London, City & Regional Prospects · Research (Cebr) as part of our macroeconomic trends, analysis and forecasting advisory membership service, The Prospects Service. This report

The Prospects Service

© Centre for Economics and Business Research ltd

London, City & Regional ProspectsThe Prospects Service

October 2014

The Prospects Service © Centre for Economics and Business Research, 2014

Contents

Executive summary 3

UK overview 4

London & City prospects 5

Central London Employment 8

Regional overview 9

Regional prospects 13

Appendix 25

Contact 26

October 2014London, City & Regional Prospects

This report is produced by Centre for Economics and Business Research (Cebr) as part of our macroeconomic trends, analysis and forecasting advisory membership service, The ProspectsService.

This report and all associated material shall remain the property of Cebr and are only made available to bone fide employees of organisations with a current and fully paid-up membership of The Prospects Service. Such materials may not be disclosed or transmitted to individuals or organisations outside the member organisation without prior written permission from a director of Cebr.

Cebr is not licensed in the conduct of investment business as defined in the Financial Services and Markets Act 2000. Any client considering a specific investment should consult their own broker or other investment adviser. Any views on investments expressed by Cebr, or on behalf of Cebr, are intended to be generic only. Cebr accepts no liability for any specific investment decision which must be at the investor’s own risk.

Whilst every effort has been made to ensure the accuracy of the material in this report, neither the authors nor Cebr will be liable for any loss or damages incurred through the use of this report or associated materials.

2


Executive Summary• Economic growth in London is projected

to remain strong in the second half of this year. Despite lowered confidence in the construction sector and anticipated house price falls in 2015, London growth is still set to outpace the rest of the UK.

• Business services and new creative technology firms are expected to be the driving force of employment and economic growth across the UK in the coming years.

• London, the South East, and East of England are expected to fare better than other regions in the face of austerity measures going forward, as much of the country’s business services and technology firms are concentrated in these regions.

• Expected public sector spending cuts over the next parliament will limit growth prospects for regions in the North of England.

Robust economic growth has continued in the UK throughout 2014 to date. The preliminary estimate of third quarter Gross Domestic Product from the Office for National Statistics shows GDP expanded by 3% year-on-year, compared to a 1.7% increase in the year between Q3 2012 and Q3 2013. However, as expected this was a slower rate of growth than in Q2 of this year. In 2015 and beyond, slower growth is expected, constrained to some extent by government spending cutbacks in the next parliament. Further limiting factors in the short term are global economic uncertainty and weakness in the country’s main trade partner, the Eurozone.

The continued recovery is expected to be felt unequally around the UK. Regions with a robust private sector are expected to lead growth over the coming years, while those with a relatively larger public sector are expected to be held back by government job shedding.

The South of England, including London and the South East, is expected to be at the driving end of the growth spectrum. The North of England, as well as the devolved nations, are expected to be held back by low levels of household discretionary income and job cuts in the public sector.

Traditional business services, such as accountancy and law, combined with business services focused around new creative technologies, such as ICT and media , are expected to help London to boost UK growth over the coming years.

Financial services, having faced years of decline, grew modestly over 2014. The sector is expected to contribute positively to economic growth for London and the UK as a whole over the years to 2020, our forecast period, although risks remain. Primary risks to London as a global financial centre are regulatory creep and uncertainty over the UK’s membership in the EU.


3


UK growth expected to slow alongside deteriorating global conditions and lower consumer confidence• The UK economic growth forecast for 2014

has been revised down slightly from 3.0%in April, to 2.9% in October.

• As expected, preliminary GDP data for Q32014 showed quarter-on-quarter growthslowing to 0.7% from 0.9% in Q2.

• Cebr also expects the UK economy to growmore slowly than previously thought in2015.

• In addition to the previously anticipatedgovernment spending cuts weighing ongrowth, Eurozone weakness and weakglobal economic conditions will furtherhinder economic prospects.

• Leading indicators, such as theYouGov/Cebr Consumer Confidence Index,suggest that consumer confidence hasslumped amidst negative expectations inregards to job security and businessactivity.


-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Source: Office for National Statistics, Cebr analysis

Real UK gross domestic product, annual % change

Forecast

4


City trading conditions improve in Q3, but regulatory creep remains a threat

• Following a pickup at the start of the year,trades conducted on the London StockExchange (LSE) witnessed a decline in thesecond quarter of 2014.

