The lopsided shape of Britain’s economic recovery has been laid bare in a new report showing how London enjoyed the biggest increase in new job creation over the last parliament.
The respected City consultancy Capital Economics said employment in London has grown by more than 13 per cent since the coalition took office in 2010, compared to an average of 6.4 per cent for the UK as a whole.
Yorkshire underperformed the UK average, with employment growth of around 5 per cent over the last five years.
“With less than three weeks to go until the general election, parties are in full-on campaign mode,” said Capital Economics.
“The Conservatives have focused attention on their economic track record, and in particular the strength of the jobs recovery.
“However, while the UK’s jobs miracle has been impressive, London has benefitted the most by far.”
The consultancy, led by influential economist Roger Bootle, is predicting UK employment to rise by 1.5 per cent this year.
The positive outlook is echoed by today’s spring forecast from the EY Item Club, which predicts that the UK will continue to grow solidly in 2015, despite political uncertainty, thanks to the boost provided by ultra-low inflation and an upturn in the Eurozone recovery.
The think tank said the positive effects of low oil prices and falls in other commodity values, along with a strong pound importing low inflation to the UK, are all supporting the solid UK economic momentum.
The Item Club said the benign environment for inflation is amplifying the benefits of high employment, boosting consumer confidence and allowing shoppers’ wallets to stretch further.
It described the increasingly robust recovery in the Eurozone as “an added bonus” to the favourable outlook.
The Eurozone recovery was already gathering steam before the start of quantitative easing and is now being reinforced by the European Central Bank’s (ECB) bond-buying programme, according to the think tank.
It said the strengthening recovery in the UK’s biggest export market should be enough to offset some of the negative effects of the strong pound on UK firms selling overseas.
As a result, the Item Club expects GDP growth to reach 2.8 per cent for 2015 and 3 per cent for 2016, a much more positive outlook than forecast by the Office for Budget Responsibility alongside March’s Budget.
Peter Spencer, chief economic advisor to the think tank, said: “The economy is taking the general election in its stride as ‘noflation’ trumps politics.
“The eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016.
“This is a mirror image of what we saw in 2010-12, when unemployment and inflation were high and Europe was in the doldrums.
“If the strength of the headwinds that held back the economy during the first years of the coalition is anything to go by, the tailwinds enjoyed by a new administration post May 7 should be strong enough to outweigh the effects of any political uncertainty.”
He is professor of economics and finance at York University.
Mark Gregory, chief economist at EY, said: “With less than a month now until the election, the economy and businesses seem to be powering through relatively unscathed.
“Despite a softer performance from business investment in recent months, we’re likely to see the pace of spending by firms gather again later this year as companies hone their strategies to tap into buoyant consumer confidence.”
He said mergers and acquisitions activity is picking up as companies look internationally for growth, with Europe attracting a lot of interest from the US, China and the UK.