Regional Forecast and Analysis Greater London (example) Sample from June 2015 forecast

Transcription

1 Regional Forecast and Analysis Greater London (example) from June 2015 forecast

2 Greater South London East Economic Outlook CONTENTS 1. Executive Summary 2. UK Economy Prospects & key risks Recent trends 2 year outlook Labour market 3. Greater London Economy Labour market Short term outlook Local Area focus Demographic outlook South East Benchmarked against other regions 4. Sector Outlook 5. Consumers Sector overview Financial & business services Consumer services Manufacturing Construction Spending and income outlook 6. Housing Market Outlook 7. Long Term Outlook If you like this sample forecast you can purchase the latest full version of this forecast here. Visit our website to browse our range of forecasts and services a. Prospects & Key Risks b. Prospects & Key Risks 2

3 Greater London Capital to remain at the forefront of UK growth London s recent growth record places it ahead of other UK regions and enhances its global standing. In terms of employment growth, the capital has been successful in generating jobs across a broad number of sectors and has seen a notable fall in the unemployment rate. Prospects remain bright, with GVA growth this year forecast at 2.9% and employment growth still going strong at 2.4%. A trend which began emerging in the later stages of 2014 and should ramp up this year is the increase in real incomes. This bodes well for consumer spending and the consumerrelated sectors. Over the medium to long term, London remains centre stage, lifted by favourable demographics, a highly-skilled workforce and a concentration of fast-growth sectors. Near-term risks to London s growth profile come in the form of increased financial regulation and the EU referendum, while over the longer term, airport capacity and housing market shortages/affordability are on the radar. Greater London Forecast Summary Forecasts Average Growth % South East Gross Value Added Full Time Equivalent Employment Unemployment rate Disposable Income House Price Growth The capital continues to outperform all other UK regions on key economic indicators. London s economy, driven by booming professional services, saw growth at an estimated 3.8% in 2014, above the UK average of 2.8%. This strong achievement will persist in Forecast highlights Working age population United Kingdom Sources: ONS, DCLG, Experian Gross Value Added Full Time Equivalent Employment Unemployment rate Disposable Income House Price Growth Working age population

4 Interest rates UK Recent Trends Business Planning Assumptions 2-Year Outlook Longer-Term Outlook Consumer Trade Inflation Labour Market Prospects & Key Risks GDP growth was 0.3% q-on-q in 2015q1as falling oil and construction output hit total activity. However, the indications are that the economic upswing remains on track and a bounce back is expected in 2015q2. Bank Rate on hold at 0.5% until 2016q1. Rises will be gradual and the rate will be low by historic standards in , at around 2.7%. Real GDP growth forecast at 2.4% in 2015 followed by 2.3% in Key risks: Weaker growth if real incomes, investment and Eurozone demand fail to recover. GDP growth of 2.3% a year in , with annual employment growth of 0.8%. Key risks: Efforts to restore public finances coupled with higher interest rates constrain growth more than expected. Healthy rate of spending to be sustained as growth in real incomes picks up strongly in Key risks: Earnings growth setback; bank rate hike hits highly-exposed borrowers in 2017/18. Export outlook remains weak as overseas demand, notably from the Eurozone, falters. Key risk: Eurozone demand weakens further. Inflation at -0.1% in April could edge further then pick up in 2015h2, but remaining well below 2% in Key risk: Prospect of an extended bout of deflation but the risk is small. Labour market progress will remain solid in the next few months in line with recent output gains. Key risk: Private sector job creation fades as productivity gains account for output rise. With inflation at zero, the Bank of England s MPC held rates at 0.5% at its June meeting, although two members regarded the decision as finely balanced. But with inflation possibly falling further and expected to remain very low for several months ahead, this cautious stance is likely to remain a minority view among the MPC, and we expect the first move to be in the Spring of next year. (% per annum) Base rate (y/e) yr yield (y/e) KEY RISK Inflation can pick up quite sharply given the impact of the base effect ( a fall in prices a year ago dropping out of the calculation and being replaced by a rise). If this rise proves steep, the base effect could become a key factor in driving inflation up markedly later this year, especially if oil prices rise much further. Exchange rates Sterling has regained its poise following the decisive May general election result. /$ - Uncertainty remains over the fact that the US economy appears to have lost momentum. Volatility around the current rate of $1.56/ is probable in the near term, with the rate settling near that level in the second half of the year. / Eurozone problems amid tense Greek negotiations heighten prospects of a period of exchange rate volatility. But fundamentally we expect the pound to retain the gains made in recent months against the Government Fiscal tightness to continue at least until Key risk: Combination of tighter monetary policy and ongoing austerity damages growth prospects. US$ per (y/e) per (y/e) REER (Jan 2005=100) KEY RISK strength vs. the continues to exacerbate problems for exporters already struggling with weak orders. 4

5 Local area focus In 2014 some of London s growth highlights in terms of GVA growth included Kingston upon Thames, Sutton, Hounslow and Enfield. But this year the City of London is expected to achieve the fastest GVA growth across London, though this is very dependent on a revival in the financial services sector, which is at risk given regulation tightening. Close behind the City of London is Tower Hamlets and Islington. Across the 33 boroughs in London we forecast GVA growth to range from 3.7% this year to 2.2%. While most boroughs are set to experience a moderation in growth, similar to the London and UK averages, there are some exceptions, including the City of London and Tower Hamlets, which reflects a projected recovery in the financial services sector, and these boroughs will play a pivotal role in this trend. In terms of full time equivalent employment, all boroughs are expected to achieve growth ahead of the UK average this year. Beyond the near term, the most vibrant job growth will be centred in Westminster, City of London, Southwark, Tower Hamlets and Islington. To fully understand our forecasts, it is important to note the inter-dependence of local authorities as this is a key feature of our model. The charts below show the commuting patterns for 2 major centres in this region and how they depend upon both the jobs and the labour market of other local areas. Source: Annual Population Survey,

