London’s economy appears to be resilient and strong, with a record numbers of jobs and record low unemployment rate in the capital at the end of 2017 and beginning of 2018 respectively. Business confidence, as measured by the Purchasing Managers’ Index, is net positive, but sits
below the English average.
In the final quarter of 2017, there were a record number of jobs in the capital – over 5.86 million, which was 1.7 per cent higher than in the same period in 2016. For the first time in a year, London’s job growth out-stripped the rest of UK’s.
The fastest growing sector was construction – it saw year-on-year job growth of 10 per cent – while the education sector continued its downward trajectory with a fall of 5 per cent.
Service sector jobs growth overall – for so long the backbone of London’s economy – continued to be sluggish, with a rise of 0.8 per cent. Research has suggested that vacancies in the first few months of this year have increased showing the capital’s businesses still have an appetite for recruiting new talent.
While job growth is continuing, candidate shortage continues to place upward pressure on pay, and recent figures suggest pay growth is again slightly above price inflation.
The number of self-employed jobs bucked the national trend by growing nearly 7 per cent (across the UK, numbers fell 1 per cent) to a record high of 800,000 across the capital (13.7 per cent of all jobs). Over the last year, the proportions of self-employed jobs in London and the rest of the UK have diverged, with London’s level one percentage point higher.
The number of people unemployed in London fell to a record low of 239,000 – or 4.8 per cent of the economically active 16+ population – demonstrating the continuing resilience of London’s jobs market to Brexit uncertainty. However, there are continued concerns over in-work poverty for London’s lower earners.
The number in employment also rose, mirroring the rise in number of jobs, to over 4.7 million – equating to three quarters of the 16-64 population. London does, however, continue to have the widest gap in male and female employment rates in the country – the subject of a planned Centre for London study.
Not in Education, Employment or Training
Just under 100,000 young people (aged 16-24) across London were classified as NEET (Not in Education, Employment or Training) across the final three months of 2017. This follows the annual trend of falling after the third quarter as graduates find jobs or start various qualifications. It is also 1.4 per cent lower than the same period in 2016. There have been recent calls for compulsory careers education in colleges, to prevent many leavers failing to find a job and becoming a NEET, but the current funding environment may make this a challenge.
Central London commercial property data suggests a promising start to the year, showing the capital is still an appealing place to do business. Active demand for commercial space rose to over 10 million square feet, a level not seen in the last four years. Research suggest that the sectors driving this growth were banking and finance, as well as the creative industries.
Take-up, on the other hand, rose to a modest 2.3 million square feet, higher than the same period last year, but lower than Q3’s high.
Meanwhile, vacancy rates fell for the first time in nearly three years, and now sit at 4.8 per cent, but second-hand space coming onto the market has driven up future office space availability, which may increase vacancy rates moving forward. The City and Isle of Dogs/Stratford continue to have higher vacancy rates than the West End.
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 higher the score, the quicker this expansion.
According to the IHS Markit indicator, London’s businesses remain relatively subdued compared to other English regions: London was England’s second worst performing region in January (scoring 51.8), third worst in February (54) and second worst in March (52.4). It has been now been below the UK average for the last four months. That said, research suggests that over the longer term, London’s business confidence is growing and is the highest in the country, with 40 per cent of firms expected to take on new staff this year, but other research suggests confidence is low given it is facing challenges and uncertainty in a number of sectors over the coming months.
Foreign Direct Investment
These figures show foreign companies starting new ventures in London with the help of London & Partners, the Mayor of London’s official promotional agency (therefore not a complete picture of total foreign direct investment (FDI)). They record both the number of new ventures, and the number of new jobs created – London & Partners’ activity is particularly focused around ICT, Financial Services, Business Services, Creative Industries and Retail.
In the year to March 2018, the number of companies started in the capital was 311, , up 7 per cent on the year to March 2017. The number of jobs from these ventures also rose compared to the previous year, by 11 per cent, to around 6,750. Despite continuing Brexit uncertainties, foreign investors appear to not be being put off London – particularly as many of these ventures may be from beyond the EU.
“This data confirms that the outlook for the capital is promising and points to a possible turnaround in inward investment into London as we enter 2018, given the decline in foreign direct investment seen between 2016 and 2017 (-8% for London and -17% globally).
London remains the most attractive European city for foreign investors, receiving more projects than Paris, Amsterdam and Berlin combined in Q1 2018. We are confident London will remain a fantastic place for people from all over the world to invest, work and live in for many years to come.”
Jules Chappell, Managing Director Business, London & Partners