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Last Updated: Wednesday, 7 March 2007, 15:32 GMT
London 'edges up wealth rankings'
London skyline
London's economy is heating up, the PwC report says
London is set to overtake Paris and Chicago as the fourth largest economy among world cities by 2020, according to PricewaterhouseCoopers (PWC).

Tokyo, New York and Los Angeles will rank ahead of London by 2020 but the capital's growth rate of 3% is expected to outstrip that of its rivals.

By 2020, income generated by London's 8.5 million citizens should rise from $452bn in 2005 to $708bn, PwC added.

Strong growth in business and financial services will drive London's growth.

City boost

As the home to one of the world's leading financial markets, the capital's economy has recently benefited from soaring bonuses at City financial firms.

Tokyo - $1602bn GDP
New York - $1561bn
Los Angeles - $886bn
London - $708bn
Chicago - $645bn
Paris - $611bn
Mexico City - $608bn
Philadelphia - $440bn
Osaka/Kobe - $430bn
Washington DC - $426bn
*Source: UK Economic Outlook, PwC

Earlier this year, the Centre for Economic and Business report predicted City workers would bag a total of 7.5bn in bonuses this winter.

"London's strength in financial and business services is a product of history - it has been a centre of excellence ranging back centuries, combining trust with a fairly liberalised regulatory regime," said PwC head of macroeconomics John Hawksworth.

"We continue to assume that regulatory bodies and Government will continue to sustain this so that they do not frighten people away."

Winners and losers

However, cities elsewhere in the UK Birmingham, Leeds and Manchester are expected to slip down PwC's rankings.

The group predicts Birmingham will drop to 79th position from 71st, Manchester from 73 to 82 and Leeds will slide from 85 to 108 in its global gross domestic (GDP) rankings over the coming 15 years.

But the UK Economic Outlook report says the trio's decline will not be because their economies are stagnating, but rather that their growth rates are not expected to keep pace with economies of similar size.

"Within the developed world, it seems likely that the most successful cities of the future will be those that have comparative advantages in intangible business, financial and consumer services that are not so easily emulated by the rising stars of China, India or Brazil," Mr Hawksworth added.

PwC also forecast that by 2020 there will be five "mega-cities" with populations above the 20 million mark - Mumbai, Mexico City, Sao Paulo, New York and Tokyo.

Tokyo is also expected to remain the largest world city economy in 2020, with an estimated GDP of $1602bn, up from an estimated $1191bn in 2005.

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