The London Economy Justine Lovatt - LCCI Economist November 2002.
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Transcript of The London Economy Justine Lovatt - LCCI Economist November 2002.
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The London EconomyJustine Lovatt - LCCI Economist
November 2002
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LCCI Economic Research
• London Economy Research Programme – NIESR econometric model forecasts and quarterly London Economic Review
• London Monitor business confidence surveys
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London’s GDP in 2002
• London’s GDP is forecast to rise by only 1.5% in 2002.
• This is above NIESR’s forecast for the UK economy of 1% for 2002.
• London is suffering from an economic downturn but is not in recession.
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London/UK GDP 1998-2005
Annual % Change in London/UK GDP 1998-2005 (1995 Prices)
0%
1%
2%
3%
4%
5%
6%
7%
1998 1999 2000 2001 2002 2003 2004 2005
London GDP (Residents) UK GDP
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London’s Economic Downturn
• Unemployment in London is now the highest in the UK at 7.5%.
• The only sector to have increased employment in the last 12 months is the public sector.
• The City has been hit by Stock Market falls. Finance output forecast to fall 0.6% in 2002.
• Manufacturing is in recession as in the UK with output forecast to fall 3.8% in 2002.
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Unemployment By UK Region
7.5%
6.6%6.3% 6.2% 6.2% 6.0% 5.8%
5.4%4.8%
4.1% 4.1% 4.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Lond
on
Scotla
nd
N Irela
nd
West
Mid
lands
North
Eas
t
North
West
Yorks
& H
umbe
r
Wales
East M
idlan
ds
South
Wes
t
South
Eas
tEas
t
ILO Unemployment by UK Region July to September 2002
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Unemployment in London
• London unemployment is now 40% higher than UK unemployment.
• Unemployment has been higher in London than the UK over the past decade. Recently unemployment has risen faster in London than the UK.
• Since 1995 unemployment has fallen in both the UK and London.
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London/UK Unemployment 1997-2002
London and UK ILO Unemployment 1997-2002
4%
5%
6%
7%
8%
9%
10%
Jul-S
ep 1
997
Oct
-Dec
199
7
Jan-
Mar
199
8
Apr-J
un 1
998
Jul-S
ep 1
998
Oct
-Dec
199
8
Jan-
Mar
199
9
Apr-J
un 1
999
Jul-S
ep 1
999
Oct
-Dec
199
9
Jan-
Mar
200
0
Apr-J
un 2
000
Jul-S
ep 2
000
Oct
-Dec
200
0
Jan-
Mar
200
1
Apr-J
un 2
001
Jul-S
ep 2
001
Oct
-Dec
200
1
Jan-
Mar
200
2
Apr-J
un 2
002
Jul-S
ep 2
002
London ILO unemployment UK ILO unemployment
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A Two-Speed Economy
• The London economy, like the UK, is operating at two-speed with service sector growth much higher than industrial production.
• In 2001 and 2002 the industrial production sector has been in recession whilst the service sector has recorded healthy growth.
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A Two-Speed Economy
6.5%
4.0%
2.5%
-0.5%
2.7%
0.6%
2.9%
-2.1%
1.5%
-3.2%
2.8%1.9%
2.9%2.3%
2.8%2.6%
-4%
-3%-2%-1%
0%1%2%3%
4%5%6%7%
1998 1999 2000 2001 2002 2003 2004 2005
Annual % Change in Services and Industrial Production Indices
Service Sector Index (1995=100) Industrial Production Index (1995=100)
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London Growth To Improve
• The London Model forecasts that growth will pick up from 2003.
• London is forecast to grow by 2.8% in 2003 compared to 1.5% in 2002.
• But there are threats to London’s economic growth . . .
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Threats To The Economy
• More Stock Market falls or housing market crash – both will reduce consumer spending.
• War with Iraq – oil price etc
• Public sector wage demands e.g. firefighters strike for 40% rise
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The London Monitor
• The London Monitor is an LCCI monthly survey of business confidence.
• Quarterly surveys are conducted in conjunction with the British Chamber of Commerce.
• Balances show % of respondents expecting an improvement less % expecting things to worsen.
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UK Economy Predictions
Q3 2002 Survey predictions for next year:
• A balance of +5% expect UK economic growth to improve.
• The balances for UK inflation (-23%), interest rates (-12%) and unemployment (-44%) are all negative (negative denotes to worsen/rise).
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UK Economy Predictions
Expectations for UK Economy for next 12 Months Q2 and Q3 2002 Balances
-42%
-67%
-40%-44%
+24%
-12%-23%
+5%
-80%
-60%
-40%
-20%
0%
20%
40%
EconomicGrowth
Inflation Interest Rates Unemployment
Bal
ance
Q2 2002 Q3 2002
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London Economy Today
Q3 2002 Survey showed economic downturn:
• A balance of only +5% said that their company’s output has increased over the past month.
• This is the worst result since the November 2001 survey.
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London Economy Predictions
Q3 2002 Survey predicts improvement in the short to medium term:
• A balance of +27% expected growth to improve in London.
• A balance of +59% expected their business to improve.
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London Business on Politics
• In our October LM survey 77% of businesses rated Blair’s leadership skills highly.
• Only 15% rated Iain Duncan-Smith highly.• Even Red Ken had a higher rating at 35%.• Bush was rated highly by 44% of businesses. • 66% supported an attack on Iraq, most only
with UN approval.
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Conclusions
• Economic growth is weak in London at 1.5% in 2002. Manufacturing and finance are currently in recession.
• Economic growth should now improve.
• Possible threats to this are housing market/Stock Market falls, war with Iraq and public sector strikes.