City of London 'over the worst'

Trading is beginning to pick up

London's financial centre is showing signs of recovering from a downturn which has seen thousands of job cuts, a survey has found.

"The worst now seems to be over," said Douglas McWilliams, chief executive of the Centre for Economics and Business Research (CEBR).

"A recovery seems to have started in the City and - provided it continues - should spread out over the rest of London."

The CEBR's latest quarterly survey of London's economy found the City was seeing more takeover deals and said share trading volumes were up about 25% on the same time a year ago.

Wider impact

The downturn in the UK share market over the past couple of years has caused City firms to shed thousands of jobs as trading volumes and takeover deals have dried up.

The loss of so many high-paid jobs in London has hit growth in the capital, and has also had an impact on the housing market.

Recent house price surveys have found prices static and falling in some areas.

However, the CEBR is not forecasting an immediate pick-up in jobs.

It says the City jobs market should stabilise by the end of this year, but will not begin to expand significantly until 2005.

London's housing market is also set to remain subdued, but should avoid a slump.

"We now expect house prices (in London) to plateau in 2004 and 2005 instead of falling by a cumulative 10%," said CEBR economist Adrij Halushka.

Rebound

The recovery in the City should help to drive growth in London.

The CEBR said the capital's economy remained flat with 0% growth during 2002, but is now expected to grow by 1.6% this year.

Growth is then expected to accelerate to 2.7% in 2004.

"Obviously there are still risks to London," said Mr McWilliams.

"Terrorism and international economic volatility are still potential problems... and consumer spending will probably be sluggish for some time.

"But our best guess is that London's growth should be leading the UK by next year."