London to lead rebound after 'mild' recession

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The Independent Online

London's economy suffered a "mild" recession earlier this year but it is poised to lead the UK into the coming rebound, according to yesterday's figures from Experian Business Strategies, a regional analysis firm.

Activity in the capital contracted in the last quarter of 2002 and the first quarter of 2003 and is set to be the worst performing of the UK's 12 regions, the firm said.

London is expected to grow by 1.4 per cent this year compared with 2.1 per cent for the country as a whole and 3.1 per cent in the east of England. "We estimate London was in a mild recession as the effect of new uncertainty over Iraq delivered the final blow at the end of 2002," Andrew Burrell, an associate director of Business Strategies, said.

Meanwhile the London Chamber of Commerce (LCC) cut its growth forecast to 2.4 per cent from 2.8 per cent because of continued weakness in manufacturing and finance. Manufacturing output is forecast to grow just 0.6 per cent in 2003 after a fall of 4.5 per cent in 2002. Finance is forecast to grow by just 1.3 per cent in 2003 after failing to grow in 2002, largely because of three years of falling stock markets.

Business Strategies said growth would bounce back to 2.9 per cent next year and average 3.8 per cent each year between 2005 and 2007, making London the top performing region. "Our long-term view reverts to the 1990s where regions in the south tended to perform better because of better fundamentals and demographics," Mr Burrell said.

The LCC was more cautious about the outlook for the capital, saying that it expected growth of 2.2 per cent in 2004 and 3.1 per cent in 2005. Justine Lovatt, the LCC's chief economist, said: "We are anticipating the London economy to recover gradually from the second half of 2003. However, economic performance will remain mixed."