UK: London shows most resilience in 2023, despite house prices

We forecast small increases in economic activity across nearly all UK nations and regions this year, with London in the lead in terms of GVA and employment. Consumer spending falls everywhere.

What you will learn:

• After a worrying start to 2023, the UK now looks set to see modest economic growth this year. Indeed, the Monetary Policy Committee is clearly concerned about the failure of inflation to moderate as quickly as expected.
• Against that background, London will probably outperform all other regions in GVA terms this year, thanks to its industrial structure, with both information & communications and business services supporting growth, and little negative impact from the manufacturing sector, because of its modest scale in the capital.
• The regional GVA growth rankings map onto employment growth patterns only approximately. In particular, the South East has the second largest GVA rise this year but the second largest employment fall.
• Differences in employment patterns across regions will affect consumer spending, as will the housing market. We expect London to experience larger house price falls than elsewhere, although we do not predict a collapse.
• Real consumer spending will probably fall in every region in 2023 but should recover modestly in future years.