London -- the Country's Wealth Generator
Mayhew, Judith, New Statesman (1996)
The debate surrounding London's contribution to the UK economy has received new prominence of late. This has been largely initiated and stimulated by a series of reports commissioned since 1993 by the Corporation of London from the Centre for Economics and Business Research (CEBR). These reports, London's contribution to the UK economy, consider a number of aspects of the capital's economy -- demographics, recent economic trends, the international perspective, investment, trade links and the fundamental contribution of the financial services industry.
According to this research, in 2000 London's gross domestic product was estimated at [pound]196.2bn which equates to 21% of UK national income and is significantly larger than estimates by the Office of National Statistics ([pound]164bn and 17% of UK GDP). Official measures are prone to underestimate the genuine level of economic activity in London. Firstly, the contribution of commuters working in London is excluded (26% of London's 2000 workforce) and secondly the National Statistics accounting methodology play down the income generated by key sectors, notably financial services.
The demographic nature and population dynamics of London differ from the rest of the United Kingdom. London is the largest city in Western Europe (7.3 million residents in 1999) at the heart of the most populous region. Furthermore the population is now growing again after decades of decline. Indeed the rate of growth outstrips the UK -- 2.6% between 1998 and 1999, compared with only 0.4% nationally. In addition, the population profile is younger as a result of the number of quality educational establishments and job opportunities, and projections suggest that it will get even younger -- the proportion of pensionable age was 16.3% in 1991, 14.6% in 1999 and projected as 14.3% in 2011. Whilst it is true that Londoners are paid significantly more than the national average (29.8% more in 2000) this is due partly to a different mix of jobs and higher skill levels. The earnings gap narrows further after deducting income tax and national insurance and in any case higher living costs mean that living standards are o nly 7% better. The overall makeup of the London economy is dominated by finance and business services with over a quarter of London's workforce in business services accounting for 31% of London's GDP. In addition there is an 11% contribution from financial intermediaries.
The City of London is the world's leading international financial centre -- a global powerhouse at the heart of London. The jobs of more than 250,000 Londoners are dependent on the City, the square mile in the centre of the metropolis that drives the whole of London's economy. The UK financial services industry contributes nearly 10% of the country's GDP rising to 20% if business services are included. The sector generates [pound]3lbn to the UK balance of payments (1999 figures). It is estimated that over 60% of this comes specifically from the Square Mile itself, which remains the world's largest centre for foreign exchange, international bank lending, fund management, maritime activity and international insurance.
More generally it is interesting to note that the public sector in London is significantly smaller than elsewhere in the UK, with public administration and defence, education, social work and health services representing 14.5% of London's GDP in 1998 as against 17.5% nationally. London also has a dominant role in Britain's knowledge-based industries, notably film & broadcast media (54%), publishing (40%) and marketing & design (35%).
The fact that the London economy has grown at an average rate of 3.2% over the past decade is partly due to a relatively small contribution from manufacturing (11% versus 20% nationally) and has therefore been protected from the worrying recent contraction in this sector. A large proportion of imports to London come from the rest of the UK (an estimated [pound]88. …