London faces substantial job losses over several years warns a new report from researchers at LSE London. But in the longer term the capital has the underlying strength to recover from the effects of the world's economic crisis.
The report examines London's Place in the UK Economy both from a long-term perspective and in relation to early phases of the credit crunch.
The new London economy, shaped in the 1980s, is highly productive, across a very wide range of service activities - not simply finance - but is especially prone to wide boom-bust cycles and is associated with high levels of economic inequality.
One aspect of the city's long-term competitiveness, the reputation of its financial institutions, has been seriously challenged by the current crisis. But important underlying strengths of London's service economy remain relevant - including its flexibility, the breadth of accessible expertise and intelligence, and the city's attraction for talented young people seeking rapid advancement.
In the immediate future, restructuring and retrenchment in financial services are generally expected to involve substantial job losses in central London. Beyond these, past performance indicates that London job losses in other sectors are likely to be much deeper than in other regions, continuing over several years. One consequence will be rising unemployment, concentrated among groups living in inner/eastern parts of London where rates of worklessness are already among the highest in the country.
The downturn in the housing and residential construction markets is already significantly greater than in the country as a whole. But strong underlying demand factors allied with limits on supply growth will reassert themselves as the economy improves.
A major long-run problem for the London economy is its inability to generate an independent source of revenue for the infrastructure required to sustain its potential, and key contribution to UK economy. Recent attention to this issue - both for transport projects and affordable housing - has focused on realising gains from enhanced land values. The present crisis and emerging recession represent a major setback for this approach and call in question the funding of elements of projected investment in these fields.
London's Place in the UK Economy 2008-9, is produced by researchers at LSE London - a research group at the London School of Economics and Political Science - and published by the City of London Corporation.
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THE (30 October)
London School of Economics - City will survive economic blitz
London has the underlying strength to recover from the effects of the world's economic crisis, according to a study conducted by a research group at the London School of Economics. Although the crisis has tarnished the reputation of its financial institutions, which are vital to the City's long-term competitiveness, important underlying strengths of London's service economy remain relevant, including its flexibility, the breadth of accessible expertise and intelligence, and its attraction for talented young people.
16 October 2008