• In Q3 2014 trading values again saw someimprovement, with a particularly high threemonth average year-on-year increase inSeptember. However, the volume of tradedeclined in the same period, suggesting thatfewer trades of higher value are taking place.

• Confidence among firms in the banking,finance and insurance sectors has declinedfor every quarter of the year, as shown bythe ICAEW/Grant Thorton UK BusinessConfidence Monitor.

• Growth prospects for the finance andbanking sector are likely to be limited in thecoming years as the LSE prepares for theintroduction of various EU regulations, suchas those limiting the amount of anonymouslytraded shares, which were adopted in April2014.


-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Sep

-08

Mar

-09

Sep

-09

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Source: London Stock Exchange

London Stock Exchange main market and alternative investment market – 3 month year-on-year change in trading, values

5


Domestic M&A market to remain subdued

• M&A activity remaines subdued in Q22014, compared to both recent andhistoric levels.

• The total value of domestic mergers andacquisitions in the UK in the first half of2014 was below that of a year before, withthe Q2 2014 value 21.1% lower than in Q22013.

• M&A activity is still far from its pre-financial crisis levels. The averagequarterly value of M&A deals over 2000-2008 was £8.4 billion, versus just £3 billionover 2009-2013.

• With business confidence cooling andfirms planning to limit investment in thecoming year, M&A activity is likely toremain subdued in the short and mediumterm.


£0

£5

£10

£15

£20

£25

Q4

20

00

Q2

20

02

Q4

20

03

Q2

20

05

Q4

20

06

Q2

20

08

Q4

20

09

Q2

20

11

Q4

20

12

Q2

20

14

Bill

ion

s

Source: Office for National Statistics

Value of UK domestic mergers and acquisitions, 4 quarter moving average value

6


London and other top financial centres perform poorly overall • According to the latest results of Z/Yen’s

Global Financial Centres Index, the topfinancial centres have performed relativelypoorly with San Francisco being the only ofthe top 10 centres to increase its rating inthe six months to September 2014.

• London, along with all other top WesternEuropean centres, saw a decline in ratingson the Index, while leading centres inEastern Europe and Central Asia sawratings increase.

• The Index score for Washington DCincreased by 2.2% between March 2013and March 2014, placing it amongst thetop 10 financial centres. Geneva’s scorehas declined since the last Indexpublication, moving the financial centredown to 13th place in the global ranking.

• London’s rating suffered due touncertainty over national and EU-levelregulatory policy outcomes, worries overthe UK’s membership in the EU, and theperception that the city is becoming lesswelcoming to foreigners.


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

600620640660680700720740760780800820840

New

yo

rk

Lon

do

n

Ho

ng

Ko

ng

Sin

gap

ore

San

Fra

nci

sco

Toky

o

Zuri

ch

Seo

ul

Bo

sto

n

Was

hin

gto

n D

C

Sep-13* Sep-14* Annual changeSource: Z/Yen

Global Financial Centres Index score (LHS) and annual percentage change in score (RHS), top 10 centres

* Index published dates

7


Business services sector and creative technology firms persist as drivers of employment in Central London • The finance and business services sector is

expected to make a strong contribution toCentral London employment growth overthe coming years.

• The financial sector is expected to add anincreased number of jobs over 2015,while business services are likley tocontinue their robust performance.

• Average annual employment growth of 2%is expected for the sector between 2014and 2020, up from the 1.7% averageannual growth forecast in April.

• Meanwhile, the creative technology sector(such as web and software design) dubbedby Cebr as the ‘flat white economy’ (inreference to the coffee shop culture of thesector) is expected to show strong growthover the same period.

• Employment in the sector is projected torise by 15.1% between 2014 and 2020, anannual average of 2.4% growth.


80

100

120

140

160

180

200

220

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

Flat white economy * Finance and business services *

Source: ONS, Cebr analysis

Central London* employment, by industry, Indexed such that 2004 = 100

* Definitions included in Appendix

Forecast

8


Falling cost of essential items helps boost spending power

• Discretionary household income, asmeasured by the Asda Income Tracker, isincome left over after taxes and essentialitems have been purchased.

