Despite some economic uncertainty the London and UK economies continue to grow
Gordon Douglass from GLA Economics goes through the latest economic forecast for London…
Since our previous forecast was published in the spring of 2016, economic events have moved on a pace with the UK voting in the June referendum to leave the EU. Although this vote has led to increased economic uncertainty, London’s economy continues to grow and at a faster pace than the UK as a whole. This uncertainty, especially around the possible course of the Article 50 negotiations, makes economic forecasting particularly fraught. That said, as outlined in our bi-annual economic forecast ‘London’s Economic Outlook’, we expect:
- Activity in London to continue to grow by 2.8 per cent in 2016. This growth will slow slightly in 2017 to 2.0 per cent before picking up a little to 2.3 per cent in 2018.
- Employment growth to be strong this year with it growing by 2.5 per cent in 2016, moderating a touch to 1.2 per cent in 2017 and then slowing to 0.3 per cent in 2018.
- Household incomes and spending in London to grow in each of the forecast years but at a moderating pace.
The following diagrams show what this means for jobs and growth, and how this compares to other independent forecasters. The light blue lines show past growth in employment and output, the black line gives our forecast and the red lines what other forecasters think will happen to employment and output in the next couple of years.
Employment (annual growth, per cent)
We also forecast output and employment in important sectors of London’s economy. Shown below is a selection of these forecasts; the grey bars show our forecasts for employment and the blue line demonstrates how we expect economic output as measured by Gross Value Added (GVA) to change over the forecast period.
Financial and business services (combined)
As well as data from the forecast, the report offers a commentary on the state of the London, UK and world economy and an additional section looking at the short-run and possible long-run impacts of ‘Brexit’.
London’s economy continues to grow, with a number of indicators showing this expansion. Growth in London’s economy is for example evident by the continuing strong growth in jobs. Thus, figures for the second quarter of 2016 show these now stand at 5.732 million. That’s a new record and an increase of 2.4 per cent compared to Q2 last year.
Data for output growth calculated by GLA Economics also shows that London’s economy has been growing at a faster rate than the UK in the first half of 2016. While a number of surveys show continued increasing business activity in the UK and London.
However, a number of risks are on the economic horizon, the most prominent being the uncertainty caused by ‘Brexit’. Other risks include: the continuing structural problems in the Eurozone; a number of conflicts around the world; and the size of Chinese debt. You can read more about them and our autumn 2016 forecast for London in London’s Economic Outlook: Autumn 2016.
We also publish a monthly economic overview, London’s Economy Today.
Finally if you want to receive regular updates on our work, you can join our mailing list.