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London was the one UK area the place labour productiveness fell under pre-pandemic ranges in 2023, official knowledge exhibits, a development that has been narrowing the capital’s effectivity lead since earlier than the monetary disaster.
Output per hour labored in London fell at a median annual price of 0.3 per cent between 2019 and 2023, in line with figures printed by the Workplace for Nationwide Statistics on Thursday.
The UK as an entire posted 0.7 per cent common progress over the identical interval, with all different areas exterior the capital reporting greater labour productiveness in 2023 than earlier than the Covid-19 pandemic.
Regardless of remaining the best area — with output per hour nonetheless 28.5 per cent above the UK common — London’s lead has shrunk steadily, down from 33.4 per cent in 2019 and an all-time peak of 38.7 per cent in 2007.
Economists level to a mixture of elements for London’s underperformance, together with post-crisis constraints within the monetary sector, difficulties in attracting expertise and weaker funding in high-growth areas.
Paul Swinney, of the Centre for Cities think-tank, cited “a relative decline in attracting and retaining expertise, each domestically and internationally”, as a consequence of unaffordable housing within the capital and adjustments in migration after Brexit.
Analysts additionally stated that decrease survey response charges after the pandemic could have affected the info’s precision. Like many official indicators, Thursday’s figures had been labelled “official statistics in growth”, indicating a wider diploma of uncertainty.
For the reason that 2008 monetary disaster, productiveness in London’s monetary sector has been held again by a extra cautious strategy to dealmaking, tighter authorities regulation and a slowdown in credit score enlargement, in line with Ron Martin, professor of financial geography on the College of Cambridge.
The rise in distant working for the reason that pandemic “could effectively have contributed” to the sector’s continued underperformance, he added.
Evaluation by the Centre for Cities discovered that London’s poor productiveness was linked to funding in costly actual property “crowding out” extra productive intangible funding, resembling analysis and growth and software program.
“Pandemic-related disruptions — particularly within the transport sector, together with public, personal, and air journey — have additionally seemingly performed a job,” stated Bart van Ark, managing director of the Productiveness Institute, a analysis organisation.
He added that the robust efficiency of the South East and East of England could recommend some longer-term advantages from so-called “doughnut” results, the place financial exercise shifts from the capital to surrounding areas.
London’s “productiveness malaise” was persevering with with output remaining under the place it was 16 years in the past, stated Swinney. This affected not simply the prosperity of the capital however nationwide efficiency too, he added.
The federal government’s new industrial technique, anticipated subsequent week, “will want a solution to London’s woes if the UK is to interrupt out of its productiveness stupor”, he famous.
Productiveness progress is a crucial driver of upper residing requirements as companies with greater output have extra scope to boost wages.
London is the UK’s largest and richest regional financial system and a key supply of revenues for public funds. Within the fiscal yr to March 2023, the capital raised essentially the most income of any area, at £216.4bn, in line with official knowledge.
UK productiveness total has largely stagnated for the reason that monetary disaster, following a long time of robust progress, a development that has weighed on residing requirements and is called Britain’s productiveness puzzle.
The ONS knowledge confirmed that between 2019 and 2023, the North West registered the quickest annual common productiveness progress charges at 2.4 per cent, adopted by Northern Eire at 1.8 per cent.
Each areas recorded common output progress of greater than 1 per cent, whereas the variety of hours labored fell. For London, output progress was a extra modest 0.5 per cent, whereas the variety of hours labored elevated.
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