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Economy

The London Intelligence – Issue 7

Economy

London’s labour market remains strong, with continued job growth, particularly for employee jobs. This is despite progressively fewer foreign nationals registering to work in the capital. Although the take-up of office space remained steady, business activity slowed and business confidence declined further.

Workforce jobs

The capital’s labour market remains strong as the number of workforce jobs continued to grow, reaching 5.98 million in the third quarter of 2018. Although the annual growth rate has slowed down in recent quarters, it is still 1 percentage point above the rest of the UK.

While the long-term trend in self-employment is still one of growth, last quarter’s jump in self-employed jobs has been reversed. There were almost 774,000 self-employed jobs in Q3 2018 – almost 44,000 fewer than last quarter, or a 1 per cent increase compared to Q3 2017. Employee jobs stood at just over 5.2 million; an increase of nearly 57,000 on last quarter and a growth of 1.5 per cent year-on-year.

At the industry level, the picture looks nuanced. Following strong growth last year, London’s construction industry saw an 11 per cent decline in job numbers in the year to Q3 2018; the second consecutive negative quarter. The capital’s transport workforce also shows signs of contraction – falling 5 per cent year-on-year – a continuation of the downward trend that began at the beginning of 2018. This indicates that the decline in EU migration might be manifesting itself in skills shortages.

In contrast, London job growth was fastest year-on year in information and communication (12 per cent), arts and entertainment (11 per cent), real estate (11 per cent) and accommodation and food services (9 per cent).

However, recent research demonstrated that job growth in London and the wider UK has not been matched by an increase in average pay, or growth in productivity.

Unemployment


With the number of workforce jobs growing, unemployment in London continues to fall, with a 1.6 per cent decline in the year to October 2018. Though only 236,000 Londoners aged 16 – 64 are out of work, the unemployment rate in London (4.8 per cent) remains 0.7 percentage points above the UK average (4.1 per cent).

Though London’s unemployment rate is at historically low levels, this can mask growing instances of in-work poverty, as jobs for many workers may be low paid and insecure.

Commercial property


Despite political uncertainty, the central London office market remained resilient in the final quarter of 2018.

Take-up of office space remained steady, at 3.1 million square feet, increasing 3.5 per cent on the previous year and 22 per cent ahead of the 10-year quarterly average. Vacant office space saw a corresponding decline, while demand was down slightly on the previous quarter.

Active demand for office space in central London dropped by 5 per cent in the fourth quarter of 2018, to just under 9 million square feet. This may be an indication that some businesses are biding their time until the fluctuating pound – and Brexit – settles, as opposed to actively searching for space.

PMI


The Purchasing Managers’ Index (PMI) measures business activity by surveying companies on output, new orders, employment and prices; any reading below 50 shows a decrease in activity from one month to the next. The higher the score, the quicker this expansion.

The NatWest/HIS Markit PMI shows activity in London has fallen for the first time since the EU referendum in July 2016, signalling heightened uncertainty undermining demand as the Brexit deadline approaches. The capital has also seen the slowest increase in prices of all UK regions, with only slight rises in prices across the city.

This chimes with the London Chamber of Commerce and Industry’s latest Quarterly Economic Survey, which saw London companies’ confidence in their own prospects plummet to a record low in Q4 2018.

London’s economy is steadily losing the momentum it had at the beginning of last year, with commentators calling for clarity on Brexit in order to prevent the economy sliding into contraction.

National Insurance Number registrations


Foreign nationals require a National Insurance number (NINo) to work in London, and the number of registrations can provide a measure of work-related immigration in the capital.

Q3 2018 continued the recent trends. Non-EU registrations have remained broadly stable since 2015, falling 1.7 per cent in the three years to Q3 2018. EU registrations on the other hand have seen a dramatic decline, falling 39.5 per cent over the same period, to 33,400 registrations.

When compared to the previous year, Q3 2018 saw the largest fall in eastern European EU8 and western European EU15 nationals registering for work in London, declining by 19 per cent and 16 per cent respectively. Whilst the number of EU2 (Romanian and Bulgarian) nationals registering fell 9 per cent over the same period, registrations from Maltese, Croatian and Cypriot nationals saw a 128 per cent increase in Q3 2018 – albeit from a small base – after restrictions were lifted in June.