London’s economy is wobbling from the early effects of Brexit judging from the capital’s faltering housing market, fewer EU citizens seeking work and weaker job creation, according to a report from the Centre for London think- tank.
Despite the unemployment rate holding at its lowest in more than 25 years at 5.5%, job creation has slowed and the number of foreign workers seeking payroll tax registrations has dropped 15% compared with a year earlier.
“While no-one knows how Brexit will play out, this new analysis suggests that London’s economy is beginning to wobble,” think-tank director Ben Rogers said.
The UK economy performed much better last year than most economists expected in the months after the vote to leave the EU. However, since the start of this year, there have been signs of slowing consumer spending and increased reluctance among businesses to invest.
Demand for luxury housing in central London has fallen sharply, and the Centre for London said that the overall annual rate of house price growth was less than 3%, the weakest since 2012 when the city was still recovering from the 2012 financial crisis.
“London has shown remarkable resilience in the years following the recession. However, its growth has not been painless. Levels of inequality have soared. Congestion, pollution and the housing shortage have all worsened,” Mr Rogers said. The report was sponsored by Australian property and construction company Lendlease.
It comes as new figures showed British inflation unexpectedly slowed last month for the first time since October, dousing expectations among investors that the Bank of England might soon raise interest rates for the first time in a decade. Consumer prices rose 2.6% compared to a year earlier.
Sterling fell after the data, down by half a cent against the dollar, and fell to 88.9p against the euro, and British government bond prices jumped as the figures suggested the Bank of England was under little pressure to raise rates when it next meets in early August, despite concerns among some of its policymakers about rising prices.
“This is going to kill the chances of a rate rise in the short term. We will learn more about the Bank of England’s thinking in a couple of weeks, but we can expect the calls for a rate rise to reduce to a whimper,” Lucy O’Carroll, chief economist at fund managers Aberdeen Asset Management, said.
Chancellor Philip Hammond said the UK economy will adapt to changes in the value of sterling, when asked by an MP about the impact of the fall in the pound. n Reuters
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