London 'on verge of recession'

A sharp increase in City job cuts has pushed London to the brink of recession, a report said today.

The Centre for Economics and Business Research (CEBR) estimated that London’s GDP growth for 2002 has fallen from 0.7% in August to 0.2%.

It added its forecast showed the last two quarters of the year were showing negative growth – technically a recession.

However it said because of the uncertainty about estimates for an individual quarter, it was realistic to describe London as on the “verge” of recession.

A major cause of the decline has been a sharp increase in City job losses. This was highlighted by reports yesterday that US investment bank Morgan Stanley, which employs around 5,000 staff in the UK, would axe 2,200 staff worldwide.

In its report, the CEBR estimated the decline in City jobs in 2002 and 2003 had increased from 8,000 to 25,000, as tough conditions and volatile stock markets took their toll.

CEBR said the City had held on to people in jobs for much longer than previously expected and much longer than the announcements of redundancies in City firms had implied.

The CEBR’s view of the London economy suggests a sluggish recovery with 0.7% growth in 2003, leading to growth of 2.4% in 2004 and unemployment rising from 4.2% in 2001 to 5.85% in 2003, an increase of 58,000 people.