The Economic Outlook for London

After a period of rapid growth in the first half of the year, the UK economy hit a softer patch in the summer. This article looks at whether this softer patch threatens the recovery in London from the significant shake-out of jobs in 2000–2002, which had previously looked to be underway. It concludes that fewer net new jobs are likely to be created in London this year than we expected six months ago, but that employment growth is still expected to exceed the UK average in 2005 and 2006.     

The Economic Outlook for London

This article reviews how the London economy has fared over the past six months and prospects for the next few years. For the first time, it includes estimates and forecasts of GVA growth in each of the Central London boroughs. It concludes that there appears to have been something of a slowdown in the London economy recently, and the outlook is for slightly softer growth than at the time of the last 'London Outlook'. But, nonetheless, job creation is expected to remain healthy - and above that for the UK as whole. Central London is expected to grow faster than the rest of London, as it benefits from the renewed expansion of financial and business service employment.     

The Economic Outlook for London

The strength of London's economy has been very apparent over the past year, after a period when the potential for recovery was clear but there was less hard evidence. Financial services have clearly played a large part in driving the acceleration in London's growth, with stock markets, M&A activity and profitability all strong over the last 18 months. London's growth has also been bolstered by strong international immigration. Our latest forecasts show a modest slowdown in London's economy next year from a robust 3.9% in 2006, in response to higher UK interest rates and weaker growth in both the US and the Eurozone. But employment in London is still forecast to rise by 1.2% in 2007, with GDP expected to grow by 2.9% in London compared with 2.3% in the UK as whole.     

The economic outlook for London

London's economy clearly entered a new growth phase in 2005, supported by strong recovery in financial markets. This improvement in economic performance has been especially marked within the Central London Boroughs, but with some significant variation between them. This article argues that this marks a return to London-led growth for the UK, becoming more noticeable moving into the medium term once the short-term impacts of last year's terrorist attacks have disappeared.     

The spatial and temporal diffusion of house prices in the UK

This paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system. We use changes in real house prices within the UK economy at the level of regions to illustrate its use. Adjustment to shocks involves both a region specific and a spatial effect. Shocks to a dominant region - London - are propagated contemporaneously and spatially to other regions. They in turn impact on other regions with a delay. We allow for lagged effects to echo back to the dominant region. London in turn is influenced by international developments through its link to New York and other financial centers. It is shown that New York house prices have a direct effect on London house prices. We analyse the effect of shocks using generalised spatio-temporal impulse responses. These highlight the diffusion of shocks both over time (as with the conventional impulse responses) and over space.     

THE ECONOMY AT A TURNING POINT

In this Forecast Release we assess the evidence from the economic indicators and the latest official statistics for the view that the economy is at a turning point. We conclude that, while last year's rapid decline in UK output is coming to an end, a broadly-based recovery of the UK economy is unlikely until the world economy starts to grow again. The business surveys suggest that the upturn in European economy is less well established than the UK recovery. It may also be delayed further by high interest rates. The world turning point is thus likely to be some months later than die UK turning point, despite the strong upswing in the US. This implies that the UK recovery could be somewhat hesitant in the coming months.     

Book reviews

Book reviewed The Other Women’s Movement: Workplace Justice and Social Rights in Modern America
Dorothy Sue Cobble
Princeton University Press, 2005, 336 pp., £12.95
Reviewed by Sue Ledwith
Ruskin College, UK Work–Life Balance in the 21st Century
Diane Houston (ed.)
Palgrave, 2005, 288 pp., £50.00
Reviewed by Gill Kirton
Queen Mary, University of London, UK The Work/Life Collision: What Work is Doing to Australians and What to Do About It
Barbara Pocock
Federation Press, 2003, 304 pp., A$35.00
Reviewed by Geraldine Healy
Queen Mary, University of London, UK Gender Equality and Decent Work––Good Practices at the Workplace
Bureau for Gender Equality
ILO, 2005, ix + 121 pp., £10.95
Reviewed by Geraldine Healy
Queen Mary, University of London, UK Gender Roles and Sex Equality: European Solutions to Social Security Disputes
Ingeborg Heide
ILO, 2004, xi + 117 pp., £11.95
Employers’ Organisations Taking the Lead on Gender Equality
Bureau for Employers’ Activities
ILO, 2005, iii + 85 pp., £10.95
Reviewed by Harriet Bradley
University of Bristol, UK     

Economic Viewpoint: Economic Models and Economic Forecasting: Ptolemaic or Copernican?

