According to data from the Office for National Statistics (ONS), London’s economy is leading the way in the UK, displaying the fastest expansion and the least impact from the coronavirus pandemic. The figures highlight the challenge faced by the government in its efforts to “level up” the country.
During the period between the second and third quarters of last year, London experienced a 0.9% increase in output, in stark contrast to the national contraction of 0.1%. Meanwhile, Wales and Scotland saw declines of 2% and 0.3% respectively, and growth remained stagnant in Northern Ireland and England, with London outperforming the rest of the country.
Among the English regions, the East Midlands fared the worst, experiencing a 1.6% contraction. Susannah Streeter, a senior investment analyst at Hargreaves Lansdown, noted that London has played a crucial role in sustaining the UK economy, while other regions have performed disappointingly.
The concept of “levelling up,” aimed at reducing regional inequalities, was a key focus of the Conservative party’s 2019 election campaign. However, Streeter highlighted that the initial round of levelling-up policies failed to significantly impact the regions in need, with London still attracting the majority of investment.
In addition to being the wealthiest region in the UK, London has also demonstrated the best performance in comparison to pre-pandemic levels. While the overall UK output has not yet reached the levels achieved in the fourth quarter of 2019, London’s output has surpassed that level by 4.4%. Conversely, the Midlands and East of England are still lagging by over 2% compared to pre-pandemic levels.
Krishan Shah, an economist at the Resolution Foundation, remarked that the figures for London defy predictions of the demise of cities due to the pandemic.
The ONS data further reveals that London’s economy benefited from robust growth in information, communication, and financial services, which constitute a significant portion of the capital’s output. Conversely, sectors like construction, real estate, and manufacturing are still below their pre-pandemic levels.
Richard Holt, director of global cities research at Oxford Economics, attributed London’s stronger performance to its dominance in sectors such as professional services and digital, as well as its limited reliance on manufacturing. Holt predicted that London would continue to experience stronger growth compared to other UK regions in 2023.
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