflation this month. This showed that CPI inflation had slowed to 2.0% in the 12 months to May 2024, down from 2.3% in the 12 months to April. This is the first time CPI has been at the Bank of England’s 2% inflation target since July 2021 and is down from a peak of 11.1% in October 2022. The ONS notes that the largest contributions to the slowdown in inflation “came from food and non-alcoholic beverages, recreation and culture, and furniture and household goods. Transport provided the largest, partially offsetting, upward contribution”. Beyond the headline figure other measures also dropped back. Core CPI (excluding volatile energy, food, alcohol and tobacco prices) inflation slowed to 3.5% over the year to May 2024, down from 3.9% in April. The CPI goods annual rate fell from negative 0.8% to negative 1.3%. While the CPI services annual rate eased from 5.9% in April to 5.7% in May (Figure 2).

Figure 2:

Eurozone and Canada cut interest rates but elsewhere remain on hold

The international economic picture remains mixed. The European Central Bank (ECB) cut interest rates in the Eurozone from a record high of 4% to 3.75% in June. This was the first cut in the Zone’s rate for five years. Christine Lagarde, the president of the ECB said that with inflation falling “markedly” the cut was now justified. She did however warn that inflation would likely stay above the ECB’s 2% target “well into next year”. Adding, given this, that rates would remain “sufficiently restrictive for as long as necessary”.

The Bank of Canada also cut interest rates in June from 5% that had held since July 2023 to 4.75%.

However, elsewhere interest rates remain on hold with the US Federal Reserve keeping rates in a range of 5.25 – 5.5%. Commenting on the Fed’s decision, the Fed’s Chair Jerome Powell observed that “we want to see more good data to bolster our confidence that inflation is moving sustainably toward 2%” before they reduce rates.

London remains the most productive region of the country

The ONS recently published analysis on regional productivity in the UK and found that London remains the most productive region. London’s labour productivity, as measured by output per hour worked, was 26.2% higher than the UK average in 2022. The South East was the only other UK region with output per hour worked higher than the UK average, at 10.8% higher.

However, despite the capital maintaining its productivity lead over the other UK regions the ONS observed that the productivity gap (or the ‘efficiency gap’) between London and other regions is the lowest since 1998. It noted that “despite London being the region with the highest levels of productivity (since records began in 1998, compared with the UK average), its productivity growth was lower in 2022 compared with 2019. Owing to its size, this means London has the largest negative contribution to productivity growth of any region” (Figure 3).

Figure 3:

That said, these figures need to be contextualised and treated with caution, given recent methodological challenges related to ONS’ labour-market surveys, changes to GVA estimates that impacted certain sectors more than others (with implications for regional GVA figures used to calculate productivity), and data quality issues related to employment hours (which also affect regional productivity data).

London named best tech city

The seventh edition of the Smart Cities Index from Z/Yen was published at the end of May. The index combines data on global commercial and financial centres from a range of independent providers with survey data on finance professional’s views on three dimensions related to innovation and technology. These dimensions being innovation support, creative intensity and delivery capability. The index then combines all this data to produce a ranking. This ranking saw London placed first among the 131 centres examined for the index. This is the second time in a row that the capital has come out top in the index, with it outranking New York in second place and San Francisco which came in third place.

GLA Economics will continue to monitor London’s economy over the coming months in our analysis and publications, which can be found on our publications page and on the London Datastore.

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