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…But economic success brings its own difficulties, and there are a number of fundamental challenges for London policymakers to tackle to ensure the sound functioning of the Capital’s labour market in the years ahead.
Across a whole host of economic indicators, London’s performance has outstripped every other city in the UK over the past two decades. The Capital’s population has grown by over 1 million in the past ten years and is expected to reach 9 million by 2018. In the decade leading up to the financial crash of 2008, for every one new private sector job created in the North and Midlands, 10 were created in London and the South. London alone saw the creation of 320k new private sector jobs during this period, around 290k more than any other UK city, highlighting its critical role in the national economy.
In terms of nominal GVA, London grew by 12.4 per cent between 2007 and 2011, nearly double the next best performing region. And wages are significantly higher in the Capital than in other cities across the UK, with the average wage now 30 per cent higher in the Capital than the national figure.
But such economic success should not be taken for granted when we look to the future. Despite boasting the most successful regional economy in the UK, London’s unemployment rate has been consistently higher than the national average, at 8.9 per cent in February 2013. This is partly driven by mismatches between the skills of many Londoners and the kinds of jobs available. Given the trend towards knowledge economy jobs is forecast to continue, much more needs to be done to make sure that Londoners are equipped with the skills they will need to compete and access jobs in the growth sectors of the future, from e-business to developing technologies.
At the same time, continued population growth will further increase already high levels of demand for housing, transport and other services. As public sector budgets to fund each of these continue to be squeezed, it seems inevitable that the cost to users will increase at a time when state support for low paid individuals is also being cut. This could have the impact of pricing out significant numbers of people from accessing job opportunities across the Capital.
These factors stand to be exacerbated by the current geographical concentration of economic activity in just a handful of central London Boroughs. While you would expect businesses to cluster together within the heart of the London economy in order to take advantage of agglomeration benefits, the current disparities between inner and outer London Boroughs, and the pressures on transport capacity that this causes, presents a real challenge to the future successful functioning of the London labour market.
These issues all require significant attention from London policymakers. Together with Addleshaw Goddard, we are convening a range of sector specialists this week to discuss how London can meet these challenges head on, and continue to grow in the years ahead.
Policy and Research Manager
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