The capital’s economy shrinks by 7.4% following lockdown but data for an earlier pre-pandemic period shows strong growth with a big uplift in production

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A nowcast for London for the 12 months ended June 2020 on a rolling 4 quarter basis, published by the Economic Statistic Centre of Excellence (‘ESCoE’), has estimated that the capital’s economy contracted by 7.4%.

This ranked the city last in the UK and suggests the capital’s economy has so far coped ‘poorer’ with the pandemic relative to the other eleven UK ‘regions’. Over the same period the East Midlands was ‘best’ with a fall of 4.5%, with London’s contraction the ‘worst’; the UK decline according to the Office for National Statistics (‘ONS’) figures was 5.3%.

ESCoE is a partnership of research institutions and the ONS and has highlighted that during these unprecedented times, there is no historical data that their model can use to fully understand how the pandemic will impact regional economies. Consequently the partnership emphasises the uncertainties that exist with their nowcast at this time.

ONS GDP to December 2019

Official ONS figures for an earlier period which reflects Brexit uncertainty rather than Covid 19 turmoil, show the capital’s performance relative to other parts of the UK. Following its first publication of quarterly GDP estimates for the regions in September 2019, the ONS has now published its fifth estimate for London, the other eight English regions, and Wales.  GDP figures have been available for the UK since the 1940s, for Scotland since 2002 and Northern Ireland since 2013.

These stats are for the period six months before ESCoE’s estimates shown above and compare GDP in the quarter ended December 2019 with the same quarter a year earlier. These showed that London’s growth was 5%, the same as the previous quarter. This placed the capital first (previous ranking also first) out of the twelve UK ‘regions’.

London topped the table whilst UK growth over the same period was 0.9%. The West Midlands was again the worst performer and contracted by 2.7%. The North East, Wales, East Midlands and the North West were the other ‘regions’ in the UK to suffer a decline.

In the same report, the ONS’s figures highlighted that the standalone quarter to December 2019 showed a worsening picture in London with the data poorer than the previous quarter. The capital’s economy grew by 0.5% in October to December 2019, following +1.5% in July to September 2019.

This placed London second (previous ranking first) out of the twelve UK ‘regions. London was one of five regions of the UK that saw their economies grow but overall UK growth was flat.

The SW was top with quarterly growth of 0.8% whilst the North East was bottom, posting a drop of 1.3%.

In this period, London’s best sector was water supply with growth of 14.7% but mining fell by 6.4%. Overall production was +3.2%, construction -0.2%, services 0.4% and agriculture -5.3%.

Labour

Data from the ONS showed the Job Retention Scheme continued to depress unemployment across the UK. Unemployment in the city was 4,000 lower at 235,000 between April and June; the drop of 0.1% took the rate to 4.6%. At 5.2% the North East was the highest; Northern Ireland had the lowest rate of 2.5%, with the UK rate at 3.9%.

The South East had the highest employment rate at 79.7%, this compared with 71.7% in Northern Ireland and 76.5% in London where 4.8m are employed; the UK rate was 76.4%.

Housing

The capital’s average property price fell by 1.6% in April 2020 to £480,425. The drop took the annual increase to 2.3%. In comparison, UK prices dropped by 0.2% to £234,612 during April, an annual growth rate of 2.6%.

The ONS data is based on completed housing transactions. Typically, a house purchase can take 6 to 8 weeks to reach completion so the price data in the April figures will therefore reflect those completions that occurred before lockdown.

This is the first publication of the UK HPI since it was suspended in May 2020. The UK Property Transactions Statistics for April 2020 showed that that between March 2020 and April 2020, transactions decreased by 55.5%.

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