London’s economy set to grow but lose momentum in 2016
The rate of economic growth within London is expected to grow by £8billion in the next 12 months even though the annual rate of expansion within the capital will slow during 2016 compared to 2015 – according to a new report.
Law firm Irwin Mitchell’s latest UK Powerhouse report, which has been produced with the Centre for Economic and Business Research (Cebr), provides an estimate of GVA¹ and job creation within 40 UK cities 12 months ahead of the Government’s official figures.
Highlighting a general slowdown in the economy, the study reveals that although London’s economy grew by 3.1% in the 12 months to September 2015, the rate of growth is expected to fall to 2.7% in 2016.
Fuelled mainly by a growth in demand within the business services and ICT sectors, the total value of the goods and services produced in London is expected to increase to £370.9 billion over the next 12 months.
Although all cities in the study increased their GVA, the report reveals that Cambridge and Milton Keynes were the fastest growing in the third quarter of 2015 with a 3% and 3.4% respective year-on-year rise in output. These two cities are expected to continue outperforming the rest of the UK over the coming 12 months – although at a slower rate compared to 2015.
Northern cities such as Middlesbrough, Hull, Bradford and Sunderland remain in the bottom 10 in terms of projected GVA growth in 2016.
Looking further ahead, the report’s projections for the next 10 years still show that London will continue to grow at a much faster rate than other parts of the UK.
Irwin Mitchell’s report forecasts that by the third quarter of 2025, London’s economy will have grown by 26.9% since 2015. Over the next 10 years Greater Manchester’s GVA is predicted to grow by 18.3% with other large cities in the North expect to record similar increases in GVA with Leeds and Liverpool growing by just under 18%, Sheffield 15% and Newcastle recording a 17% increase.
The value of the economic gap between London and the northern region currently stands at £62bn and is expected to reach £115.3bn in 2025 according to the study’s latest analysis².
Edward Persse, partner at the London office of law firm Irwin Mitchell said: “According to our report, London’s economy performed strongly with year-on-year growth to the end of Q3, 2015 exceeding 3%. Although GVA is expected to increase at a slower rate in 2016, the value of our goods and services is still forecast to increase by £8billion. The strength and resilience of London’s economy is clear.”
Irwin Mitchell produced its first UK Powerhouse report in October 2015. It predicted a widening economic gap between the South East and the North of England and made nine policy recommendations along with a call for the Government to radically rethink how it looks to rebalance the UK’s economy.
The report’s Powerhouse Tracker provides a ‘nowcast’ of GVA and employment for key cities across the UK. Cebr has utilised a range of timely indicators to create a detailed estimate of how the regional economies of the UK are performing up to 12 months ahead of the Office for National Statistics.
For further information and to download the latest version of the report, visit www.irwinmitchell.com/ukpowerhouse
¹ (GVA) Gross values added is a measure of the value of goods and services produced in an area
² 2012 prices