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Capital - undercapitalised: new report on London's place in the UK economy

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A new report, London's Place in the UK Economy, written by members of LSE London (Ian Gordon, Tony Travers and Christine Whitehead) for the Corporation of London, was published yesterday [Wednesday 22 October]. 

London makes a net contribution to the UK's economy of up to £17.45 billion says a new report published today by the Corporation of London. This outward investment in the rest of the country's well-being, whilst recognised as a function of a healthy capital city, comes at a time when investment in London's own transport, housing and education systems is sorely needed. If not reversed, such lack of investment could threaten London's place as a leading world city and economic force, to the detriment of the UK as a whole.

The report highlights the following issues:

  • Despite a temporary decline in the rate of growth of the London economy, its net financial contribution to the UK economy (the difference between tax paid by the capital and public expenditure in the capital) is between *£7.25bn and £17.45bn
  • London remains one of the most expensive place in the UK in which to live with housing costs in particular continuing to discourage key workers from living and working in the capital
  • In the context of the higher than average demands of its knowledge-based economy, significant parts of the education system in London fail to meet the needs of residents and employers
  • Enormous investment is required to upgrade and expand London's Victorian transport infrastructure to meet the needs of the 21st century. The congestion charging scheme is a bold innovation but is no substitute for long term capital investment
  • Without a 21st century infrastructure, London's world city economy will be at risk. There is little evidence yet from Central Government of the necessary funding to support new infrastructure.

Michael Snyder, chairman, Policy and Resources Committee, Corporation of London said: 'London is a leading world city. It needs a first class infrastructure - with positive investment in schools, transport and housing - to maintain its position, and to grow and prosper. If London does not grow and prosper, how can it be expected to continue to make the tremendous contribution it does to the whole of the United Kingdom?'


For more information, contact the authors of the report:

Or contact Fiona Milligan, Corporation of London, on 020 7332 3451

Note to editors:

*The wide range in the estimated contribution figure is due to two factors. Taxation paid by London in 2001-2002 was £64.3bn if measured on a residence basis, but £68bn if measured on a workplace basis (including taxation paid by people working in London while living outside). Public expenditure on London ranged from £50.55bn to £57.05bn, depending on how one allocates central spending on such areas as defence and overseas representation.

The Corporation of London provides local authority services for the City of London in addition to its role in promoting the City as the world's pre-eminent financial centre. More information can be found at www.cityoflondon.gov.uk| 

Press cuttings

Daily Telegraph (23 Oct)
Crumbling London a 'threat to economy'
A report written for the Corporation of London by LSE has highlighted the gaping hole between the tax paid out by the capital and the public money ploughed back in. Tony Travers, one of the authors of the report, quoted. 

Financial Times (23 Oct)
17,000 vital workers seek to leave London
Reference to a report from LSE, which says London's net contribution to the UK economy could be as much as £17.5bn.

Evening Standard (23 Oct)
Capital pumps £17bn-plus into UK
London contributed more than £17bn to the British economy last year as it pays considerably more in tax than it receives in public spending says new report. 

Bloomberg (23 Oct)
London shed 50,000 jobs in 2002, avoided recession, report says
London's dependence on financial services exacerbated a slowdown seen in the rest of the country, according to LSE, which produced the report. 

Updated 24 October 2003