17 October 2007
A capital contribution - London’s Place in the UK Economy,
2007-08
Despite making up only 12% of the UK’s population, a City of
London research report published today (Wednesday 17 October) says
London accounts for 19% of UK GDP and 15% of jobs. London’s unique
place in the UK economy is further confirmed by Londoners’ net
contribution of £12.7 billion to UK public finances in 2005-6.
The report, London’s Place in the UK Economy, 2007-08, prepared
by Oxford Economics, highlights the increased importance of
London’s wealth and tax generating capabilities at a time when the
overall UK budget balance is continuing to deteriorate. With the
exception of the Wider South East (comprising London, the South
East and Eastern regions), all other regions in the UK have a net
fiscal deficit.
London’s contribution to UK public finances:
(This graph is featured on page 59 of the report)
The report finds that London is pivotal to the health and success
of the wider UK economy, acting as a pump for capital and
innovation throughout the regions. London’s cluster effect,
particularly in financial services, has seen rapid productivity
growth and a highly skilled labour force contribute to
competitiveness on an international level. Financial and
professional business services now generate around 13% of total UK
gross value-added.
Despite current global financial market jitters, the report
finds that London will continue to prosper over the next decade,
highlighting the importance of;
- Immigration – London’s foreign born population has been
increasing rapidly (making up almost one third of London’s
population). The majority of immigrants have been young, skilled
jobseekers, which has helped to ease labour market pressures.
- Manufacturing in London – a highly specialised market with 42%
of jobs in publishing, printing and recorded media and 14% engaged
in the manufacture of food and beverages.
- Tourism – it is vital for London, producing some 5-6% of the
capital’s GDP. This sector is set to increase in importance as 2012
approaches.
Given the finding that economic growth is in part driven by
migration, the report maintains that investment in public
services, training and infrastructure are vital, a sentiment echoed
by the City of London’s Policy Chairman, Michael Snyder.
“London’s contribution to the rest of the UK is not just via tax
revenues and public finances. London attracts the best and
brightest workers from around the world, draws tourists to the UK
and acts as a funnel for business and capital investment to
regional areas.
“The government, and the country as a whole, cannot afford to
let London’s growth falter. Investment in Crossrail is a major boon
for the London economy and will create hundreds of jobs. Commitment
to keeping London at the top of its game internationally is
vital.
“People from all over the world want to do business here but our
aviation hubs, public transport, training opportunities and quality
of life need to be top class if we are to compete on the world
stage,” he said.
The report offers a clear message to policy makers that London’s
continued growth and high productivity are critical for the future
health of the nation. This is not just because of the contribution
to public finances, but also because London is a key trading
partner for the rest of the UK. In 2006, for example, London
imported over £123 billion of goods and services from elsewhere in
the country.
Ends
Download
the report
Note to editors
The figure of £12.7bn for London’s net contribution to the UK
public finances in 2005-6 is the mid-point in a range from £7bn to
£17.8bn.
For London’s contribution to tax revenues, the estimates range
between £83bn and £90bn, depending on the exact mix of resident and
workplace-based figures used.
For public spending on London, the estimates range between £72bn
and £76bn.
The key variables behind these ranges are assumptions made about
London’s commuter workforce (a net number of approximately
500,000), and the allocation of that part of central government
expenditure (roughly 17%) of the total not clearly identified with
a particular region.
A full explanation of the methodology employed is included as an
appendix to the report.
For further information, please contact the City of London Press
Office:
Cubby Fox on 020 7332 3451.