The catastrophic truth about London's decline
It may well be a few years behind schedule, but it is finally happening. The UK is levelling up between London and the rest of the country. House prices are falling in the capital, the mega-rich are all leaving for Italy and Dubai, the City is not minting new hedge fund millionaires any more, and this week we learnt that it is now the only region of the country where productivity has not managed to claw its way back to its pre-pandemic levels.
There is just one catch. A failing London will be a catastrophe for the British economy – and if we can't find a way to turn that around, it will be impossible to escape from permanent stagnation.
We may think of London as the beating heart of the British economy. But increasingly that is no longer true. According to the latest data from the Office for National Statistics, output per hour worked in London fell at an average annual rate of 0.3pc from 2019 to 2023, compared to an average annual gain of 0.7pc a year across the rest of the country.
Every other region has now clawed back its pandemic losses, and is above the 2019 level for productivity, but London is still behind. Sure, it is still the most productive part of the country, with output per hour still 28pc ahead of the rest of the UK. But its lead is steadily shrinking, falling from a 33pc lead in 2019 and an all-time high of 38pc back in 2007. At this rate, by the middle of the century there won't be much difference in output per person between London and Manchester, Leeds or Bristol.
We can all speculate about the reasons for that. London has a lot of civil servants, and we know that productivity levels in the public sector are dire. It has always been a slog to get into the office, so working from home has stuck for longer in the capital than elsewhere, and that also typically means less output.
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