London’s economic growth outpaces all other UK regions

London’s economy is the best performing in the UK, recording the fastest expansion and smallest impact from coronavirus, according to data that emphasises the government’s challenge to “level up” the country.

Output in the UK’s capital rose 0.9 per cent between the second and third quarters of last year, far outstripping the 0.1 per cent national contraction, the Office for National Statistics disclosed on Thursday.

Output in Wales and Scotland fell by 2 per cent and 0.3 per cent respectively during the same period, while growth was flat in Northern Ireland and England, where London performed best.

The expansion in the capital contrasted with a 1.6 per cent contraction in the East Midlands, the worst-performing English region.

Susannah Streeter, senior investment analyst at asset manager Hargreaves Lansdown, said: “London has kept the UK economy ticking over, and growth in the capital has been masking a disappointing performance across much of the rest of the UK.”

Levelling up — reducing the large regional inequalities across the country — was a key theme of the ruling Conservative party’s 2019 election campaign. Levelling up secretary Michael Gove published a white paper last year to tackle the issue.

However, Streeter said that the first round of levelling up policies “clearly failed to make much of an impact on moving the economic dial much for regions in need, with London still appearing to be the magnet for investment”.

London, which is by far the richest region in the country, was also the best performing compared with pre-pandemic levels. While output across the UK has not yet regained the level it achieved in the fourth quarter of 2019, it was 4.4 per cent higher in the capital. In the midlands and East of England, output was still more than 2 per cent below its pre-pandemic levels.

Krishan Shah, economist at the Resolution Foundation, a think-tank, said the figures for London were “defying pandemic predictions of the death of cities”.

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The ONS data showed that London’s economy, relative to pre-pandemic levels, was boosted by strong growth in information, communication and financial services, which account for a larger share of output in the capital than in other regions. In contrast, output in other sectors, including construction, real estate and manufacturing, was still below pre-pandemic levels.

“Stronger performance for London largely reflects growth in sectors in which London is strong, such as professional services and digital, and London’s very low reliance on manufacturing,” said Richard Holt, director of global cities research at the consultancy Oxford Economics.

Holt forecast that the capital would also see stronger growth than other UK regions in 2023.

The Department for Levelling Up, Housing and Communities did not immediately respond to a request for comment.