• The Q3 2013 to Q3 2014 growth in weeklydiscretionary household income washighest in the East Midlands, where thefigure increased by 5.6%. This boost islargely explained by strong wage growth inthe region’s manufacturing sector.

• Compared to the 3.3% average annualgrowth across the UK , the lowest growthof 1.9% was recorded in the East ofEngland. Due to the falling cost of essentialitems e.g. fuel and food, families in theregion still saw their spending powerincrease by £4 per week.

• Discretionary income around the UK looksset to continue rising as wage growth isexpected to pick up in 2015 andcompetition in the retail sector minimizesprice pressures.


0%

1%

2%

3%

4%

5%

6%

£0

£50

£100

£150

£200

£250

N. I

rela

nd

No

rth

Eas

t

Wes

t M

idla

nd

s

Wal

es

York

s &

Hu

mb

No

rth

Wes

t

Sou

th W

est

East

Mid

lan

ds

Sco

tlan

d

Sou

th E

ast

East

Lon

do

n

Source: Asda Income Tracker

Average weekly discretionary household income by region (LHS) Q3 2014 and annual % change (RHS)

9


South East and other areas with large private sectors to see stronger growth

• In the period following the May 2015election, deep spending cuts are likely tobe implemented as a means of bringingthe public sector fiscal deficit undercontrol. For those areas of the UK with arelatively larger public sector economythis will be a significant constraint ongrowth.

• London, the South East, and the East ofEngland will continue to play substantialroles in driving the UK economy as manyof the industries that are expected toperform well, e.g. business services, areheavily concentrated in these regions.

• The devolved nations of Northern Irelandand Wales will be among the regionsmost constrained by governmentspending cuts, considering theircomparatively high dependence on publicspending.


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Lon

do

n

Sou

th E

ast

East

Engl

and

Sou

th W

est

East

Mid

lan

ds

Sco

tlan

d

Wes

t M

idla

nd

s

York

s &

Hu

mb

No

rth

We

st

Wal

es

No

rth

ern

Irel

and


Real % change gross value added by regional economy,2014-2020

10


UK business confidence cools, but remains relatively strong


0

5

10

15

20

25

30

35

40

45

Wes

t M

idla

nd

s

No

rth

Wes

t

Sou

th E

ast

Lon

do

n

Engl

and

Wal

es

No

rth

ern

En

glan

d

East

Mid

lan

ds

East

of

Engl

and

York

s &

Hu

mb

er

Sco

tlan

d

Sou

th W

est

Q4 2013 Q4 2014

Business confidence by region as measured by the ICAEW/ Grant Thorton Business Confidence Monitor

• The ICAEW/Grant Thorton BusinessConfidence Index assesses businessconfidence over the next 12 monthscompared to the previous 12 months witha positive score relating to improvementsin confidence.

• UK business confidence has declined in Q42014 and currently stands at +28.6. Thiscompares to +32.3 in Q3 and a record highof +37.3 in Q2. Despite the consecutivedeclines in the last two quarters,confidence remains higher than over mostof the past ten years.

• The Index is showing signs that goingforward growth may be limited. Ofparticular concern are slowing exportincreases and businesses’ plans to limitinvestment in the coming year.

• With confidence falling back across mostof the country, Northern England has seenespecially persistent falls in confidence,likely due to weaknesses in the region’slabour market.

Source: ICAEW/Grant Thorton Business Confidence Monitor, Cebr analysis


Confidence among small businesses evens out across UK regions


Federation of Small Businesses’ Voice of Small Business Index. Business prospects over coming three months

• The Federation of Small Businesses’ Voice ofSmall Business Index measures smallbusiness prospects for the next three monthscompared to the previous three months.

• Small business confidence increasedeverywhere in the UK over the past yearexcept in London. Also, while some regionaldisparities remain, levels of confidenceacross different parts of the country aresomewhat evening out.

• The most substantial boost in confidencewas recorded for the North East, a likelyresult of a strengthening local labour market.Total employment increased by 4.4% year onyear during April to June 2014, compared toa UK-wide increase of 2.8%. However, evenwith this boost the region is expected to seethe highest unemployment in the countryover 2014.

