Capital cheaper than New York for first time in seven years

The cost of living in London has dropped dramatically as a result of the recession and is now cheaper than New York for the first time since 2002, according to research out today.

London has fallen to the world's 27th most expensive city from eighth place six months ago, according to a survey by the Economist Intelligence Unit.

At the start of last year and before the credit crisis hit, London was the third most expensive city in the world.

According to the figures, New York is now the 23rd most expensive city, from 39th six months ago, meaning that for the first time in seven years, prices in London for food, alcohol, utilities and clothing have dropped well below those in the Big Apple.

The Mayor of London, Boris Johnson, welcomed the findings. He said: "The results of this survey are timely and heartening. During the downturn, it is important we continue to celebrate and advertise the richness and diversity of our unique city and the world-beating attractions, galleries, exhibitions, theatres and restaurants on offer here.

"Overseas visitors are crucial to the capital's economy and I use every opportunity I can to promote London and attract visitors whether at home or abroad. We are working closely with Visit London to ensure that everyone from Seattle to Shanghai knows that there has never been a better time to visit London and get great value on every pound, dollar, euro or yuan spent here," he said.

Jace Tyrrell, of the New West End Company, which represents businesses in Oxford Street, Bond Street and Regent Street, said: "We've seen an incredible increase in European visitors in the last six to eight weeks - walking down Oxford Street on a Saturday now feels as if you're in Paris."

Mr Tyrrell said the influx of visitors is helping the capital's economy during the financial crisis. He added: "The spend by international visitors from outside Europe is up 38 per cent in the past couple of months. We're fortunate the tourists are here during the recession." Ken Kelling, of Visit London, said: "There has never been a better time to visit London. It is now 25 per cent cheaper for an American to come to London than it would have been this time last year."

The worldwide cost of living survey compares the price of around 160 items, ranging from food staples, taxi charges, newspaper prices, clothes, electronics and household goods. It does not include accommodation costs or house prices.

Tokyo was the most expensive city on the list, followed by Osaka and Paris.