London to lead UK growth for years to come

Tim Wallace
Follow Tim
THE CAPITAL will keep on booming over the next five years, economists predicted today, leading the UK’s spreading recovery.

The positive forecast came amid a raft of strong data, with a survey from the Confederation of British Industry (CBI) which showed services firms are more upbeat than at any time since 1998.

Households are now £3 per week better off than they were last year as wages grow faster than prices, Asda’s income tracker shows.

And the recovery means interest rates will in time start to edge up slowly, said the Bank of England’s deputy governor Charlie Bean, potentially rising to three per cent in three years’ time.

London’s economy will grow by 4.2 per cent this year and 15.4 per cent over the next five years, faster than any other region, the Centre for Economics and Business Research (CEBR) predicted today.

As a result one-third of Britain’s economic growth from now to 2019 will come from London.

Business services, technology and construction will drive this, and will lead to a huge increase in hiring – in finance and business services alone, employment will jump by 100,000 over five years in central London.

Such a surge compares with solid GDP growth of 10.7 per cent for the UK as a whole.

“Growth has returned to the financial services sector faster than expected in the capital and the strong bout of construction in the region will help fuel London’s economy in 2014,” said CEBR economist Christopher Evans.

Meanwhile the CBI’s survey shows most services firms reporting rising business volumes in the three months to May, with almost half of consumer services firms taking on staff in the period.

Of consumer services firms, 47 per cent hired staff in the three-month period, while just 12 per cent cut jobs.

In business services, 30 per cent of firms took on workers while eight per cent reduced their headcount.

“With a full year of growth under their belts, service sector firms are more upbeat than they have been for a long time,” said the CBI’s Katja Hall.

“But a rising number of firms, particularly in business and professional services are having problems finding the right staff. This survey identifies a skills gap as a growing constraint on business expansion in the sector over the year ahead.”