Strong economic and employment growth are projected for London, with 246,000 jobs added between 2012 and 2018
London unemployment rate to fall to its lowest level since before the financial crisis by 2018
Business services employment in Central London expected to rise annually by 2.6% on average in years to 2018
The tech and creative sectors of the ‘flat white economy’ expected to add jobs in Central London at rate of 1.8% a year on average between 2013 and 2018
New forecasts from the latest Centre for Economics and Business Research report London, City and Regional Prospects show economic growth in London outperforming the UK as a whole over the years to 2018. The capital’s economy is set to expand in real terms by 1.2% this year, and by an annual average of 1.9% between 2013 and 2018. This compares to average expected growth in the UK as a whole over the same time period of 1.4%.
These findings show that the capital is again becoming a key driving force for economic growth, following a period in 2010 and 2011 where London actually acted as a drag on the UK due to a declining financial services sector. Although the underperforming finance sector means that the South East is likely to grow faster than London this year and in 2014, London is expected to lead the pack once again by 2015.
In addition, residency-based employment growth of 1.3% is expected in London for 2013 as a whole, equivalent to 49,000 extra jobs. Furthermore, an average growth rate of 1.0% is expected between 2014 and 2018, adding an additional 198,000 jobs. This compares to a UK-wide forecast of 0.8% this year and an average projection of 0.6% between 2014 and 2018, as illustrated in Figure 1.
On the back of this jobs growth, London’s unemployment rate is set to reach its lowest since before the financial crisis by 2018. The rate is projected to reach 8.1% that year, the lowest since 2008, before the effects of the financial crisis were felt in earnest in the labour market.
Within the headline figures, Cebr has identified two important parts of the economy that have both helped boost London employment in 2012 and are expected to be key contributors to job growth in the capital over the coming years. These are traditional business services, such as accounting, legal and administrative services, and the emerging technology-based businesses of the ‘flat white economy’. This term, coined by Cebr in 2012 in reference to the coffee popular in East London Cafes, refers to a sector formed of media, information and creative industries. Included here are software publishing and programming, TV & film post-production, advertising agencies and website design. One of the highest concentrations of jobs in this sector is in Islington, such as around the so-called Silicon Roundabout of Old Street; 7.5% of all jobs in Islington are in the flat white economy. Camden has an even higher concentration, at 8.5% of all employment.
London’s overall residency-based employment boomed in 2012, rising over the year by 2.3%, compared to UK-wide growth of 1.2%, as shown in Figure 1. While part of this will likely have been due to a temporary Olympics effect, Cebr has identified both business services and the flat white economy as major contributors to the boost, with Central London workplace-based employment in these sectors rising over the year by an estimated 8.9% and 10.5% respectively.
Cebr’s research has also identified the flat white economy as being a major contributor to London employment growth over much of the past ten years. As shown in Figure 2, the number of jobs in the flat white economy has boomed, increasing by 70% between 2004 and 2012. Over the same time period, overall London employment climbed by 8.8% and total UK employment by 3.6%.
Cebr expects robust growth in employment in this sector in Central London to continue over the coming years. Although the very high growth rates seen in previous years are expected to ease off as the sector becomes more established and the growth base becomes larger, the number of flat white economy jobs in Central London is expected to rise by 2.5% in 2013 to reach 160,000. Following this, average annual growth of 1.6% is projected for the years to 2018.
These latest projections corroborate the results of the Q2 2013 ICAEW / Grant Thornton Business Confidence Monitor. In the IT & Communications sector, average business confidence over the past four quarters had been higher than in any other part of the economy.
In addition, traditional business services are projected to show buoyant employment growth over the coming years, helping to drive job creation in Central London’s economy. An increase of 3.5% is expected for 2013, taking workplace-based business services employment in Central London to 623,000. Following this, average growth of 2.4% is forecast for the years 2014 to 2018.
Rob Harbron, economist at Cebr, commented “It is encouraging to see London once again becoming a key driving force of the UK economy. Rebalancing away from financial services and towards business services and technology will help London to better weather future financial crises.”
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