London has come through the first two years of the current crisis with less damage to its economy than other more industrial regions, finds a new LSE London report.
But, the report argues, long-term growth is likely to be much more modest than predicted in the London Plan, with net job gains expected to average 20,000 rather than the 35,000 suggested by the Mayor.
The report, London's Place in the UK Economy 2009-10, is published by the City of London Corporation today. It examines how the London economy has developed over the past three decades as well as at recent changes, looking particularly at the labour market, the housing market, standards of living in London public finances – and the distinctive issues of Outer London.
The researchers found that London's relative strengths are most evident in financial services but also include information and communication, professional services and the arts, where employment growth has been much stronger. This mix is reflected in the very high proportions of managerial and professional occupations.
Productivity is also much higher in London than other UK city regions, although London's record on innovation is less strong than the rest of the south.
Professor Ian Gordon said: 'London's strength lies in the relative youth, education and skills of its workforce, the diversity of its economy and its responsiveness to market opportunities. More serious challenges may still emerge as longer term responses to the crisis are worked out, in the UK and internationally - but most of the advantages underpinning London's strong long-run performance should sustain it beyond this recession.'
But, the researchers caution, long run growth in both population and jobs has been much more modest than in productivity, and this trend is expected to continue. Population growth may also be constrained by pressures in the housing market as well as lower net migration and the recession.
Professor Christine Whitehead said: 'Much of London's potential success depends on what is happening in the global economy but the most likely outcome is a return to the trend growth path of the past couple of decades – rather than those of the boom years.
'But London's growth could be damaged by reactions to the crisis such as a radical tightening of financial service regulation, a shift toward a more "sustainable" kind of macroeconomic strategy, or the emergence of more antagonistic political attitudes in relation to London's role in the UK economy. Serious attention needs to be paid to these possibilities to mitigate potential negative impacts on key long term economic assets and the welfare of Londoners.'
Download London's Place in the UK Economy 2009-10 (PDF)
London's Place in the UK Economy 2009-10 was published by the City of London Corporation on Wednesday 21 October 2009.
The report's authors are Ian Gordon, Tony Travers and Christine Whitehead, with Kath Scanlon, from two research centres at the LSE: LSE London and the Spatial Economics Research Centre.
21 October 2009