Report Shows That London Boosted By Dominant Position For Attracting FDI
Inner London will be one of the best performing locations in the UK for both economic growth and job creation next year, according to a new study.
The latest UK Powerhouse report from Irwin Mitchell, produced by the Centre for Economics and Business Research (Cebr), reveals that Inner London will move up 34 places to 6th in the study’s league table for economic growth by Q4 2023, with a 2.3% increase in GVA* and an economic boost worth £11.6bn.
The outlook for job creation is even better with a 2.2% year-on-year growth in 2023. This translates into 157,000 new jobs relative to 2021 and a top five spot in the employment league table.
By contrast, Outer London is predicted to be 23rd in Q4 2023 with a 1.9% year-on-year growth in GVA. In terms of employment it is expected to be in 30th position with 1% year-on-year growth.
While London’s overall performance was at the weaker end of the scale in Q4 2021, and Outer London’s GVA growth of 6.2% outperformed the 5.8% growth seen in Inner London, by Q4 2023 there is a complete reversal of fortunes.
The report says that Inner London’s retail and hospitality sectors suffered during the pandemic due to a reduction in footfall. Despite further turbulence in the financial services sector, the report says this sector will help drive significant growth by the end of next year.
It adds that the concentration of financial services in the South will drive further economic growth in the city as it is the second largest sector for attracting FDI into the UK.
Bryan Bletso, partner and Head of International at Irwin Mitchell, said: “Despite the challenges of 2021, Inner London’s recovery by the end of Q4 2023 is set to be remarkable. While not in the top spot, it is predicted to be extremely consistent in terms of economic output and job creation.
“London’s power in financial services and computer services continues to make it a magnet for FDI. If the government’s levelling up agenda is to work, the North will need to attract a share of overseas investment in these sectors but as things stand; it looks like Inner London’s dominance is set to continue for some time to come.”
Josie Dent, Managing Economist at Cebr and one of the report’s authors, said: “The economy is still expected to face some turbulence between now and the end of next year, notably through volatility in commodity prices, supply chain pressures, and the emerging cost-of-living crisis domestically. All of these factors are set to impact growth both at the aggregate level and, to a varying extent, within individual cities.
“This report highlights that much of the fastest growth during next year will be concentrated in the South. Locations such as Milton Keyes, Cambridge and Oxford have economies which are dominated by high-growth sectors and they have also been hot spots for overseas’ investment. If economic levelling up is to be tackled effectively, these two issues must be recognised and quickly addressed.”
* GVA – Gross Value Added (the total value of goods and services produced)
** Foreign Direct Investment (FDI) refers to cross-border flows where an investor establishes a lasting interest in a subsidiary located in a country that is not the investor’s. Typically, 10.0% or more of the organisation’s voting power should be controlled by the foreign investor for this to represent a lasting interest.