Capital leads way to recovery

LONDON'S economic fightback gathered pace last month, with business activity in the capital expanding at its fastest for two and a half years and outstripping the national average.

In a further boost for Londoners, the outlook for employment has drastically improved. Only a handful of staff were axed last month and the rate of job shedding was the lowest for more than two years.

The findings come in the latest Royal Bank of Scotland London poll, based on the respected CIPS/Reuters national purchasing managers' report.

The survey's headline business activity index was 57.1 in August, a big improvement on July's 55.7 and signalling the third consecutive month of growth. A reading above 50 indicates expansion. The national figure was 56.5, indicating growth in London was stronger than that for Britain as a whole.

'Stronger growth of business activity levels generally reflected efforts to clear existing work-in-hand while responding to improving demand conditions,' the report says. 'Robust growth was recorded in the manufacturing and service sectors.'

Incoming new business grew at the fastest rate for 14 months. That was attributed to a general upturn in business confidence. More firms are beginning to hire staff.

'London is now leading the UK recovery,' said Stuart Porteous, senior economist at RBS. 'Even more positive is the fact that business activity is now growing at its fastest rate since February 2001.

'Profitability and recruitment are still under a little pressure-but this should ease as demand continues to grow. The longer the recovery in business activity is sustained, the more confident business will be about recruiting again.'

The Centre for Economics and Business Research last week raised its growth forecast for London this year from 1.6% to 2.3%.

In its report, RBS says all 12 UK regions registered growth in August, adding to mounting evidence that the economy is recovering. Although London and the South-East are leading the upturn, the manufacturing regions such as the West Midlands and North-West are also showing a marked improvement.

'Stronger order book gains were recorded across the regions as improved sentiment encouraged greater investment and spending,' the report says.