Increasing capital: London economy pulls away from rest of UK in December
London’s economic performance was “head and shoulders” above the rest of the country in December, survey data has shown, while the capital’s businesses were cheered by the emergence of some political certainty.
London was the only British region where output grew in December, with firms hiring at the fastest rate since July, the data from Natwest and stats firm IHS Markit showed.
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The UK economy slowed towards the end of last year as political uncertainty from Brexit and the General Election alongside weak global growth hurt output. November’s GDP reading is due today and is expected to show no expansion.
Yet London’s economy outstripped the rest of the country in 2019 – a trend that continued in the final month of the year.
“The performance of the London private sector remained heads and shoulders above the rest of the country,” said Stuart Johnstone, managing director for London at Natwest.
Many businesses hope that Boris Johnson’s decisive election victory and the certainty it brings will boost the economy and investment.
Firms in the capital became more upbeat for the third month in a row in December. In the rest of the country, 10 of the 12 regions also became more optimistic, Natwest and IHS Markit said.
Peter Bishop, chief executive of the London Chamber of Commerce and Industry, told City PM that the survey data chimes with his members have been saying.
“Despite weaker export and domestic demand during the final quarter of 2019, profitability expectations rose amongst London’s businesses, as did economic outlook,” he said.
A survey by auditing giant Deloitte last week showed that chief financial officers were hugely buoyed by Johnson’s election win, with their confidence hitting an all-time high in December.
Deloitte senior partner Richard Houston said: “In addition to boosting business confidence, a majority government is well placed to focus on the challenges and opportunities the UK faces.”
Yet Bishop cautioned that missteps in the upcoming trade negotiations with the European Union could undermine any economic recovery. He said: “Striking the right future trading agreement with the EU remains paramount.”
The Bank of England has also warned against expectations of an economic bounce this year. It has predicted that business investment – which fell in 2019 – will rise by only 0.25 per cent in 2020.
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The economic dominance of London and the south east has been scrutinised in the weeks since Johnson’s win, which saw swathes of Midlands and northern voters turn their backs on Labour.
Chancellor Sajid Javid is expected to use his March Budget to refocus investment away from the capital and south east towards poorer parts of the country.