By Mark Wingham
A common question we get asked at the GLA is how does London compare with other international cities. Many comparisons between London and other global cities to date have focused on particular topics or sectors, such as tourism and foreign direct investment. These comparisons have been outlined in Chapter 3 of the Draft Economic Evidence Base.
Our work adds to this body of research by looking at output, employment and productivity for the following global cities. Although not a definitive list, more cities can be added over time.
From the offset, international comparisons are fraught with difficulty – differences in definitions, geography and data collection methods are well documented (see our Working papers 9, 13 and 21, as well as Current Issues Note 17 for example). This analysis is no exception and should therefore be considered as experimental and be treated with some caution.
The first comparison is the size of the economy as measured in terms of output. London’s total economic output using the Gross Value Added (GVA) measure was £364bn in 2014 according to the ONS.
Figures for the other global cities examined have been converted from their national currencies into pound sterling using purchasing power parities. This shows that London’s economy was smaller than Paris (£487bn), though this refers to 2013 and also the Île-de-France region.
A number of other global cities use the Gross Domestic Product (GDP) measure which is not directly comparable with GVA. That said, London was also smaller than Tokyo and New York (though this refers to the New York, Newark and Jersey City metropolitan area), but larger than Singapore and Hong Kong.
The following chart shows the compound annual rates of output growth in real terms for the global cities between 2006 and 2014. The cities with the strongest growth over these years were Shanghai and Singapore, with compound annual rates of real output growth of 5.8 per cent and 5 per cent respectively. That was twice as fast as London (2.4 per cent), though its rate of growth was nonetheless stronger than New York and Paris.
Economic output in constant prices for the global cities between 2006 and 2014
Source: ONS, US BEA, INSEE, Statistik Berlin Brandenburg, Tokyo Bureau of Statistics, SingStat, HK Census & Statistics Dept., China NBS, Dubai Statistics Centre.
Note: Paris refers to the 2006 to 2013 period and Shanghai only includes output of urban units
The largest sector in London was Finance & Insurance, which contributed 19% of total output in 2014. This share was larger than any other global city suggesting the importance of finance to London.
Meanwhile, London’s employment rate was one of the highest among the global cities. Only Dubai and Singapore posted higher employment rates than London.
On the other hand, London’s unemployment rate was broadly similar to New York, but higher than the global cities in Asia.
Another key international comparator is productivity. This is an important indicator of economic performance by measuring the efficiency of converting inputs into outputs. We look at labour productivity in our analysis which includes output per job and output per hour.
The next chart shows the estimates of output per job for the global cities. London had the third-lowest figure overall at £66,100 per job in 2014. However, cities cannot be directly compared as they measure output and jobs in different ways. Nonetheless, the compound annual rate of growth in constant prices for London (0.6%) was broadly similar to New York (0.8%).
Output per job for the global cities between 2006 and 2014, constant 2014 prices
Source: ONS, US BEA/BLS, Eurostat, INSEE, Statistik Berlin Brandenburg, Tokyo Bureau of Statistics, SingStat, HK Census & Statistics Dept., China NBS, Dubai Statistics Centre
Similar trends were observed for output per hour. For example, the figure for London using the median number of hours worked was £35 per hour worked in 2014, which was below that for Hong Kong (£42) and Paris (£47 for 2013) yet above Berlin (£31).
We investigated why London’s productivity was lower than other global cities by looking at the economic structures and workforce characteristics such as skills, but found no evidence. Instead, this could potentially be explained by the differences in definitions and data measurement.
To view the complete analysis including tables broken down by industry for each global city, please download Current Issues Note 48 from our website.