While press speculation over Brexit gradually builds to a frenzy and speculation mounts over the potential damage that leaving the EU could do to London’s financial services industry, London’s economy is secretly doing surprisingly well.
A lot of official regional economic data is too out of date by the time it is released to be of much use in informing us about what is happening in the here and now, but employment data is an honourable exception. Official jobs data based largely on employer surveys are available for the UK regions about 12 weeks after the period that they refer to. At present, the data goes up to June 2018.
The data is subject to revision but it still makes interesting reading. The total number of jobs in London has been increasing at around 2% a year for the past three years. Recently this has slowed and the increase in the six months to June was just 0.6%.
What is interesting, however, is the composition of London’s jobs growth. If we focus in on the sectors that are likely to occupy office space, we see a slowdown in 2016-17 from the very rapid expansion seen in 2013-15, but the big surprise is the acceleration so far in 2018. In the six months to June 2018, employment in these office-based sectors jumped by 2.9% – that’s more than the 1.8% recorded for the whole of 2017.
Much of the increase is coming from the information and communications or ‘tech’ sector, but financial services had actually added a reasonable number of jobs too. June, of course, is ancient history to some and there has been a lot of noise in the Brexit negotiations since then.
With no recent official data to rely on we need to look elsewhere for a guide. A useful source is the recently released IHS Markit report on jobs in London. This is based on a survey of recruitment and employment consultants in London.
The September results show the fastest rise in permanent placements for 16 months and a three-year high in temporary placements. Overall, they found that “survey respondents widely commented on stronger demand for staff”.
This is very encouraging. Recruitment data may be only a broad guide to what is going on but, combined with the official data to June, it paints a far more positive picture of London jobs growth than many would have expected given the uncertainties over the Brexit outcome.
Hiring decisions have to be based on expectations about the future so whatever reservations companies may be expressing through surveys and in public, their behaviour implies a rather more optimistic view of the future.
It might also help to explain why City office rents are holding firm despite the quite substantial amounts of new space that are coming on to the market.
Neil Blake is global head of forecasting and analytics/EMEA chief economist at CBRE