London 2030 How will the capital s economy change? EXECUTIVE SUMMARY
London 2030 London s economy is growing strongly, easily outpacing both the UK and its nearest European rivals such as Paris and Frankfurt. Significant investments in public infrastructure, office buildings, retailing, and homes all point to widespread optimism that the pace of growth will continue, not just for the next year or two but for many years to come. Yet the experience of recent years, both nationally and globally, suggests that emerging economic difficulties frequently go unrecognised until it s too late. How confident should we be about London s growth trajectory? Could travel congestion, or housing supply, or a decline in one or more of London s key sectors, cause the optimistic story to unravel? What will happen to London s many retail centres in the face of increasing internet shopping? Are there ways in which London needs to adjust, beyond what is currently planned, to achieve its potential? Will the geography of the city change radically, perhaps with more growth in the suburbs along transport corridors? If so, might that help London exceed all our expectations, growing even faster than the consensus suggests? The Oxford Economics London 2030 study considers the direction and magnitude of change that is likely to confront London s economy in the fifteen years to 2030. This executive summary draws on a full research programme that provides our baseline forecast, comparisons with the Mayor of London s plan, analysis of housing trends, an assessment of alternate scenarios, and our view on possible drivers of change. The full study and supporting data sets are now available for purchase. Employment growth forecasts for London, Frankfurt, and Paris (2000 = 100) 160 London Frankfurt Paris 150 140 130 120 110 100 90 2000 2006 2012 2018 2024 2030 2 OXFORD ECONOMICS
Employment, population, and housing forecasts In London 2030 we project that the rate of employment growth in London is set to slow down, averaging a little under 1% a year to 2030, compared to an average of a little under 1½% between 1991 and 2015, and a peak of over 5% in 2014. This equates to an additional 800,000 jobs, compared to a rise of over one million jobs in the 2000-2015 period. Baseline forecast: Jobs growth, % y-on-y, London boroughs, 2015-30 8.8 22.8 Nevertheless, London s population grows much faster than that of the UK as a whole, and breaches the 10 million mark before 2030. In London 2030 we also forecast employment in London, and growth in average earnings, and what those drivers mean for house prices. Even if earnings grow only slightly faster in London than nationally, and even if higher interest rates, tighter credit and more cautious borrowing behaviour all mean that London house prices keep pace with earnings rather than racing ahead, average house prices in London are likely to breach the 1 million barrier before 2030. Our baseline population and employment projections differ from the forecasts presented in the Further Alterations to the London Plan (FALP) published by the Greater London Authority (GLA) in 2014. We forecast population growth of 2.4 million from the current level by 2036, compared to the Mayor s forecast of an increase of 1.4 million. The London Plan relies on employment projections that take no account of the 625,000 increase in employment seen in London between 2012 and 2014. It shows employment growth in the period 2015-2036 which is 314,000 lower than we project. OXFORD ECONOMICS 3
We forecast population growth of 2.4 million from the current level by 2036, compared to the Mayor s forecast of an increase of 1.4 million. Total London population, 1991-2036, baseline forecast and Further Alterations to the London Plan 11500 11000 10500 OE FALP 10000 9500 9000 8500 8000 7500 7000 6500 1991 1996 2001 2006 2011 2016 2021 2026 2031 2036 If that happens alongside an increasing divergence between those with high and low incomes, then it will mean affordability problems for people on low incomes. The Mayor s London Plan relies on employment projections that take no account of the 625,000 increase in employment seen in London between 2012 and 2014. It shows employment growth in the period 2015-36 which is 314,000 lower than we project. Total employment, London, 1991-2036, baseline forecast and Further Alterations to the London Plan forecast (000s) 7000 6500 6000 5500 OE FALP 5000 4500 4000 3500 1991 1996 2001 2006 2011 2016 2021 2026 2031 2036 4 OXFORD ECONOMICS
