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London’s economy remains buoyant despite Brexit uncertainty and population slowdown

New analysis from Centre for London has found that London’s economy remains buoyant – with unemployment falling and job numbers reaching a record high – despite continuing political uncertainty from Brexit, and a significant slowdown in population growth.

Published today in The London Intelligence, Centre for London’s quarterly review of data on London, the analysis of economic data found that:

  • Job numbers in the capital reached a new high of 5.9 million at the end of March 2018, an increase of 1.9 per cent on a year previously and the highest since it started being recorded in this way in 1996. This is compared to the rest of the UK, where job numbers grew by just 0.5 per cent over the year.
  • Job growth has spread through London’s economy – the real estate sector and the creative industries both grew significantly by 7 per cent each in the first quarter of 2018, bucking a previous downward trend.
  • Unemployment is also down to 255,000, falling 0.4 per cent since last year.
  • Business confidence, as measured by the Purchasing Manager’s Index, stood at 56.2 in June, its highest since October last year, and one point higher than the UK as a whole.

While London’s economy is demonstrating resilience, a significant growth in the number of people moving from London to rest of the UK, and a slowdown in international migration, suggest that the city is become a less desirable place to live and work.

The analysis found that London had the slowest rate of population growth for over a decade and almost half the rate of the previous year, specifically:

  • Net international migration (year to mid-2017) to London was 83,500, 34 per cent down on the previous year, and the lowest level since 2013.
  • Net internal migration over the same period saw a balance of 106,000 people move away from London. This was a 14 per cent increase on the previous year and suggests that people are looking for an alternative to London to live and work.
  • Figures for the first three months of 2018 show 16 per cent fewer foreign nationals registered for national insurance numbers, compared to the same period in 2017. The total number of registrations fell by 25 per cent amongst EU citizens, while non-EU citizen registrations increased by 9 per cent.

The London Intelligence suggests that the continuing affordability crisis and the prospect of Brexit are dampening the city’s appeal, with the former seen as driving the rise in the number of people in their mid-twenties to thirties leaving the capital. The London Intelligence found that:

  • House prices in the capital, though cooling, rose by 2.8 per cent in the year to May 2018, meaning that affordability remains highly challenging at a time of stagnating wages.
  • Over the same time period, the rental market remained relatively flat, but prices rose particularly quickly for 2 bed flats (+3.6 per cent).
  • Other quality of life indicators, such as crime and pollution, worsened over the last year. In the quarter to June, total crimes rose by 0.4 per cent compared to the same period in 2017, while violent crimes rose 3.6 per cent. Particulate matter pollution, the most dangerous to human health, saw annual increases in excess of 15 per cent on both on main roads and background levels.

Silviya Barrett, Research Manager, Centre for London said:

“The strong employment numbers and buoyant economic performance are encouraging against the background of continuing political uncertainty around Brexit. However, declining pay levels and stalling productivity are signs that there could be stumbling blocks on the horizon.

“These data also indicate population growth may be levelling out, though it’s too early to say whether this is a temporary blip, perhaps reflecting post-EU referendum uncertainty, or the beginning of a longer-term trend.

“While some might interpret the drop in migration and population growth as easing the pressure on infrastructure and public services, in the longer term, it has the potential to threaten their viability and significantly damage our economy.”

Vicky Pryce, Board Member, Centre for Economics and Business Research

“The news on job creation in London is very welcome. While UK GDP recovered in the second quarter, following the impact of the bad weather in early 2018, recent forecasts have downgraded GDP growth for this year. Service activity fell in July according to the latest BDO/CEBR survey and the interest rate rise in August could well dent confidence. Only 6 per cent of FT-350 companies now expect the economy to improve in the coming year.

“For London, long believed to be better able to absorb shocks like Brexit due to its diversity, housing affordability and rising living costs in the capital are encouraging an exodus. Any loss of EU workers and the likelihood of services not being covered by any Brexit deal would leave the City particularly vulnerable.”

ENDS

Notes to Editors:

  • Centre for London is the capital’s dedicated think tank.
  • The London Intelligence is Centre for London’s quarterly review of demographic, housing, transport, economic and quality of life data.

Data sources:

  • Job numbers, unemployment, pay data and mid-year population estimates from the Office for National Statistics
  • Business confidence data from NatWest / IHS Markit regional Purchasing Managers’ Index
  • National Insurance Number registration data from Department for Work and Pensions
  • House prices data from Acadata, for price paid figures
  • Rental market data from Dataloft, based on actual transactions
  • Crime data from Metropolitan Police
  • Pollution figures from King’s College Air Quality Network

Correction: This press release stated that job numbers in the capital reached a new high of 5.9 million at the end of June 2018. However, this high was reached in March 2018. This press release has been amended to reflect this error.