London’s productivity growth has fallen in recent years. Discover why productivity growth matters and how the plan will raise the average productivity growth rate by 2035 to transform the UK economy and the lives of Londoners.
Why it matters
London’s productivity grew strongly in the decade before the global financial crisis, which boosted incomes and wages. Between 1998 and 2007, productivity grew by an average 3.16% each year and wages rose with it.
Since then, London’s productivity has flatlined. Between 2008 and 2022, productivity grew at just 0.12% per year on average.
The ambition of this 10-year plan is to start to close the gap with London’s productivity growth before the financial crisis. If we could get productivity growth back to an average of 2% per year for the next decade, it would transform the UK economy and the lives of Londoners.
If we reach 2%, the London economy could be £107bn larger in 2035 and that means an average of £11,000 in extra pre-tax income for the nearly nine million people living in our city. London would be contributing an extra £27.5bn in taxes to the Treasury[12].
Our ambition
Raise the average annual productivity growth rate to 2% from 2025 to 2035.
2%
productivity growth rate
What we will do
How we will achieve our productivity ambition:
- Sectoral mix: Grow the highest productivity sectors through international trade and innovation. The plan for this is in growth sectors and places.
- Skills: Grow the size of the skilled workforce by enabling all Londoners to participate to their full potential. The plan for this is in inclusive talent strategy.
- Housing and infrastructure: Increase affordable housing and investment in infrastructure. The plan to tackle this is in housing and infrastructure.
- Business productivity: Grow productivity within London’s businesses and back them to scale up and export. The plan for this is in backing our businesses.
Discover the key actions
Inclusive talent strategy
Explore our plan to unlock the potential of London’s skilled workforce and drive the economy.
Backing our businesses
Discover how we will continue to support London businesses from high streets to startups.
Housing and infrastructure
Understand London’s priorities for building new homes and infrastructure to boost growth.
Investment and promotion
Find out how we will win more investment in growth and build London’s global reputation.
Local places
See how London will create more thriving local places where growing businesses support their communities.
Sources:
12. GLA Economics calculations based on ONS regional gross value added (balanced) current price estimates, consumer prices index (CPI) inflation and ONS regional labour productivity: 2021 (output per hour, chained volume measure). Projection using 2% p.a. productivity growth uses historic linear relationship between GVA and productivity to project GVA forward. Gap between output growth and productivity growth (output per hour) therefore represents assumption that labour force growth follows similar historic growth rates (i.e. larger workforce and/or greater hours per worker). £107bn divided by the ONS’s figure of London’s 8.95 million population gives a figure of just under £12,000 per capita.