The economy is sustaining slow growth but there is continuing uncertainty for a number of economic growth indicators. The capital’s unemployment rate increased marginally and job growth slowed. Though the total number of tourists is down, the total visitor spending continues to be up, likely due to the weaker pound.
There were more jobs in London in the three months to September 2017 (5.84m) than a year previously, with an annualised growth rate of just over one percent, which is the second lowest rate since 2011 (the previous quarter’s annual growth was under 1 per cent). For the third successive quarter job growth in London was also slower than in the UK as a whole.
The sectoral breakdown suggests that the widely-discussed continuing construction boom is having an impact in London, with a 12 per cent annual growth in construction job numbers, while admin and support work has also risen over 10 per cent. The bigger losers were financial and insurance services (-5 per cent) – perhaps hit by post-Brexit uncertainty as well as continuing structural change – and jobs in arts, entertainment & recreation (-11 per cent). After a resurgence in public sector jobs last quarter, private sector jobs are now growing faster.
While national figures for the three months to November were better than expected (remaining at 4.3 per cent), London’s unemployment rate experienced a slight uptick – to 5.2 per cent (equating to 255,000 people). The rate has been fluctuating around 5 per cent over the last few months, indicating that it may have bottomed out at this level.
For those in employment, wage growth at the national level has been rising in recent months, but still lags behind inflation, a particularly acute problem for Londoners given the high cost of living, especially renting or buying a home (as highlighted elsewhere in this issue).
During the third quarter of 2017, the number of young people not in education, employment or training (NEET) was 127,000, equating to 12.9 per cent of the age group. This is significantly higher than in the previous two quarters (to be expected given the end of the academic year, following historical trends), but slightly down on the same quarter last year (0.5 percentage points lower).
The data presented here is from JLL’s Central London Office Market Report, which provides quarterly data and analysis covering a range of commercial property indicators.
Take up in the capital fell marginally year-on-year in the fourth quarter to just under 3 million square feet, but this was still well above the 10-year average. Total take-up in 2017 was 13 per cent above the long term annual trend.
Meanwhile, the vacancy rate rose to 5.1 per cent, stimulated by an increase in second hand supply coming onto the market. Active demand rose slightly year-on-year to over 9 million square feet after year-on-year falls in the four previous quarters, and analysts predict that demand for offices in 2018 will continue to rise, particularly in the City, where financial and insurance firms continue to take on more space despite Brexit uncertainty, and co-working spaces also expand their reach.
Prime rents in the City and the West End both remained flat, as they have done for the past year.
Purchasing Managers’ Index
Purchasing managers’ indices (PMIs) measure business activity by surveying companies on output, new orders, employment and prices; a score above 50 shows an increase in activity from one month to the next.
The Lloyds Bank / Markit Economics indicator shows business confidence in London declined slightly at the end of the year, but remains broadly positive, and higher than during the summer. In December, the PMI hit a three-month low of 54.5, which was also marginally below the 12 month average. Analysts suggested that most of the business concern stemmed from cost pressures, such as increased raw material costs and salary pressure, but many retained an optimistic outlook for 2018.
After a strong second quarter which saw a large rise in visitor numbers, quarter 3 – the ‘peak summer’ months of July to September – saw a drop in the number of international visits to the capital, albeit only by a modest 1.3 per cent, and has now remained broadly flat for three years.
While the number of tourists coming to the capital fell, the spend per visitor grew significantly, to over £800 per person, a year-on-year rise of nearly 25 per cent.
Both these trends contrast with the rest of England, which saw a modest rise in visitors of 2.7 per cent, and fall in spending of nearly 10 per cent (as compared to the same quarter last year).
Foreign Direct Investment
These figures show foreign companies starting new ventures in London with the help of London & Partners, the Mayor of London’s official promotional agency (therefore not a complete picture of total foreign direct investment (FDI)). They record both the number of new ventures, and the number of new jobs created – London & Partners’ activity is particularly focused around ICT, Financial Services, Business Services, Creative Industries and Retail.
The number of projects started in 2017 was just over 300, which was down 8 per cent on 2016. However, the number of jobs expected to be created in the first year of these ventures rose by 9 per cent to 6,790, despite a relatively weak fourth quarter. This slowdown towards the end of the year should be seen in the context of a global slowdown in FDI, which fell 17 per cent in 2017. London does, however, remain the leading destination city for FDI in Western Europe, attracting over twice as many investment projects as Paris through November 2017.