December 21, 2010
‘The London Economy Update’
Here are the headlines from the latest City Economy Digest – the full report is available here.
- The economy has seen a fairly strong recovery from the recession so far, with growth in both the second and third quarters well above expectations. As a result of this improvement the Office for Budget Responsibility has raised its estimate of this year’s GDP growth rate to 1.8% from the 1.3% forecast it made in June.
- National income data released by the Office of National Statistics shows that the UK economy grew by a fairly robust 0.8% in the third quarter, with the strong boost from overseas trading activity offsetting the slowdown in domestic consumer spending and business investment.
- Although the economy overall may avoid a double dip, the housing market looks as though it is heading for one, with all the recent surveys pointing to a drop in house prices during 2011.
- In its comprehensive spending review, which was released last October, the government set out its plans to eliminate the “structural” budget deficit over the next four years by cutting public spending during the period by approximately £81bn.
- Whilst the government’s fiscal stance will stay restrictive well into the medium term, the Bank of England’s freedom to inject additional funds into the economy, by way of quantitative easing, will also remain limited because inflation is expected to stay above the target rate well into next year
- On competitiveness, the proportion of firms that believe the UK is less competitive as a financial centre has fallen once again to 68%, from a peak of 85% in this year’s March survey.
- The City jobs market is continuing to recover from the downturn that followed the financial crisis that began in 2008. The latest employment survey conducted by Morgan McKinley, shows that the number of new jobs at City financial institutions rose by 5% in October, and this figure was 13% ahead of the position a year earlier.
- Fears that the City is losing out against other financial centres are being eased by news that foreign investors are moving back into the UK financial services sector. Foreign-owned businesses accounted for 9.1% of new authorisations by the Financial Services Authority in the first half of 2010, sharply higher than a year earlier.
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