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Has the London economy performed better or worse than other UK regions since the pandemic? The answer depends on when you ask.
Figures published last year showed that the capital was the star of the UK’s regional economic recovery. However, more recent statistics show London underperforming the rest of the country.
As a result, the city has become another story in the series “how the UK’s radical data revisions shattered its economic narrative.” It follows the shift last year when a major ONS GDP revision brought the UK post-pandemic economic performance from the bottom of the G7 leagues to the middle of the pack.
A changing understanding of London’s economic trajectory is no small matter considering that we are in an election year and “levelling up” was a key objective in the 2019 Conservative manifesto.
So, what happened with the data?
Until May 2023, the ONS published quarterly experimental regional GDP figures that showed London outperforming the rest of the country.
The underlying data of the latest publication of that series showed that the London economy in the three months to September 2023 was 4.4 per cent larger than in the final quarter of 2019, before the pandemic. This contrasted with the UK’s overall output which had yet to recover to the pre-pandemic level.
At the time, one economist said the figures defied “pandemic predictions of the death of cities”.
But those were experimental statistics, and have since been “temporarily paused” while the ONS carries out “work to reduce the level of uncertainty in the estimates”. The stats body told us of this series:
While it tends to give reliable estimates during times of economic stability, it has been shown to be more liable for revision during periods of great upheaval, resulting in notable revisions between some publications.
That didn’t matter much for London’s story, because the ONS’s headline annual measure of the UK economy at a local level, published last year, was still showing London outperforming the rest of the country.
The underlying data of the ONS’s “Regional economic activity by gross domestic product, UK: 1998 to 2021”, revealed that, in 2021, the London economy was 3.7 per cent below its 2019 level — better than the 4.3 per cent contraction across the country. The differences with the quarterly results relative to pre-pandemic levels depended on comparing the economy across 2022, rather than in the most recent three months, and London was an outperformer either way.
The narrative about London’s economic recovery changed, however, in the “Regional economic activity by gross domestic product, UK: 1998 to 2022,” published last week. This time, the underlying data showed that output in the capital was 0.6 per cent below its pre-pandemic 2019 levels by 2022, underperforming the UK economy, which grew 1.7 per cent over the same time:
That shortfall is despite London experiencing the largest regional increase in real GDP in 2022.
In fact, the updated data shows the London economy contracted much more than previous estimates in 2020 (–13 per cent vs –11.2 per cent respectively). In contrast, the hit to the rest of the economy was revised to a milder one (minus 10.4 vs minus 11), in line with the revisions to national accounts carried out in September 2023.
The UK economic rebound in 2021 was also revised to be much stronger, while it was left largely unchanged for the capital.
As a result, between 2019 and 2021, London shifted from being an outperformer — as in last year’s release — to the second-worst performer after Wales according to the latest data:
The ONS told us that London presents a “mixed” picture:
Whereas some parts of London have recovered relatively quickly from the pandemic, other areas of the capital have been some of the worst affected, including the areas around Heathrow airport and many Outer London boroughs. It is a mixed picture, but the impact on transport hubs, especially rail and air transport, has been extensive and deep.
However, with all the data revisions and suspensions, we would say that the picture is rather muddled instead.