• Small business confidence has held up betterthan overall business confidence in the UK,perhaps because smaller firms are moredependent on domestic demand thanexports (which are struggling to grow). Source: Federation of Small Businesses, Cebr analysis

-10

0

10

20

30

40

50

60

Sou

th E

ast

Sou

th W

est

E. M

idla

nd

s

No

rth

Eas

t

W. M

idla

nd

s

Lon

do

n

Engl

and

East

ern

York

shir

e

No

rth

Wes

t

N. I

rela

nd

Sco

tlan

d

Wal

es

Q3 2013 Q3 2014


London set to lead the UK as robust growth in business and technology sectors continues

• Business services and technology firms,comprising roughly one fifth of the Londoneconomy, are set to be a driving force forgrowth in the next six years. Both sectors areless confident now than at the start of theyear, but still more confident than for muchof the past decade according to the ICAEW/Grant Thornton Business ConfidenceMonitor.

• As such, London is expected to see real GVAgrowth of 4.1% in 2014 and 3.5% in 2015.

• This is a very slight downward revision fromthe 4.2% 2014 forecast in April. Theconstruction sector, which was expected tocontribute substantially to growth fuelled bylarge increases in house prices, has sinceseen a dip in confidence. London houseprices are now expected to decrease in 2015before returning to growth the year after.

• Still, London’s growth performance isexpected to outpace the rest of the UK overthe years to 2020.

Real gross value added, annual % change and average employment level, annual % change

London


-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

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11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

13


South East economic growth bolstered by an abundance of ICT firms and second fastest house price growth in the country

• After London, the economy of the SouthEast has the greatest dependency on boththe business services and technologysectors. We expect strong growth inthese areas will help the South East’seconomy to grow faster than the UKaverage across our forecast period.

• In addition, as the real estate sector makesup one tenth of the region’s totaleconomic output the South East willbenefit from relatively strong growth inhouse prices. In the 2014 to 2020 periodhouse prices are expected to increase by22.5%, second only to house price growthin London.

• As a result, economic output in the SouthEast is expected to grow by 3.6% in 2014and by 2.6% in 2015 – behind outputgrowth in London but remaining ahead ofevery other UK region.


South East


-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

20

00

20

01

20

02

20

03

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04

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05

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11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

14


East of England’s strong private sector to insulate it from future spending cuts

• The East of England has the lowest regionalshare of workers employed by the public sectorin the UK, at just 15.2% in the first half of 2014,down from 16% in 2013. This compares to a UK-wide average of 17.7% for Q1 and Q2 2014.

• As a result, the effects of government cutbacksneeded in the next parliament will have lessimpact than on many other regions around theUK.

• The unemployment rate in the region isexpected to remain well below the UK average,falling from 5.9% in 2013 to an estimated 4.6%for 2014 as a whole, and down to just 2.5% by2020.

• Despite these encouraging indicators, businessconfidence is lower in Q4 2014 than it was ayear prior according to the ICAEW/GrantThornton Business Confidence Monitor.Currently at 23.9, compared to a country-wideaverage of 28.6, confidence has suffered as aresult of increased challenges from marketplacecompetition and customer demand.


East of England


-6%

-4%

-2%

0%

2%

4%

6%

20

00

20

01

20

02

20

03

20

04

20

05

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11

20

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20

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20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

15


High confidence among small businesses helps stimulate economic growth in the South West

• By 2020, we expect the unemployment rate in theSouth West to have dropped to 3.5%, a ratepreviously seen only in the pre-financial crisis period.The unemployment rate for the South West isexpected to be 4.9% in 2014, lower than the 6.2%estimated UK average.

• Economic growth is expected to rise to 2.6% in 2014from 1.7% in 2013. Economic growth prospects for2015 are dampened slightly by the fact that theregion has a higher dependency on the public sectorthan elsewhere in the south of England. However,relatively low working-age population growth meansthis will not raise the unemployment rate.

• Additionally, the significant proportion of smallerbusinesses within the South West will stimulategrowth. According to the latest Federation of SmallBusinesses’ Voice of Small Business Index, firms inthe South West are among the most confident in thecountry. This is in contrast to overall businessconfidence which based on the ICAEW/GrantThornton Business Confidence Monitor has seen thelargest year-on-year decrease out of any region inQ4 2014.


