Tuesday, 4 December 2012

A Tale of Two Economies...

A fascinating piece by one Ed Conway in last Sunday's Telegraph caught my eye. Conway argued persuasively that GDP figures and similar distort what is really happening in the UK economy and, as in most recessionary periods of modern times, London and the South-East are doing very well while the Midlands, the North and Scotland are struggling.

Indeed, Cornway argued that parts of London had barely seen a recession at all and were positively booming and this has been supported by some data I saw in City AM which claimed that London had grown by 2.2% during the past year which was well in front of the national GDP numbers.

Anecdotally, I wouldn't go as far as Conway and claim there has been no recession in my part of East London. Yes, the High Street is busy and there aren't any empty shops but Poundworld and Poundland have replaced Woolworths and Peacocks and the betting shops have continued to proliferate. The housing market remains subdued though the rental sector (aided by the travails facing anyone trying to get a mortgage) is buoyant. East Ham is a place where the enterprising and those willing to work long hours for little money (and often off the tax grid) exist cheek-by-jowl. The crowds of East European women heading into London to office jobs suggest an economy ticking along nicely.

That said, I don't disagree with Conway's view that much of the country outside London and the South-East continues to struggle. It's interesting to see Conway quote Newry as having lost 5% of its GDP given its proximity to the problems in Ireland.

Politically, this divergent economic reality makes life interesting for the main parties. IF a degree of prosperity can ripple out to the Midlands and the rest of the South, it may give the Coalition parties a chance of survival in 2015 but if it stays confined to London, Labour will have enough to win a majority or close to it.

In his Autumn Statement tomorrow, Chancellor George Osborne knows that not only has he to got to be seen to be in control of the deficit but he has also to show that the recovery and growth isn't just a phenomenon for London but for the whole country. The south-east may stay loyal to the Tories but there isn't enough elsewhere to hold back a vengeful Labour tide if he fails.

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