Leading article: An uncertain future for the capital's economy

Click to follow

One of the more uncertain consequences of the wave of terror attacks being inflicted on London may well turn out to be economic in nature. The capital's economy is already feeling the effects of the co-ordinated assaults on its transport system. The number of shoppers visiting central London is down by 20 per cent compared with this time last year. High street sales within London's congestion-charge zone have dropped by 10 per cent.

It is not just the retail sector that is under pressure. On 7 July, the theatres of the West End had to close for the first time since the Second World War. And last Thursday, when the second attack took place, only about 280 people, out of the 500 who had booked, turned up to see one popular production, despite the fact that the transport system remained running. Anyone tempted to discount the economic importance of this sector should bear in mind that about 41,000 jobs rely on the West End theatre scene. It has more shows and bigger audiences than Broadway. And as a net foreign currency earner for Britain, it is comparable with sectors such as advertising and accountancy.

Then there is tourism. British Airways reported no significant dip in bookings after the first attack. And it was heartening to see the first package tour of Chinese tourists take to London's streets yesterday. But a tourism report has warned that this year's overseas visitors are likely to spend £300m less in the UK; London would have accounted for half of this. And despite the fact that there have been no immediate holiday cancellations, future bookings could well suffer. The terrorist threat would have to be drastic for tourists to alter their existing plans, but many may decide to avoid London when making their future holiday plans.

All this uncertainty is emerging at a time when the UK economy already appears to be entering a downturn. Growth is at its slowest rate for more than a decade. Retail indicators had begun to cause consternation before this month's attacks. And according to Hometrack, house prices have been falling for the past 13 months. Britain's decent economic growth in recent years has been driven by buoyant consumer spending. Yet this is especially vulnerable to acts of terrorism. There will now be renewed pressure on the Bank of England's monetary policy committee to reduce interest rates. London is not the entire British economy, of course, and policy makers will have to take into account the rest of the UK. But the capital is such a driver of our national economy that a lowering of rates must merit consideration.

Just about every politician and senior police officer has urged us to "get on with our lives" despite these dangerous times. Such exhortations are of limited value, but there are things that those in authority, especially the London Mayor, could do to help. Tony Travers, of the London School of Economics, has suggested suspending the congestion charge in August to encourage shoppers - an idea worth considering. And the Mayor should certainly capitalise on the number of commuters taking to their bicycles by creating more dedicated routes and better parking for cyclists.

It is estimated that New York took some 18 months to recover economically from the terror attack of 2001. Madrid took around six months to get back on its feet after last year's train bombing. London is in a more precarious situation, having suffered two assaults and with the men who committed last week's attack still at large. It is unknown how many more terror cells are out there, plotting attacks. The worrying truth is that London's economic prospects - and those of the entire country - will remain uncertain until we have a clearer idea of the scale of the threat facing us.

Comments