London is outperforming the nationwide economy, indicating the capital is on course to avoid what experts think will be a long recession in the UK, a new survey out today shows.
An index of business output in London compiled by NatWest jumped to 50.2 last month, up from 48.2, meaning the capital’s economy is growing.
At a UK level, activity contracted for the fifth month in a row, with the same index in December dropping below the 50 point threshold that separates growth and contraction.
The figures offer further evidence illustrating the capital’s economy is resisting roaring inflation and higher interest rates better than the rest of the country.
According to the London Chamber of Commerce and Industry, around a quarter of the capital’s firms tried to take on more staff last quarter, the highest proportion since they started tracing the data.
The positive surveys suggest London will lead the UK back to economic strength if it does tip into what the Bank of England has forecast will be the longest recession in a decade.
London squeezes out growth
A string of data out this week will signal whether the country tipped into the technical slump at the tail end of last year.
Data last week showed the UK economy unexpectedly grew 0.1 per cent in November, meaning the country may have narrowly avoided a recession last year.
Sir Howard Davies, a former deputy governor at the Bank of England and now chair of NatWest, told the BBC’s Sunday with Laura Kuenssberg programme yesterday he thinks the country is not currently in a recession.
“The simplest thing to think about the economy is it’s flatlining at present,” Davies said.
However, fears of a coming spending slowdown in response to the cost of living squeeze prompted London firms to sack staff last month for the first time in nearly two years.
“Companies are increasingly enacting hiring freezes and leaving vacant positions unfilled, leading to the first drop in overall employment since February 2021,” Catherine Van Weenen, part of the London and the south east regional board at NatWest, said.
Wales was the only other part of the UK to register a rise in business activity at 52. Northern posted the worst contraction at 41.6.
Consumers and businesses are being crushed by inflation hitting a 40-year high and the Bank of England hiking interest rates nine times in a row to 3.5 per cent to contain.
Governor Andrew Bailey could provide clues on whether he will back another 50 basis point rate increase at the Bank’s next meeting on 2 February during a grilling session with MPs on the treasury committee at 3pm today.