London’s Economic Outlook: March 2013 Gordon Douglass GLA Economics

Overview The general macroeconomic situation Economic indicators suggest London is performing slightly better than the UK UK economy faces a tough start to 2013 A still worrying economic environment in the Eurozone and political wrangling in the US GLA Economics latest forecast for London’s economy

UK contracted in Q and virtually flat in 2012 Last data point: Q Source: ONS

London’s economy is growing slowly Last data point: Q Source: Experian Economics

London’s annual employment growth higher than in the UK Last data point: Q Source: Experian Economics

London’s unemployment rate is down from its peak Last data point: Oct-Dec2012 Source: ONS

Claimant Count Unemployment Last data point: January 2013 Source: NOMIS

Strong underground passenger growth Last data point is the 28-day period ending 5 January 2013 Source: Transport for London

Annual house price inflation is higher in London than in the UK Last data point: Q Source: ONS

Surveyors reporting house prices in London are increasing whilst falling in England & Wales Last data point: January 2013 Source: Royal Institution of Chartered Surveyors

Consumer confidence is negative but holding up better in London Last data point: February 2013 Source: GfK

PMI survey suggests London is growing Last data point: January 2013 Source: Markit Economics

Service businesses believe that their profitability will improve in the next 12 months….. Last data point: Q Source: British Chambers of Commerce

and so will their turnover Last data point: Q Source: British Chambers of Commerce

US economy virtually flat in Q but non- manufacturing US businesses is more positive Last data point: February 2013 Source: Institute for Supply Management

Eurozone GDP growth in selected countries (% change compared with previous quarter) Last data point: Q Source: Eurostat

Sterling has depreciated recently against the Euro Last data point: 5/03/2013 Source: Bank of England

Forecasts for the UK economy The IMF forecast in January that it expects the UK to grow by 1.0% in 2013 and by 1.9% in HM Treasury Comparison of Independent Forecasts: As at February 2013, the average of independent forecasts was for growth of 0.9% in 2013 and 1.6% growth for The OECD’s latest forecast published in December expected a contraction of -0.1% in 2012, growth of 0.9% in 2013 and 1.6% in 2014.

GLA Economics’ forecast for output growth in London (% change) – November 2012 Source: GLA Economics – LEO (Nov 2012) / Experian Economics Note: External forecasters are Cambridge Econometrics, Experian Economics, CEBR and Oxford Economics

GLA Economics’ forecast for employment growth in London (% change) Source: GLA Economics – LEO (Nov 2012) / Experian Economics Note: External forecasters are Cambridge Econometrics, Experian Economics, CEBR and Oxford Economics

Sector forecasts (1) (% change) Source: GLA Economics – LEO (Nov 2012) Financial Services Business Services

Sector Forecasts (2) (% change) Source: GLA Economics – LEO (Nov 2012) Financial & business services Transportation & storage

Sector forecasts (3) (% change) Source: GLA Economics – LEO (Nov 2012) Distribution, accommodation and food services activities Other (public & private) services

Sector forecasts (4) (% change) Source: GLA Economics – LEO (Nov 2012) Manufacturing Construction

Downside risks to the forecast Eurozone sovereign debt crisis flares up again Eurozone goes into a deeper recession hitting London exports The US economy falters due to political wrangling Lending to households and firms remains constrained for the foreseeable future though there are positive signs especially in the housing market due to the Funding for Lending Scheme (FLS)

To conclude London continues its bumpy recovery The deleveraging aftermath of the financial crisis recession continues to dampen growth In general forecasters expect London to grow slightly quicker than the UK The large depreciation of sterling and monetary easing should continue to provide support to the economy. Although fiscal retrenchment may act as a drag on growth it has put downward pressure on interest rates and is a required part of the necessary rebalancing of the UK economy

 Thank you Gordon Douglass 