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London’s economic activity 1998-2019

In May 2021, the Office for National Statistics (ONS) published[1] estimates of output to local authority level by sector and updated the historic time series from 1998. It updates previous summaries of ONS output releases[2].

This month, the ONS also published[3] an updated time series of estimates of sub-regional productivity to local authority level. The measure of productivity used is output per hour. This supplement presents the main London findings from these two releases[4]

London’s GVA rose to £468bn in 2019 from £448bn in 2018, growth of 2.4% (after inflation). The value of UK economic activity came to £1,977bn in 2019, growing by 1.4% over the previous year. For more than 20 years London has been growing faster than nationally, and so has been accounting for an ever larger share of national output. In 2019 London’s economy was 23.7% of the size of the UK economy, rising from 21.5% in 2009 after the financial crisis, and 19.6% in 1998.

In 2019, four local authorities accounted for 45% of London’s output: Westminster; City of London; Camden; and, Tower Hamlets (Figure A1). Outside inner London the local authorities with the largest output were Hounslow and Hillingdon, which serve Heathrow Airport. 

Figure A1:

Over time London’s output has become more concentrated. The share of the four largest local authorities by output was 38% in 1998 and 44% in 2009. That said, output has increased across all London local authorities since 1998 except Lewisham. The output of Lewisham has increased since 2009.

The London local authority with the highest productivity, Tower Hamlets, was more than twice as high as the authority with the lowest productivity, Lewisham. Higher output is associated with higher productivity across areas. The four local authorities with the highest output are among the five authorities with the highest productivity. The other authority is Hounslow, which services Heathrow Airport (Figure A2).

Figure A2:

At a sub-regional level, and to avoid the volatility of reporting for individual local authorities, it is clear that all parts of London do not grow at a similar rate, and that the pattern of growth can change over time (Table A1).  For example, growth in Inner London – West, which includes Camden, the City of London, and Westminster, has been consistently higher than in London as a whole.  In turn, growth in Inner London – East, which includes Tower Hamlets, has been consistently below the London average. In the period 1998-2009, growth was fastest in Outer London – West and North West, which includes Heathrow Airport, while since 2009 it has been close to the London average. While London in its entirety has been growing faster than the UK, this has not been the case for Outer London – East and North East, and Outer London – South.

Table A1:

Table A2 repeats Table A1 for productivity estimates. As with output London and UK productivity growth slowed after the financial crisis, and in London’s case this has been to the same rate as for the UK. As with output growth productivity growth has been faster than the UK average in Inner London – West and Outer London – West and North West, and slower for other sub-regions. Productivity has fallen since the financial crisis in Outer London – South (Table A2).

Table A2:

London also specialises in four sectors, which accounted for over half (53%) of its output in 2019: Real estate; Finance; Professional services; and, Information and communication technologies (Figure A3). These are also the sectors in which London has notably specialised compared with the rest of the UK economy.

Figure A3:

The London economy specialised in the same four sectors in 1998, which at this time contributed less than half of its output (47%) (Figure A4). Other sectors where London did not specialise were more prominent, such as: Wholesale and Retail, 11.7% of 1998 activity and 7.1% of 2019 activity; and, Manufacturing, 5.8% of 1998 activity and 1.9% of 2019 activity. So, the process of specialisation has seen more rapid growth in the sectors in which London was already specialised and a reduction in the relative role of other sectors.

Figure A4:

This period of specialisation may have reached its zenith, and a further process of re-structuring may now be occurring with the four principal sectors becoming less important to London’s economy – although this is by no means certain. Their share of activity had been increasing both for London and inner London, although it has dipped for both geographies since 2015 (Figure A5). In comparison, in outer London the contribution of these sectors to economic activity was higher than the London average up to 2015 but has been falling since 2011.

Figure A5:

Inner London has retained its attractiveness to the four principal sectors as the share of total London output produced in Inner London has been rising for each of them (Figure A6). The growth for Professional services has been limited as over 80% of output was already produced in inner London in 1998. In contrast, the growth of inner London’s share of London output has been more muted increasing from 67% in 1998 to 69% in 2019.

Figure A6:

In conclusion, London’s share of national output has been rising for the past 20 years. Four of its local authorities, Westminster, City of London, Camden and Tower Hamlets, have been responsible for a growing share of London’s output, and this is now over half of all output. They are amongst the areas with the highest productivity, and highest productivity growth, in London. The growth in output is associated with the importance of the Finance, Information and Communication, Professional services, and Real estate sectors to the London economy. While up to 2019 inner London continued to be attractive to these sectors, and as a place to work more widely, there is some evidence that these sectors may be becoming less important to London’s economy overall. Although this is by no means certain, but if so a process of re-structuring may be starting.

If you found this overview of London’s output interesting further analysis of London’s economy can be found on our publications page.

[1] ONS (2021), Regional economic activity by gross domestic product 1998-2019.

[2] See, for example, Orellana E (2020), London’s Economy Today – Issue 211 – March 2020, and Orellana E (2019), London’s Economy Today – Issue 197 – January 2019.

[3] ONS (2021), Subregional productivity in the UK.

[4] This time the ONS published data for two measures of output, Gross
Domestic Product (GDP) and Gross Value Added (GVA). GDP is the same as GVA
except it includes taxes and deducts subsidies. This note focuses on GVA as
this measure for which more granular information is available. The measure of
GVA reported is GVA(B), balanced, which combines the income and production
approaches to measuring output.