Economic forecasters have come in for a lot of criticism in recent months. But this is not new. The failure to predict the boom in 1988 and ensuing inflation and balance of payments problems led to some serious re-examination of the structure of the main macroeconometric models in the UK. The speed with which the UK economy moved into sharp recession in the second half of 1990- also appeared to catch most forecasters on the hop. This Briefing Paper is not directly about forecasting; it is about macroeconometric models. However, forecasting provides by far the most extensive use of these models. Not all macroeconomic forecasters use a formal econometric model - some City economists find a spreadsheet more than adequate - but those that do find that they are an invaluable aid to clear thinking and provide an effective way of filtering all of the information that is available, in one form or another, about the economy. This paper was originally intended to provide a retrospective review of the development of UK macro-models since the late 1970s, coinciding broadly with my period at London Business School. However, it became clear that there was a need to argue more generally in favour of macro-modelling, given the numerous assaults that this activity has sustained over the last 15 years. I want to demonstrate that the conduct of research in this area - at the very least in the UK - has been, and continues to be, a progressive research strategy in the sense in which philosophers of science use this term. I believe that macro-modellers, because they have an obligation to forecast and to make the forecast public, are closer to how theoretical constructs in economics conflict with the observation of economic events, and provide a more robust testing ground for economic theories than the relatively narrow - though very important - confines of single equation statistical testing, that dominate academic journals. This should not mean that every new theoretical idea should be expected to be able to survive immediately the rigours of testing within an existing macro-model. One of the attractions of recent developments in macroeconomic theory has been an explicit attempt to seek to try to reconcile macroeconomics with micro-economic reasoning and to derive macroeconomic principles from how rational, maximizing individuals can be expected to behave in a market economy. There is always a need periodically to re-examine the basic postulates of any area of economics, especially one such as macroeconomics, which provides the basis for the conduct of national and international economic policy, and for providing explanations for economic cycles. Macro-econometric model building is a worthwhile exercise because it confronts theoretical models of how the macro-economy is supposed to work with the hard lessons of experience. The use of these models for forecasting is therefore crucial to their continued growth and development.     

Ford in U.K. Car-tel?

The British car industry has long been suspected of provoking higher prices by restricting the importation of cheaper models. Four oconomists at the Poiytechnic of Central London arguo for the revision of UK design copyright laws to increase competition.     

Interview with Professor Adrian FM Smith

Adrian Smith joined The Alan Turing Institute as Institute Director and Chief Executive in September 2018. In May 2020, he was confirmed as President Elect of the Royal Society. He is also a member of the government's AI Council, which helps boost AI growth in the UK and promote its adoption and ethical use in businesses and organisations across the country. Professor Smith's previous role was Vice-Chancellor of the University of London where he was in post from 2012. He is a past President of the Royal Statistical Society and was elected a Fellow of the Royal Society in 2001 in recognition of his contribution to statistics. In 2003-04 Professor Smith undertook an inquiry into Post-14 Mathematics Education for the UK Secretary of State for Education and Skills and in 2017, on behalf of Her Majesty's Treasury and the Department for Education, published a 16-18 Maths Review. In 2006 he completed a report for the UK Home Secretary on the issue of public trust in Crime Statistics. He received a knighthood in the 2011 New Year Honours list. The following conversation took place at the Alan Turing Institute in London, on July 19 2019.     

An end to boom and bust - can the Chancellor deliver?

In his Mansion House speech, the Chancellor of the Exchequer emphasised his desire to avoid the boom and bust cycle that has characterised the UK economy in recent years. The objective of a more stable economy is one with which it is hard to disagree. It strikes a chord with all those who have to take long-term decisions in the business community. But can the Chancellor deliver? In this article, we argue that despite the changes to the government's economic policy framework in recent years, many of the causes of the past instability of the UK economy remain. And while the Chancellor seeks to retain short-term control of interest rate decisions, there is always the risk that political pressures on monetary policy will be an added source of volatility.     

Why levelling-up is unlikely to solve regional disparities

• ▪ Under the UK government's plan to “level up” the regions, the Budget delivered an increase in capital spending on under-performing places. However, we think the overall impact is unlikely to be large.
• ▪ The extent to which regional imbalances have worsened in recent years is unclear. In fact, the large gap in productivity between London and the rest of the UK widened the most during the 1997–2010 Labour government. Disparity with the rest of the UK is largely due to London's special characteristics.
• ▪ At the local level, austerity policies have damaged many areas, while Brexit is posing new challenges. Other problems are very deep-rooted. Previous governments have struggled to address them and we expect this one will too

     

Are we entering a new golden age of economic growth?

