London’s slowdown is the basis reason behind the UK’s weak productiveness, in line with analysis printed on Thursday displaying that the capital has lagged the remainder of the nation and related international cities over the previous 15 years.
In a report, the Centre for Cities think-tank stated the worth of output per hour labored in London since 2007 had trailed that of Paris, New York and Brussels, and argued extra devolution by central authorities would assist ease post-Brexit and post-coronavirus challenges which have hit output.
London’s weight within the nationwide economic system meant UK gross home product would have been £54bn larger in 2019 if its productiveness had grown in keeping with that of Paris, New York, Brussels and Stockholm for the reason that 2008-09 monetary disaster, the think-tank stated. Tax receipts, it added, would have been £17bn larger.
As a substitute, evaluation of official information discovered that the capital’s annual progress in productiveness — outlined as the worth of output per hour labored — had averaged simply 0.2 per cent since 2007, barely under the already feeble nationwide common of 0.3 per cent.
Over the identical interval, productiveness progress averaged 0.9 per cent in Paris — nearly twice the common for France — and 1.4 per cent in New York, towards a mean of 1 per cent for the US.
Such underperformance issues as a result of productiveness stays far larger in London, with its economic system based mostly on “famous person” corporations within the skilled companies, IT and banking sectors, than in different areas. Employment has additionally grown sooner within the capital, which means it more and more determines nationwide tendencies.
Prime minister Rishi Sunak’s authorities and the Labour get together underneath Sir Keir Starmer each see boosting productiveness as essential to reviving the fortunes of the economic system. Over the long run, larger productiveness is important if wages are to rise, and residing requirements enhance, with out this feeding larger inflation.
The report stated the principle purpose for London’s slowdown was the stuttering efficiency of the most efficient companies on the coronary heart of the capital, whereas productiveness in rising areas on its fringes grew quickest.
Noting that this sharp slowdown predated Brexit, the Centre for Cities stated it couldn’t be defined by macroeconomic tendencies — such because the lengthy interval of ultra-loose financial coverage — as a result of it had not occurred in different international monetary centres.
As a substitute, it urged the rise might be the results of growing business property prices, which had crowded out extra productive intangible funding. It added that prime housing prices and a weaker pound made London much less engaging to extremely expert abroad professionals.
Paul Swinney, Centre for Cities coverage director, stated London’s promoting level was that “it affords advantages above the prices”, in order that “if its advantages are eroded and its prices are growing, then it’s much less engaging”.
He added that, if it continued, subpar productiveness risked compounding the challenges of Brexit and homeworking, which might trigger additional decline.
The think-tank stated planning reforms may decrease the prices of housing and workplace house, whereas new fiscal powers may allow the mayor to levy a payroll tax or introduce a metropolis gross sales or vacationer tax.
It added that different ministerial priorities ought to be to spur high-skilled migration and pursue higher preparations with the EU for commerce in monetary companies, on which London’s fortunes nonetheless hinged.
HM Treasury stated the chancellor had set out a plan to spice up productiveness, and the federal government had additionally set out “bold” monetary companies reforms, whereas additionally reviewing EU-derived guidelines in different vital progress sectors.