London set for rapid growth in 2014
New forecasts from the Centre for Economics and Business Research (Cebr) for the London economy show the capital growing faster than previously expected, as business conditions continue to improve.
The London economy is now expected to expand in real terms by 4.2% over 2014 as a whole and by 3.4% in 2015. This is from October forecasts of 3.8% and 2.9% respectively, thanks to a sharp and sustained increase in both business and consumer confidence in the capital, suggesting the economy has recovered strongly. These growth estimates mean that London is expected to restore its status as the fastest growing UK region after the South East held the title in 2012 and 2013.
In fact, Cebr’s forecasts for London and the UK as a whole show that London will be accounting for almost a third of all the growth in the UK over the next five years to 2019. That is, of the 10.7% UK GDP growth expected in the next five years, 3.5 percentage points are expected to come from London. This comes despite the region accounting for roughly 13% of total UK employment – suggesting the capital is pulling above its weight.
Cebr has also upwardly revised its forecasts for London employment growth. Employment is projected to rise by 2.8% over 2014 as a whole, and by 1.5% in 2015. These are up from 1.4% for 2014 and 1.2% for 2015 in Cebr’s October forecast. Employment growth of 6.1% is expected between 2014 and 2019 in the region.
Economic growth in London is expected to be fuelled by the business services, technology and construction sectors. Due to large amounts of construction in Central London, employment in this industry is forecast to increase by 7.3% this year, the fastest sector for employment growth. Adding to this, finance and business services employment is estimated to grow by 11.0% in the next five years in Central London, equivalent to nearly 100,000 jobs.
Cebr now expects the unemployment rate in London to stand at 7.6% in 2014 as a whole, down from 8.5% over 2013 as a whole but still above the 7.1% seen in 2008, before the recession began.
Behind London, the fastest growing region in 2014 is expected to be the South East, supported partly by a strengthening technology sector. Improvements in this sector will particularly affect the South East since the region has the second largest number of ICT businesses (with London having the most), which comprised of 7.5% of all businesses in the region in 2013. Adding to this, increases in housing market activity thanks to schemes such as Help to Buy will also help the South East. The region housed the second largest number of businesses conducting real estate activities in 2013. The South East is expected to grow by 3.6% in 2014 and 2.5% in 2015 – behind output growth in London but remaining ahead of every other UK region.
Cebr economist Christopher Evans commented: “Cebr’s latest forecasts show robust growth across the UK – especially in London. Growth has returned to the financial services sector faster than expected in the capital and the strong bout of construction in the region will help fuel London’s economy in 2014.”