London’s economy is forecast to ride out the downturn better than any other region with the smallest fall in output this year before springing back with the fastest growth over the following two years.
Today’s predictions from economists at consultants EY sees the capital holding on to its spot at the top of the UK’s growth leader board after being hit harder than any other part of the UK during the pandemic.
EY’s latest Regional Economic Forecast projects London’s economy - as measured by gross value added - shrinking only 0.2% this year compared with 0.6% for the UK as a whole.
That is in line with the Bank of England’s current official forecast of a 0.5% fall over 2023 and a shorter, shallower recession than previously feared for the UK.
London is estimated to have had GVA growth of 5.5% last year, the fastest in the UK, ahead of Scotland (5.3%) and the East of England (4.3%).
The report says the capital’s economy will be shielded from the worst of the national slump by its “knowledge based sectors” such as professional and financial services less directly exposed to the squeeze on consumer spending.
The analysis also notes that people in London and the south east have more capacity to absorb rising prices than counterparts elsewhere, with the two regions the only areas in the UK with mean weekly incomes above the national average (£621).
Julie Carlyle, Managing Partner for EY in London, said: “London enjoys advantages in economic resilience, skill levels and in productivity – both in higher and lower skilled sectors. London’s performance is dependable, but should not be taken for granted. While there is a need to level up the rest of the country, London will have its own investment needs to be met so that the capital can continue to help form the backbone of nationwide growth. Just as other parts of the country will need their own plans for growth, London needs its own clearly defined plan too.”
The new forecast also says that, by the end of this year, UK GVA is expected to be 0.1% higher than it was in 2019, with London up 3.2%.
Further out UK GVA is expected to grow at an annual average 2.1% between 2024 and 2026, with London up by 2.6% per year, ahead of the South East (2.2%), South West (2.1%), East of England (2.1%) and West Midlands (2.1%).