Andrew Sentance presents an upbeat assessment of UK medium-term growth potential. He argues that the economy can sustain a lower average level of unemployment than we have become accustomed to, without inflation. As a result, he argues that the UK economy can grow faster over the next ten years than recent trends or long-term performance suggest. A return to the growth rates of the "golden era" of the 1950s and 1960s is not out of the question. The key to this scenario is not a dash for growth, but steady management of the economy coupled with measures to raise educational standards, speed the introduction of new technology and improve the functioning of the labour market.     

From London to Los Angeles: a comparison of local labour market processes in the US and UK film industries

Addressing the issue of the embeddedness of labour markets, this paper compares the processes of finding employment in the film industry within two local labour markets. Drawing on studies of freelance film crews in London (UK) and Los Angeles (US), the paper concludes that the importance of social networks in job mobility in both contexts is a consequence of common production structures. However, common labour market practice varies in each geographical space as industry processes and structures are mediated by local institutional contexts.     

Older men: the groom price of migrating Eastern European women

One type of economic behaviour in the marriage market is trading off the desired age of partner against other benefits. This paper demonstrates the presence of this effect using samples of females seeking partners from the UK and women from Eastern Europe marrying to migrate to the UK. It is found that the age of man deemed acceptable is substantially greater for women moving from the poorer to the richer economy.     

Industrial policy and employment in the UK: evidence from the pharmaceutical sector

Employment scholars have a longstanding interest in the potential for an active industrial policy to shift the UK economy to a high‐wage, high‐skill trajectory. This article addresses this topic by examining policy, performance and employment in the UK pharmaceutical sector, which has historically benefited from substantial government assistance. While weaknesses are apparent, overall the industrial policy context has supported the performance of the UK sector, underpinning a sizable number of highly skilled and paid jobs. The findings demonstrate the potential of an active industrial policy to facilitate a shift to a higher skills trajectory. Wider considerations of relevance and policy recommendations are discussed.     

Organising migrant workers: the living wage campaign at the University of East London

This critical case study looks at the campaign led by Citizens UK and Unison to get the University of East London (UEL) to sign up to the London living wage (LLW). UEL agreed to pay the LLW after a brief campaign in November 2010 and it was subsequently implemented in August 2011. The study charts the course of the campaign and draws on mobilisation theory and new primary research to account for its success. What our findings suggest is that community organisers and union activists were able to organise and mobilise a largely apolitical group of migrant workers. This, we suggest, can be explained by the successful mobilisation of the community and augurs well for future broad‐based campaigns.     

The Independence of the Bank Of England: an Update

In this article, Stephen Hall and Brian Henry reconsider the arguments for further coordination of fiscal and monetary policy in the UK. The recent inflation-unemployment performance in the UK has been good, but it appears mainly the result of beneficial developments in the world economy. Further improvement in the policy-making framework in the UK is called for. Many of the present drawbacks could be dealt with by treating fiscal policy on a par with monetary policy. There are arguments that further cooperation is not needed but these are unpersuasive. They recommend the setting up of an independent committee charged with reviewing fiscal decisions, and coordinating these with monetary decisions by the MPC.     

The Impact of Interest Rates and The Housing Market on The UK Economy

The Chancellor has asked Professor David Miles to examine the UK market for longer-term fixed rate mortgages. This paper by Adrian Cooper, which is part of a study commissioned by the Miles Review, presents the results of a series of simulations using the OEF Model of the UK economy to investigate the contribution of the housing market to macroeconomic volatility and the implications of changing the structure of mortgage finance from the current variable rate system linked to short-term interest rates to a fixed rate system linked to long rates. The main findings are that the housing market has been a contributor to past volatility in the UK economy, and that moving to a fixed rate structure would reduce the impact of a change in interest rates on key macroeconomic indicators.     

香港与世界级金融中心的差距及发展优势

我国经济规模正在迅速扩大,越来越需要世界级金融中心的支撑.香港目前是排在伦敦和纽约之后第二梯队的国际金融中心;认为香港金融业的成长具有优越的条件,分析了香港与伦敦和纽约的差距及向世界级金融中心迈进的有利条件.