1. The London Economy Justine Lovatt - LCCI Economist 1 May 2003

2. Introduction Most government London economic data stops in 1999. Chamber runs London Economy Research Programme – NIESR London model and London Economic Review Chamber London Monitor business confidence surveys

3. Economic Growth Forecasts

4. London’s GDP in 2002 NIESR forecast London’s GDP rose by 2.4% in 2002. Above the Office for National Statistics figure for the UK of 1.8% for 2002. Like the UK London has moderate growth but is not in recession.

5. London/UK GDP 1998-2005

6. High Growth Sectors in 2002 NIESR London Model forecasts for 2002: Construction 7.6% growth due to the property market boom. Wholesale and retail 4.1% growth. Public sector and hotels and catering also performed well.

7. Weak Sectors in 2002 NIESR London Model forecasts for 2002: Manufacturing was in recession, as in the UK, with output falling by 4.5%. Finance grew by just 0.4% in 2002 caused largely by Stock Market falls.

8. Effects of Stock Market Falls On 12 March FTSE 100 fell to a near 8- year low to below half its 1999 peak. 3½ years of Stock Market falls have led to City job losses and problems for company final salary pension schemes. Difficulty raising money via the Stock Market has contributed to low business investment.

9. London Growth in 2003 NIESR forecast London to grow by 2.8% in 2003, up from 2.4% in 2002. The forecast is optimistic and there are risks to NIESR’s London’s growth forecast...

10. Risks To The Forecasts

11. Iraq war impact to be added. Estimates vary from positive IoD to £1bn cost GLA. Tax rises: 1% NI, council tax, business rates. Risk of property price slowdown. Central line closure, congestion charging and terrorism. Potential threat of SARS.

12. Housing Market Fall Scenario A scenario was run to show the impact of a 20% fall in house prices by Q4 2003: Consumption would be 0.8% lower in London than base forecast in 2003. GDP growth in London would be 0.5% lower in 2003 and a further 0.5% lower in 2004 than the base forecast.

13. Unemployment in London

14. Unemployment in London is the highest in the UK at 6.8% (ILO). Since the mid-1990s unemployment has fallen in both the UK and London. There are currently 248,000 unemployed people in London.

15. Unemployment By UK Region

16. Unemployment by Area

17. The London Monitor

18. The London Monitor is an LCCI monthly survey of business confidence. Quarterly surveys are conducted in conjunction with the British Chamber of Commerce. Balances show % of respondents expecting an improvement less % expecting things to worsen.

19. UK Economy Predictions Q1 2003 London Monitor Survey showed business confidence for next year: Fallen to its lowest since September 11 for UK growth (balance of -51%). Lowest for over 5 years for London growth (balance of -16%).

20. London Economy Predictions

21. Company Performance Q1 2003 survey showed: A balance of +1% said that their company’s output has increased over the past month. A balance of +29% said their company output will increase over next 12 months.

22. Conclusions NIESR forecast growth of 2.8% in 2003. This forecast is optimistic and may soon be downgraded due to the Iraq war, tax rises, falling business confidence etc. Risk from inflated housing market. 2004 and 2005 growth expected to be in-line with UK at around 2.5%.