Economy Predicted To Grow By 27% Over The Next Decade

London’s economy is set to grow to £450 billion by 2025 -but its ability to meet its full potential may be hampered by a lack of housing- according to a new report-a joint study by national law firm Irwin Mitchell and leading think-tank, the Centre for Economic & Business Research (Cebr):
 
According to the report’s unique Powerhouse Tracker, a city-by-city measurement of current and projected economic strength, Cebr predict that London’s economy will grow by 27% in real terms between 2015 and 2025 to £450 billion. This comes on top of unprecedented growth in the last 10 years where London has grown nearly twice as fast as regions such as the West Midland and the North of England as a whole.
 
In terms of its current dominance, London and the South East comfortably provide the largest contribution to the UK economy of all regions.  Despite accounting for less than 1% of the UK’s land mass, the Powerhouse Tracker’s estimates that annual GVA in London at the end of Q2 stood at £349b nearly a 5th (17%) greater than the value of goods and services produced in the entire North of England (North West, North East, Yorkshire and Humberside). London combined with the South East accounted for more than a third (37.7%) of the total GVA across the UK.  (Need 2015 figures )
 
London’s dominance is shown by the fact its economy is currently around six times the size of Greater Manchester, whilst Inner London alone is just under 10 times the size of Birmingham. And economic activity per employed person is also considerably higher in London at over £40,000 per person.

Cebr puts this dominance down to: the growth of the service sector in London, the sector "clustering of new industries such as TNT, increased public investment into transport, a highly skilled workforce - for every ten adults living in London 6 have graduate degrees- and less reliance on the public sector for employment. London has become the mecca for young people with 1 in 3  of the 22-30 year olds who  moved cities in 2014, moving to the capital.
 
Given that the study expects that London’s economy will continue to grow - to around £450 billion and create an additional 537,020 jobs in the next decade,  it is not surprising that businesses in London are reasonably content with the current economic situation and Government policy. In terms of spending on infrastructure for example the £14.5 billion of capital expenditure planned for London's Crossrail scheme far outweighs the £1.1 billion so far outlined for the North of England rail programme 
 
As part of the UK Powerhouse study, Irwin Mitchell commissioned a YouGov survey of 1,000 businesses to examine the policy measures which the business community themselves think are the best way of boosting regional economic growth.
 
In terms of the London businesses canvassed 45% believe the Government has taken the necessary steps to boost economic growth in their region compared with 31% of businesses nationally.
 
Almost half (48%) felt that greater devolution of powers would boost economic growth in London, but when asked which one policy they would like to see, one fifth (22%) of the businesses in the Capital thought that more house building was the key priority for boosting the city’s growth.
 
London was the only region in which this is the case suggesting that the capital’s rocketing house prices are obviously having a tangible and significant impact on the business community here.
 
Businesses also supported the ability to determine business rates and being able to make decisions locally. When asked if improving transport and infrastructure was important -59% of businesses agreed- although of although among all the regions in the UK, London was alone in wanting investment in local rail services rather than for roads.  Education / skills policy and the ability to set a local minimum / living wage were also frequently cited in the report, with 28% of London businesses wanting the freedom to set a living wage.
 
Andrew Watson, Head of Irwin Mitchell’s Business Legal Services Division in London said:
 
“The Government has said a great deal about re-balancing the economy and although it is of course vital that other parts of the UK flourish, the needs of London, the UK’s only global powerhouse, must not be forgotten.
London is clearly on a roll but we cannot rest on our laurels, and addressing the housing shortage is clearly a priority, particularly if the inflow of people to the capital continues at the rates forecast.”
 
Given its importance to London, Cebr has suggested a series of measures to be introduced to reduce or stabilise the cost of housing. These include:
 
- Rethinking the concept of greenbelt land around urban powerhouses – allowing urban powerhouses to expand on land which is underutilised and often not particularly beautiful.
- Considering densification of urban areas.
- Taking measures to tackle empty homes – such as further increases in Council Tax charged on empty properties.
- Easing of planning restrictions.
- A greater supply of local authority housing.

Watson continued, " We have to get this right. All the economic indicators look set for London to continue booming but businesses are right to flag up their concerns about housing their workforces and enabling them to get to work easily."

For further information about the report, click here.