South West


-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

16


East Midlands’ exports suffer due to weakness in the Eurozone

• From the first half of 2012 to the first halfof 2013, the East Midlands saw one of thestrongest goods exports performances ofanywhere in the UK, with an increase of7.1% compared to a 1.1% UK average inthe same period.

• However, as the EU makes up roughly halfof the region’s exports, Eurozoneweakness has had a substantial impact onexport performance in the East Midlandssince then. Year-on-year exports for thefirst half of 2014 have shrunk by 8.4%.

• As the region’s primary export market isexpected to continue generating lessdemand in the coming years, growthprospects for the East Midlands arelimited. Additionally, in the 2014-2020period house price growth in the area isexpected to be the lowest in England.

• As a result, GVA growth is expected tostand at 2.5% in 2014, falling to 2.0% in2015, and to 1.8% by 2020.


East Midlands


-6%

-4%

-2%

0%

2%

4%

6%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

17


High unemployment persists in the West Midlands, limiting regional growth outlook

• Difficult labour market conditions are currentlyprevailing in the West Midlands. Theunemployment rate for 2014 as a whole isestimated at 7.7%, the second highest in theUK.

• This rate is projected to fall to 6.0% over thenext six years, but this is still higher than the4.7% UK average expected in 2020. With almostone in five workers in the region employed bythe state, further public sector job cuts will holdback employment growth.

• With unemployment at these high levels,consumer spending growth is expected to beconstrained in the short-to-medium term,especially in light of the 1% growth cap on mostworking-age benefits. These factors feed intoweaker total GVA growth.

• GVA growth is expected to stand at 2.7% for2014 but drop off sharply to 1.4% by 2016partly due to the reduction in governmentspending planned for the next parliament. Afterthis time GVA growth will be broadly unchangedto 2020.


West Midlands


-6%

-4%

-2%

0%

2%

4%

6%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

18


Small business confidence soars despite high unemployment and weak local consumer economy

• From Q3 2013 to Q3 2014 the North East hasgone from having the least optimistic smallbusinesses in the country to some of themost optimistic. This reflects strengtheningof the local labour market, which grew morethan most regions’ in Q2 2014.

• Small business confidence has risen despitehigh regional unemployment, which at 9.5%for 2014 as a whole is the worst in thecountry.

• Another sign of weakness in the localconsumer economy is house price growth. Inthe 2014-2020 period house prices areexpected to rise by 10.2%, compared to a14.5% average across the UK.

• These weaknesses feed into Cebr’sexpectation that the North East will be oneof the slower growing English regions in theforecast period. Economic growth isexpected to fall back from 1.9% for 2014 to1.5% by 2020.


North East


-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

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07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

19


Business services and technology sectors ensure strong growth for the North West in the short term

• With almost one in ten workers in theNorth West employed in the businessservices or ICT sectors – more than ineither the North East or Yorkshire and theHumber – short term growth prospects forthe region are relatively good.

• The local economy is expected to expandin real terms by 2.2% in 2014, up from1.7% in 2013.

• However, the outlook is weaker for 2015and beyond, when Cebr expects publicsector cutbacks to start to take place inearnest.

• Roughly one in five workers in the regionare employed by the state and as suchemployment growth is expected to be heldback by further government job lossesfrom 2015. Hence, the region is expectedto see the lowest GVA growth in Englandin the 2014-2020 period.


North West


-6%

-4%

-2%

0%

2%

4%

6%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

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07

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08

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09

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11

20

12

20

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20

14

20

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20

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20

17

20

18

20

19

20

20

GVA Employment


Forecast

20


Businesses in Yorkshire and the Humber lose confidence as high unemployment rate persists

• Over the past year Yorkshire and Humbersidehas witnessed the second most severe drop inbusiness confidence out of all UK regions,according to the ICAEW/Grant ThorntonBusiness Confidence Monitor.

• On the other hand, according to the Federationof Small Businesses’ latest Voice of SmallBusiness Index, the smaller firms in the regionhave noted substantial confidence gains in theyear between Q3 2013 and Q3 2014.

• Despite this recent wave of optimism amongsmall firms, the unemployment rate for 2014 isexpected to be the third highest in the countryat 7.3%. The unfavourable unemployment rateis likely to persist due to weak private sectoremployment growth combined with publicsector job cuts.

