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London’s competitive place in the UK and global economies

20 January 2011

Research report

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In the context of an uncertain global economic climate, this study, authored by Oxford Economics, examines the globally competitive advantage that London offers for the UK and EU economies and the crucial role that the capital will play in driving the UK economic recovery.

A dynamic world city

Between 2000 and 2009, London’s population rose by 7%, outstripping the growth in the national population of 4% over the same period with the capital hosting 1.7m working graduates in 2010, as well as being home to a disproportionately large number of alumni from the world’s elite universities.

London creates 21% of the UK’s total Gross value Added (GVA) and made a net contribution of £1.4 billion in 2009-10 – the only positive figure among all other regions of the country. This figure however was well down on the average annual figure over the previous decade of £17 billion, reflecting the impact of the global economic downturn.

With its focus on global financial services, the report concludes that London’s economy was always going to suffer significantly in terms of job losses and has probably experienced a recession on a par with that seen in other parts of the UK. Indeed, despite the ‘high end’ nature of London’s economy capturing much of the publicity, significant pockets of depravation, worklessness and economic under performance exist with four London boroughs in the national top ten of most deprived locations.

Leading the UK recovery

London however is expected to lead the UK recovery with its fortunes closely linked to the flow of world investment which is likely to grow, giving rise to bullish expectations for the capital’s economy in the medium term. This should result in a significant increase in future tax receipts with London’s net contribution to the UK fiscal position forecast to rise substantially by 2015/16.

The risks ahead

The study concludes that there are significant risks ahead to the economic recovery given prevailing uncertainties – the scale and impact of public sector cuts, the state of the Eurozone economies, the sustainability of the global recovery – and growing challenges to London from global cities across the world. London’s pre-eminence in global financial and business services cannot be taken for granted and concerns over issues like higher taxation, increased regulation, infrastructure issues and immigration need to be addressed as well as reputational damage from the financial crisis.

London’s contribution to reducing the overall UK budget deficit back to manageable levels will be crucial although the level of tax and rates levied at businesses in London are a potential competitiveness issue for the capital and have become a significant source of uncertainty for companies looking at a London base.

Published:
30 April 2012
Last Modified:
31 March 2015

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