Of course a lot will depend on the rate of house building. However, the Mayor of London s plan assumes lower growth in population and employment than our own projections. The Mayor forecasts population growth of a little under 1½ million by 2036, whereas we forecast a rise of almost 2½ million, to 11 million. That may not be a problem if average household sizes rise. In London 2030 we discuss how likely that is to happen, and hence what the risks are that London s growth is constrained by a shortage of housing. House prices, UK and London, 1996-2030 London 1,000,000 UK 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 1996 2001 2006 2011 2016 2021 2026 OXFORD ECONOMICS 5
Rising consumer spending The Oxford Economics forecast for consumer expenditure in London shows 2.8% annual growth over the next 15 years in real terms which is considerably faster than the 2.3% for the UK as a whole, which will present opportunities for companies looking to reach urban consumers. The geographical pattern shows consumer expenditure in Inner London growing by 2.8% and Outer London growing by 2.9%. Real consumer expenditure, London sub-areas, 2000-30 Sub-area Average annual growth (%) 2000 2015 2015 2030 Inner North (Camden, City of London, Islington) 2.3 2.8 Inner West (Hammersmith and Fulham, Kensington and Chelsea, Westminster) 1.2 2.7 Inner East (Hackney, Newham, Tower Hamlets) 3.6 2.9 Inner South (Lambeth, Southwark, Wandsworth) 2.3 2.9 Inner 2.3 2.8 Outer North (Barnet, Enfield, Haringey, Waltham Forest) 2.2 2.8 Outer West (Brent, Ealing, Harrow, Hillingdon, Hounslow) 2.2 2.8 Outer East (Barking and Dagenham, Bexley, Greenwich, Havering, Lewisham, Redbridge) Outer South (Bromley, Croydon, Kingston upon Thames, Merton, Richmond upon Thames, Sutton) 2.3 2.8 1.6 2.9 Outer 2.1 2.9 London 2.1 2.8 UK 1.9 2.3 Other factors and scenarios that might affect London s future The London 2030 study also includes examination of factors that might affect the forecast, and the impact of alternate scenarios. For example we look at how artificial intelligence is likely to alter the employment landscape. Our assessment is that new technology may eliminate some jobs, and not just at the bottom end of the skills spectrum. In high-end financial services we think the scope for this is particularly large, with obvious important implications for London. However, we do also see resultant and off-setting employment gains in other sectors and occupations. Other issues that are covered include the possible impact on London of the UK leaving the EU, and whether London s economy would benefit if some tax raising powers were to pass from central government to London s mayor and assembly. 6 OXFORD ECONOMICS
Further Information The findings of the London 2030 study are presented in full in the five papers that make up the main body of the project, alongside the set of accompanying databases. The full set of research is available for purchase. Research papers Baseline forecasts for London s economy, population growth and employment Forecast comparison between our data and The London Plan Housing trends: will a shortage of housing constrain London s growth? Impact of scenarios, such as a Eurozone crisis, or a stronger performance Possible drivers of change such as the impact of new technology, or the UK leaving the EU. Datasets London 2030 baseline forecast, by boroughs London 2030 scenario 1, by boroughs London 2030 scenario 2, by boroughs London 2030 scenario 3, by boroughs To find out more information on London 2030 or to discuss how to buy the research please contact: Frances Nicholls: Director of Business Development Tel: +44 207 803 1418 e-mail: fnicholls@oxfordeconomics.com George Armitage: Head of Global Real Estate Tel: +44 207 803 1435 e-mail: garmitage@oxfordeconomics.com Corinna Hoyer: Director, DACH, Eastern Europe, and CIS Tel: +49 69 95 925 280 e-mail: choyer@oxfordeconomics.com Pierre Delage: Director, Paris Tel: +33 (0)6 79 90 08 46 e-mail pdelage@oxfordeconomics.com Marc Venditti: Senior Vice President, Americas Tel: +1 617 206 6112 e-mail marcvenditti@oxfordeconomics.com Peter Suomi: Vice President, Asia Pacific Tel: +65 6829 7198 e-mail: petersuomi@oxfordeconomics.com OXFORD ECONOMICS 7
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