London: the Global Powerhouse February 2016 London: the Global Powerhouse 3 London: the Global Powerhouse London: the Global Powerhouse
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LONDON: THE GLOBAL POWERHOUSE FEBRUARY 2016 LONDON: THE GLOBAL POWERHOUSE 3 LONDON: THE GLOBAL POWERHOUSE LONDON: THE GLOBAL POWERHOUSE COPYRIGHT Greater London Authority February 2016 Published by Greater London Authority City Hall The Queen’s Walk More London London SE1 2AA www.london.gov.uk Tel 020 7983 4922 Minicom 020 7983 4000 ISBN 978-1-84781-619-1 Census data are adapted from data from the Office for National Statistics licenced under the Open Government Licence v.3.0 Acknowledgements: A number of people contributed to this report including Gordon Douglass, Alex Henson, Milja Keijonen, Joel Marsden, Francesco Mellino, Steven Spires, Brian Smith, Matthew Waite, and Louise Wilks. For more information about this publication, please contact: GLA Economics Tel 020 7983 4922 Email [email protected] GLA Economics provides expert advice and analysis on London’s economy and the economic issues facing the Capital. Data and analysis from GLA Economics form a basis for the policy and investment decisions facing the Mayor of London and the GLA group. GLA Economics uses a wide range of information and data sourced from third party suppliers within its analysis and reports. GLA Economics cannot be held responsible for the accuracy or timeliness of this information and data. The GLA will not be liable for any losses suffered or liabilities incurred by a party as a result of that party relying in any way on the information contained in this report. 5 Introduction by the Mayor: It gives me great pleasure to introduce you to this comprehensive new economic report on London. It is an excellent piece of work that will enrich the present debate and help enhance our understanding of London’s economy. The good news is that the report shows that London does very well on many international measures. This helps cement its claim to not only be the UK’s global city but Europe’s and the world’s greatest city. The report is filled with data and rich analysis that outlines both the challenges and opportunities ahead. In my eight years at City Hall I have taken a strong interest in helping promote London, its businesses and what its people have to offer on the international scene. This has helped us to boost exports, attract investment and tourists and create jobs. It is vital that London continues to position itself in the changing global economy. I am therefore delighted that my Chief Economic Advisor, Gerry Lyons, has produced such a valuable piece of work. Boris Johnson Mayor of London LONDON: THE GLOBAL POWERHOUSE 7 SUMMARY London is the UK’s global city. This data rich report suggests that it can also lay claim to being the world’s leading international city. This report provides a detailed analysis of London’s competitive position, outlining where London does well, future challenges and opportunities. Although London is always thought of as an international city, the scale of the increase in its international population over the last two decades provides just one of many indicators of how much more international it has become. The overseas born population has risen from 15% (or 1.1 million) in 1971, to 22% (1.45 million) in 1991 and to 38% (3.19 million) now. This percentage of 38% now puts London on a par with other international cities such as New York, Los Angeles, Singapore, Hong Kong and Sydney, among others. Given the scale of net migration into the UK, and also London’s appeal, who is to say this will not continue? In contrast, the numbers of UK born people living in London has stabilised in the recent census but is one million below where it stood at 6.1 million in 1971. The other dramatic change over recent decades has been London’s rise as a global services city. The rise of the City (London’s banking and financial district) and of the business, professional and financial services sector has been a powerful driver of London’s growth. Its world class tourist and creative sectors have helped too. The future points to continued globalisation and increasing urbanisation. London, like the UK, needs to position itself to succeed in the changing and growing global economy. • While London is not immune to near term economic uncertainty this should not cloud London’s need to position itself for future global growth. • Cities are subject to economic cycles and this basic point must not be overlooked, particularly given the high level of house prices and what might happen to interest rates, eventually. • The global mix of growth is changing, with Europe accounting for less, and emerging growth markets for more. London needs to position itself in those markets, as well as the US, while remaining Europe’s financial centre. London must be a place not only to do business “in” but to do business “from”. • The increasing global focus on inequality reinforces London’s need to focus on the living wage, and boosting opportunities through apprenticeships and further improving education attainment. LONDON: THE GLOBAL POWERHOUSE • Urbanisation points to more of global growth coming from cities. London must be prepared for increased competition, and must work with other UK cities for greater fiscal devolution. • The global focus on sustainable growth reinforces London’s existing policy of pushing a green and environmentally friendly agenda. • Another global focus is on the quality of growth and need to enhance productivity. London needs to attract investment, enhancing productivity and ensuring high quality jobs are retained and created. • The cost of living is high in international financial centres like London. London must remain an attractive place to do business, based on global access, quality of life, and also cost. • Improved connectivity is vital in the 21st century. London needs to ensure the highest quantity of digital connectivity and to invest in its infrastructure to boost transport connectivity. Chapter One, the overview chapter, looks at the London economy from a global and regional perspective. This chapter discusses the implications for the London economy, for business and for policy. It suggests that London is on the right track to address many of the consequences of the changing global economy. It also examines some of the policy issues and opportunities surrounding strategic thinking. These include big data, positioning to host future global events, the need for a convention centre, the night time economy, more centres of economic activity and improved digital and transport connectivity. The biggest immediate issue is the high cost of doing business in London largely because of high housing costs, and the economic issues around this are discussed. Chapter Two of the report focuses on London’s current economic performance. Given the scale of the financial crisis to hit London and the UK in 2008, London’s resilience and job growth has been remarkable. Creating a competitive economy and a welcoming and enabling environment for business has been a key part of this. Although there are many reasons to be positive about London it is also important to keep this in context. When there has been a period of success it is not always guaranteed it will continue. Economic cycles exist and should not be overlooked. There are economic ups and downs and as chapter two highlights, there is a strong correlation between the economic performance of London and the national UK economy. Each influences the other. Chapter Three surveys ‘London’s current position in the global economy’. It looks at areas in which the capital performs well in an international context such as in output, its educated workforce, and its attractiveness in terms of its business and lifestyle 9 environment. It then examines risks to this attractiveness, including those associated with the supply and cost of housing and office space, the cost of living in London, issues around transport capacity and the general liveability of the city such as pollution, crime and the availability of education and health resources. Chapter Four looks at ‘the impact of foreign ownership on housing’, scrutinising how foreign investment in housing in London has evolved over time. How international buyers impact the demand and prices of housing in London are discussed and put into an international context. Chapter Five scrutinises foreign investment (FDI) in a wider context. It surveys ‘FDI’ by looking at inbound FDI to London and the UK. It then examines inbound FDI to London by industry sector. Finally, this chapter compares London’s inbound FDI to its international competitors. Chapter Six focuses on ‘tourism’. It details London’s tourism economy, and measures London’s appeal to visitors. People come here for London’s heritage, its thriving arts and creative sector and the fact it’s an exciting and welcoming place to visit. International tourism trends to London are then surveyed, before moving on to study London in the context of it being a centre for business tourism. Finally, it considers London’s airports in an international context. Chapter Seven reports on ‘international migration’. This chapter sets out the stock of foreign-born populations across global cities. It then examines the drivers of and the reasons for migrating to London and the UK. Finally, an analysis of the reliance of different sectors on international migrants is provided. Chapter Eight provides a brief summary and conclusion. Appendices There are also a number of appendices. These include a data comparison between London and New York, some additional data and a summary of the London Infrastructure Plan. Like this publication that was another of the number of strategic reports that have been produced by The Mayor and the Greater London Authority (GLA) in recent years. This report focuses on the current as well as the longer term strategic issues facing London.