• The regional economy is estimated to expandby 2.0% in 2014 and 1.9% in 2015. GVA growthis expected to be largely stable, butcontinuously below the UK average for theforecast period.


Yorkshire and the Humber


-6%

-4%

-2%

0%

2%

4%

6%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

21


Scotland benefits from reduced uncertainty after the referendum and a strong business services industry

• According to the ICAEW/Grant Thornton BusinessConfidence Monitor, Scotland was one of the only partsof the UK where business confidence increased fromQ3 to Q4 2014. The boost probably came from reduceduncertainty in the aftermath of the referendum. Evenwith this increase, business confidence is still lowercompared to a year ago.

• Although the referendum on independence is nolonger a source of uncertainty, additional tax-settingpowers being devolved in 2015 and 2016, still makeScotland’s economic growth less certain than the otherregions of the UK.

• Economic growth in the region measured by GVA isexpected to fall from the 2.5% estimated for 2014 to2.2% in 2015.

• Output from North Sea oil rigs is expected to decline inthe coming years, this will negatively impact economicgrowth prospects.

• However, Cebr expects that the business servicesindustry, which employs roughly one in five workers,will help pick up the slack created by this decline andbolster growth in the face of public sector austeritymeasures.


Scotland


-6%

-4%

-2%

0%

2%

4%

6%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA EmploymentSource: ONS, Cebr analysis

Forecast

22


Welsh businesses feeling confident despite expected impact of austerity measures

• Business confidence among Welshbusinesses as measured by theICAEW/Grant Thornton BusinessConfidence Index was above the UKaverage for the last two quarters of2014.

• This confidence is echoed in a pickup inGVA growth from 1.2% in 2013 to anestimated 2.1% for 2014. However,public spending cuts are expected todepress economic growth from 2015onwards.

• Measures of austerity are likely toweigh heavily on Wales’ future as nearlya quarter of employees (24%) workedfor the state in the first half of 2014.


Wales


-6%

-4%

-2%

0%

2%

4%

6%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

23


Weak spending power and future public sector austerity limit the growth outlook for Northern Ireland

• Households in Northern Ireland have thelowest levels of discretionary income in theUK, according to the Asda Income Tracker.However, after an annual fall in familyspending power in Q2 2014, growth returnedin the third quarter.

• The unemployment rate figure in Q3 wasaround 6%, down from 6.6% in Q2. Despiteunemployment falling at a slower rate than inEngland and Scotland, rapid wage growth inthe manufacturing and constructionindustries is helping to boost income.

• Nevertheless, Northern Ireland has the largestpublic sector employment share of anywherein the UK and as such its labour market ismore exposed to the sharp public spendingcuts needed in the years to come. Therefore,employment growth is expected to remainweak to 2020.

• This contributes to Cebr’s expectation thatGVA growth for Northern Ireland will decreasefrom 1.9% for 2014 to 1.6% in 2015.


Northern Ireland


-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

GVA Employment


Forecast

24


Appendix: Definitions

Central London is defined as the following boroughs:

• Camden, City of London, Islington, Kensington & Chelsea, Lambeth, Southwark, Tower Hamlets, Westminster

The Financial and Business Services sector is defined as the following sections of the economy:

• K: Financial and Insurance Services

• L: Real Estate Activities

• M: Professional, Scientific and Technical Activities

• N: Administrative and Support Service Activities

The ‘flat white economy’ is defined as being comprised of the following standard industrial sectors:

• software publishing, computer programming / consultancy, data processing & websites, ‘other information services’, advertising, market research, television and film post-production

April 2014London, City & Regional Prospects

25

© Centre for Economics and Business Research ltd

Unit 1 4 Bath Street London EC1V 9DXT 020 7324 2850 F 020 7324 2855 E [email protected] cebr.com

Contact

For enquiries on this publication please contact the authors:

Rob Harbron Nina Skero

+44 (0) 20 7234 2864 +44 (0) 20 7234 2876

[email protected] [email protected]

mailto:[email protected]

mailto:[email protected]

Documents

London, City & Regional Prospects · Research (Cebr) as part of our macroeconomic trends, analysis and forecasting advisory membership service, The Prospects Service. This report