Economic Resilience To Covid-19 In The Commuter Belt But No Capital Gains
A new economic study has forecast a rapid economic recovery from Coronavirus for London’s commuter belt in 2021, while the capital is expected to struggle adjusting to a ‘new normal.’
The latest UK Powerhouse report by law firm Irwin Mitchell and the Centre for Economics and Business Research (Cebr), reveals that towns like Reading will see strong growth in economic output and employment in 2021, while inner and outer London lag behind in both metrics.
By the end of next year, London, together with other major cities in the UK such as Leeds, Manchester and Edinburgh will be among the five slowest growing economies in terms of output.
In contrast, southern locations such as Reading and Oxford are projected to see year-on-year employment growth of over 6% at the point when the government’s furlough scheme comes to an end.
Reading is expected to record the smallest economic contraction of any UK city, at -6.8% by the end of the third quarter this year. Thanks to this comparatively mild economic downturn, a mild recovery is also projected, with a 4.9% annual GVA* growth forecast by the end of 2021.
According to the report, the secret of Reading’s success lies in its flourishing information and communications sector with both Microsoft and Oracle having multi-building campuses in the city.
With coronavirus accelerating the growth of working from home solutions, Reading is said to be well placed to adapt to this changing environment, with a workforce capable of conducting business online.
While making the city resilient to the economic shock that has hit others, the trend has made the economy more reliant on the IT sector, but this is unlikely to impact growth over the coming year.
Reading is expected to see the strongest employment growth coming out of the coronavirus crisis, with 6.6% and 10.0% annual growth in quarters two and four of 2021 respectively. Outer London by contrast, is expected to be propping up the employment table at this time, on -8.9%.
Other cities in the south are also expected to exit the second lockdown successfully, with nearby Oxford places third in terms of year on year employment in 2021.
With a Covid-19 vaccine now imminent, Oxford, with its large scientific research and development sector has seen considerable funding and investment during the pandemic. This has sustained local jobs and will likely see the creation of more once a vaccine is ready for distribution.
Expert Opinion“While the south recovers better overall from the coronavirus crisis, it is clear from this report there will be something of a hangover for larger cities, and London is no exception to this.
“With strong pharma, IT and tech sectors, the London commuter belt has been able to weather the storm better than most and this is shown in their resilience and the robust recovery they are expected to enjoy over the coming year.
“Cities with modern businesses and flexible workforces to match still tend to be located in the south and are expected to come out best accordingly. It is telling that of the top five cities to have used the furlough scheme, only one is in the south.
“Big cities aside, the south continues to prosper ahead of the north and it will be interesting how far the chancellor may go to address this as part of the government’s ‘levelling up’ agenda.” Victoria Brackett - CEO of Business Legal Services & Partner