6 Demographic outlook London s growth to outstrip UK by significant margin The current demographic profile reflects London s position as a global business centre. Its population is younger and better-qualified compared to the national average. A much greater proportion of the population lies between the ages of 20 and 40 while it has a smaller proportion of people aged 50 and above. The city s population is expected to continue growing by about 1% per annum over the next decade while the number of those of working-age will rise by about 1.2% per annum over the same period. As a result, the dependency ratio is set to fall significantly. The capital retains its edge over the national average, which will experience more modest rises in both the total and working-age populations. Key indicators 2014 Total Population (thousands) 8,642 Working-age population (thousands) Greater London and UK Projections 5,836 Population: 0-14 years (thousands) 1,663 Population: over 65 years (thousands) 998 Workforce (thouands) 5,553 Participation rate (% of workforce) 80.0 Source: ONS (% Change) Total Population Student State Working Age State Retirement Sources: ONS, Experian Greater London UK largest key centres total population outlook (% Change) City of London Westminster Camden Islington Total State Working Age Sources: ONS, Experian 6

7 Greater London benchmarked to other regions FTE Employment GVA House Prices Unemployment Rates 7

8 Sector performance London s economy is dominated by its world-class financial & business service sector which generates well over half of its output. Smaller but still significant sectors are consumer services and public services. The financial service sector remains under pressure of continuing tight regulation under BASEL III and domestic regulatory bodies. In addition, a still-fragile Eurozone is keeping the sector s growth muted relative to the historic average. In contrast, professional services, such as accounting and legal activities, stayed resilient during the recession and it is these robust sectors that will drive forward growth in the near term. The TMT (Technology, Media and Telecommunications) sector in particular has seen rapid expansion in recent years underpinned by the uptake of new technologies. Overall, we expect professional services to expand by 3.1% per annum in the medium term at a similar pace to the UK average. Consumer services will be buoyed by a boost in real incomes and high tourism spending. We expect the sector to perform well compared to the UK average. The region s public sector has seen a downsizing in jobs and given a stringent austerity plan in place, this sector will not underpin any sustained output or job growth in the next few years. The construction sector will be driven forward by large transport projects. Prof & other Priv Services Fin & Insurance Info and Comms Pub Services Industry share Agric, Forest & Fishing 30% 25% 20% 15% 10% 5% 0% Accom Food & Retail Transport & storage South East Sources: ONS, Experian Prof & other Priv Services Fin & Insurance Info and Comms Accom Food & Retail Agric, Forest & Fishing Transport & storage South East Extraction and Mining Manuf Utilities Construction Wholesale & Retail UK Location Quotient* Pub Services Extraction and Mining Wholesale & Retail UK (2013) Manuf Utilities Construction *The location quotient measures the concentration of industries in a region relative to the UK average. A value of 1 means that the region has the same share of an industry as the UK while above/below 1 denotes a larger/smaller share. Data for Sources: ONS, Experian Average Growth % Total GVA Agriculture, Forestry & Fishing Extraction & Mining Manufacturing Utilities Construction Wholesale & Retail Transport & storage Accomodation, Food Services & Recreation Information & communication Finance & Insurance Professional & Other Private Services Public Services Sources: ONS, Experian 8

9 UK local area outlook Source: Experian 9

10 Our economic forecasting expertise Experian's team of 20 economists is a leading provider of global, national, regional and local economic forecasts and analysis to the commercial and public sectors. Our foresight helps organisations predict the future of their markets, identify new business opportunities, quantify risk and make informed decisions. Experian Market Intelligence Group Would you like to understand how your credit portfolio compares to your peers and how it is likely to be impacted by changes in lending policy, market competition and the economy in the future? Our experts in economics, credit risk, construction, market analysis and portfolio benchmarking combine to provide an indepth understanding of the market and economic context in which you manage your business both now and in the future. How we can help you: An independent unbiased view of the market based upon quantitative analysis of data. Benchmark your portfolio against your peers, both now and forecast into the future Provide economic forecasts specific to your sector Develop accurate business case(s) for entry into new markets Assess future market risk and predict potential economic pressures at a granular level Highlight future revenue opportunities Meet regulatory requirements for stress testing and loss forecasting Experian helping organisations understand the market, economy and future changes in household and business finances. Contact our team on: T: +44 (0) or W: Contact Rebecca Snow Managing Economist E: rebecca.snow@uk.experian.com T: +44 (0) Rebecca has been a key member of the Economics team since Rebecca contributes to the UK Regional Planning Service, which produces forecasts and analysis of detailed economic indicators for the UK and its regions, counties and local authorities. Rebecca specialises in forming a house view on the performance of the UK s key centres and produces high-quality regional and city reports. Sunita Bali Principal UK Economist E: Sunita.Bali@uk.experian.com T: +44 (0) Sunita manages the suite of Economics Forecasting Products. She joined Experian in 2008 as a senior economist and in this role produced forecasts, scenarios and analysis on the UK economy and consumers. Prior to joining Experian, she worked as a Treasury Strategist at Rabobank and an International Economist with IHS Global Insight. where she held various roles related to modelling and forecasting global macro, industries and energy markets.

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