Transcript London Economic Briefing Bank of England Agency for Greater

The London Economy
Justine Lovatt - LCCI Economist
22 May 2003
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
Economic Growth Forecasts
London’s Economic Growth
• NIESR forecast 1.9% rise in London’s
GDP in 2002 and 2.4% rise in 2003.
• Similar to ONS UK figure of 1.8% for
2002 and NIESR forecast for UK of
2.2% for 2003.
• Like the UK London has moderate
growth but is not in recession.
London/UK GDP 1998-2005
Annual Change in London and UK GDP 1998 to 2005
(1995 Prices)
7%
6.5%
6%
5%
4%
4.4%
3.3%
3%
3.1%
2.2%
2%
2.8%
2.4% 2.2%
2.2%
3.1% 2.9%
1.8% 1.9%
1.6%
1.3%
1.5%
1%
0%
1998
1999
2000
2001
2002
London GDP (Residents)
2003
UK GDP
2004
2005
High Growth Sectors
NIESR London Model forecasts for 2003:
• Construction 6% growth due to property
market boom/public sector investment.
• Public sector 3.5% growth forecast.
• Wholesale and retail forecast to grow
3.4%, down from 4.1% in 2002.
Weak Sectors
NIESR London Model forecasts for 2003:
• Manufacturing forecast to grow by only
0.6% in 2003 after falling 4.5% in 2002.
• Finance forecast to grow by just 1.3% in
2003 after not growing in 2002, largely
due to Stock Market falls.
Effects of Stock Market Falls
• On 12 March FTSE 100 fell to a near 8year low to below half its 1999 peak.
• 3½ years of Stock Market falls have led
to City job losses and closure of many
company final salary pension schemes.
• Difficulty raising money via the Stock
Market has contributed to low business
investment.
London Growth in 2003
• NIESR forecast London to grow by
2.4% in 2003, up from 1.9% in 2002.
• There are risks to NIESR’s London’s
growth forecast . . .
Risks To The Forecasts
•
•
•
•
Risk of property price slowdown.
Equity market not increasing slowly.
Declining business confidence.
Central London issues: war/terrorism
affecting tourism, Central line closure
and congestion charging.
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.
Tourism in London
• London Tourist Board (LTB) forecast a
6% decline in tourist visits in 2003.
• LTB forecast a 14% decline in tourist
expenditure in 2003 – a £1.2bn fall.
• Decline led by war in Iraq and terrorism
fears. London’s share of all UK visits
forecast to fall though still 46% in 2003.
LCCI Retail Survey
LCCI conducted survey of retailers in
congestion zone in March.
• Three quarters of retailers in zone
reported downturn in year-on-year trade.
• Half of these attributed this ‘all or
mostly’ to congestion charge given a
choice of five reasons.
Unemployment in London
Unemployment in London
• 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.
Unemployment By UK Region
Regional ILO Unemployment December 02 to February 03
6.8%
7%
6%
5%
6.6%
6.1%5.9%
5.5%
5.1% 4.9% 4.8%
4.4%4.4%
3.9%
4%
3%
2%
1%
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0%
3.6%
Unemployment by Area
Claimant Count by Area of London
Inner London: East
5.7%
London Total
3.7%
Inner London: West
3.5%
Outer London: East & North East
3.2%
Outer London: West & North West
2.9%
Outer London: South
2.4%
0%
1%
2%
3%
4%
5%
6%
The London Monitor
The London Monitor
• 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.
UK Economy Predictions
Q1 2003 London Monitor Survey
(conducted in March) 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%).
London Economy Predictions
Business Confidence in London Growth (Next 12 Months)
100%
Weighted Balance (+/-)
80%
60%
40%
20%
0%
-20%
-40%
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
98 98 99 99 99 99 00 00 00 00 01 01 01 01 02 02 02 02 03
Company Performance
Q1 2003 Survey showed:
• A balance of +1% said that their
company’s output has risen over the past
month.
• A balance of +29% said their company
output will rise over next 12 months.
Conclusions
• NIESR forecast growth of 2.4% in 2003.
• Risks to this forecast include equity
markets, inflated housing market, low
business confidence and tourism.
• 2004 growth expected to be in-line with
UK at around 2.2%.