The capital’s unemployment rate is at a record low of 5.5 per cent. Meanwhile private sector job growth is continuing, but is slowing for the first time since early 2015. London’s rate of job growth is now just below the rate of UK job growth, having been significantly higher in the years following the recession.
Growth in the number of jobs in London is slowing, though is still relatively high in historic terms – year-on-year growth was 1.1 per cent. This rate of job growth is also now similar to the rest of the UK, having been significantly higher in the years following 2008, suggesting London’s post-recession bounce may have come to an end.
London’s job growth is driven by the private sector. Public sector jobs have been falling since Q3 2013, meaning that a record percentage of people working in London are employed in the private sector. Within the private sector, there has been a very slight decline (0.5 per cent) in the proportion of self-employed jobs, putting an end to a year of growth in self-employment. On its own this small drop may not be significant, but will merit observation over coming quarters.
When it comes to sectors, ‘other services’, ‘professional, technical and scientific’ and ‘food’ saw the largest growth in job numbers compared to this time last year. ‘Real estate’ saw the largest drop in numbers – 13 percent – followed by ‘arts, entertainment. and recreation’ and ‘education’.
The next few years will be historically defining for the City, for our capital, and for the country at large. Firms of all types are grappling with increasing uncertainty, underpinned by Brexit and political change. But London’s starting point is strong, and the capital continues to be the world’s leading financial and business centre thanks to the breadth and depth of the institutions clustered here, its tax rates, regulatory regimes and close proximity to other major centres.
Catherine McGuiness, Chairman Policy & Resources Committee, City of London Corporation
The capital’s unemployment rate is at a record low of 5.5 per cent, previously achieved in December 2016. Data from May this year shows a decrease (0.3 per cent) in the unemployment rate from the same time last year, following small rises in the previous two months, but continuing the trend of almost continually declining unemployment since April 2012. London’s unemployment rate is consistently higher than the UK’s, with the current gap standing at 1.1 percentage points.
An estimated 83,000 young people were classified as not in employment, education or training (NEET) in London over the first quarter of 2017, compared to 89,000 in this period last year, a decrease of 0.7 per cent. This equates to 8.6 per cent of all 16-25 year olds across the capital. Forthcoming releases will indicate if the apprenticeship levy introduced in April this year has any impact on NEET numbers.
This welcome decline in NEET rates is hopefully a result of well-performing economy combined with some great youth employment programmes across London. However anecdotal evidence points more to the fact that an increasing number of young people are falling out of the statistics as they get sanctioned and stop engaging with the system all together. Estimates show that for every 100 young people reported as unemployed there may be as many as 30 hidden from the statistics. These young people need high quality personalised support to help rebuild their trust and confidence. 8.6 per cent of young people not working is still an unacceptable waste of potential.
Rosie Ferguson, Chief Executive, Gingerbread
Purchasing Managers’ Index
Purchasing Managers’ Indices (PMIs) measure business activity by surveying companies on output, new orders, employment and prices; a score above 50 shows an increase in activity from one month to the next.
The Lloyds Bank Regional PMI data from June 2017 show a significant cooling off in the rate of business activity growth, falling to an eleven month low. This is likely to reflect political uncertainty on account of the general election and Brexit negotiations. London businesses are particularly pessimistic, experiencing the largest drop off of any UK region. This could reflect differing attitudes towards Brexit, economic reliance on the EU, and the pressures of squeezed household incomes.
The data presented here is from JLL’s Q2 Central London Office Market Report. JLL publish quarterly data and analysis covering a range of indicators including vacancy rates, demand, take up and average rent.
Q2 data shows an overall positive picture for the central London’s office market after a shaky start to 2017. Take up of office space in Central London – the total amount of space leased or purchased – is well above the 10 year quarterly average at 2,813,000 square feet, and well above the same quarter last year which fell to 1,666,000 square feet. This 2016 figure is likely to reflect pre-referendum uncertainty. Vacancy rates are also up compared to this time last year now at 4.96 per cent, but below the 10 year quarterly average of 5.47 per cent. While a sharp rise in vacancy rates can signify an economic slowdown, very low rates and high rents can constrain economic growth.
Taking a look at sub-markets, we see that average prime rents in the West End fell from a peak of £120 per sq ft in Q3 2016, possibly reflecting uncertainty following the vote to leave the EU and have remained steady at £110 per sq ft for the past three quarters. Prime rents in the City appear more resilient, having remained at a peak of £70 per sq ft per annum since Q4 2015.
Demand for central London office space registered a clear fall in the quarter prior to the EU referendum. The market has since regained some momentum and leasing volumes have been in line with historic averages. Demand closely reflects employment trends – technology, media, and telecoms sectors have continued to expand in London, while demand from financial services has been more subdued. The flexible office (serviced office and co-working) sector has boomed over the last few years, driven by the rapid expansion of new entrants, notably WeWork, and an increasing desire for flexibility amongst tenants.
James Norton, Director, UK Research, JLL
The number of international visitors into London in the last three months of 2016 was 8 per cent higher than a year earlier, not showing their usual post-summer drop off and remaining above five million. This rise could reflect the fall in the value of the pound following the vote to leave the EU last year – the pound fell almost every month to the end of the year against other major currencies. This may also explain why total spend was 3.7 per cent higher than in the same period in 2015.
2016 saw the traditional tourist markets (North America and Europe) continue to dominate in terms of visitors and nights spent in London. Three Middle Eastern countries saw large year-on-year rises: Oman (56 per cent), Bahrain (52 per cent) and Qatar (23 per cent), which are especially important given the high average spending power of visitors from these countries. Chinese tourism levels remained consistent, possibly because of the UK’s relatively difficult process for tourist visa applications, despite a rapid global growth in Chinese tourism.
Foreign Direct Investment
These figures show foreign companies starting new ventures in London with the help of London and Partners, the Mayor of London’s official promotional agency. They record both the number of new ventures, and the number of new jobs created – London and Partners’ activity is particularly focused around ICT, Financial Services, Business Services, Creative Industries and Retail.
Latest data suggest a mixed picture. While the number of projects completed in the year to June 2017 rose 11 per cent, the number of jobs created from these fell 15 per cent (to 6,010) over the same period. This may indicate that foreign companies are still investing in London, but doing so more tentatively with smaller projects that do not require a high footprint of staff.
Foreign Direct Investment will warrant further observation in future editions of The London Intelligence as Brexit negotiations continue and while investors consider the future shape of London’s – and the UK’s – relationship with the European Union is still unknown.