Times will be tough - but we can lead the fightback

As I gaze up from the newspapers and stare out of the window of my City Hall office, across the Thames to the City, I am stunned by what I see. The Gherkin is still standing, and so too is Tower 42. The roads are still full of traffic. Despite the tales of apocalypse now, not just the City but the city is still alive with the sound of people making money.

This is not to say that there aren't real problems, and that the pain in the financial sector is not spreading to the wider economy. The national economy is contracting for the first time in 16 years, and faster than expected; unemployment is rising; house prices are falling; companies are hurting. But to those who say London is doomed by the crises in financial services and housing, I say: nonsense. The Visigoths are not at the gates.

The surprise is not that London is at the forefront of the national downturn but that our capital's economy larger than that of Austria is so far holding up surprisingly well in the face of this financial tsunami.

According to the Royal Institution of Chartered Surveyors' latest survey, the housing market isn't as bad here as in the rest of England and Wales. The latest figures from Nationwide show London has suffered a 9.4 per cent fall in house prices, but that is actually one of the smallest falls in the UK. A Royal Bank of Scotland business survey showed that last month London was the only region to experience an increase in activity. Retail sales are falling across the UK but in the West End they are holding up, just. Transport use is still growing, even though during recessions it normally declines. My team of economists assures me that London will suffer a less severe downturn this year than the rest of the UK.

I concede 2009 is likely to be far tougher. But amid all the capital gloom, we mustn't forget that London retains the strengths that propelled it to becoming the world's leading city. We speak English, the modern lingua franca. Our time zone hasn't changed, and 90 per cent of the world still shares some of its working day with us. We are still open, diverse, and welcoming to people from across the globe. Our workers are still among the most productive on the planet, our highly skilled and flexible workforce is still second to none. We are world leaders not just in financial services but in the media, fashion and high technology, with world-class universities pumping out ideas and talent. We are still the best city in the world to live in. To those who say Zurich is a more attractive place to do business, the joke goes: have you ever spent an evening there?

Businesses tell me there is a bright side. The fall in property prices and the pound is making once notoriously expensive London now surprisingly affordable to foreigners, investors and visitors alike. Our attractions are becoming even more attractive to overseas tourists, bringing back Americans and gaining new visitors from Asia and the Far East. My agency Visit London predicts a growth in tourist income next year.

But while we should be confident about our long-term future, we must not be complacent. These are difficult times. We have been in extended talks with a range of business groups, small companies, finance houses and leading multinationals to develop an Economic Recovery Action Plan for London. Although I can't set interest rates or the main taxes, there is a lot I can do to help the London economy and small businesses recover, to help individuals weather the storm, and to position London to be stronger than ever when the upturn comes.

We may not all be Keynesians now but we must not shelve the major infrastructure projects such as Crossrail that not only safeguard jobs in the short and medium term but ensure London's competitiveness in the long term. I have lobbied the Government hard on this, and welcome its pledge that it will safeguard our major projects including the Olympics. Moreover, I am looking at whether it is possible for any other projects currently in the pipeline to be brought forward.

Financial services may have been the root of our problem but they have been incredibly important for us in the past, and they will continue to be so in the future. In difficult times, it is important too that we don't sit back but rather redouble our efforts to sell the benefits of London to the rest of the world. I am working on ways to make far more effective the promotion of London as a global magnet for business, talent and tourism. It is important that we don't let our odiously complex tax regime frighten global companies from making their base in London, and I am pressing government to ensure that the UK has competitive corporate taxes.

I am looking at a range of ways of helping small and medium companies, the mainstay of the London economy. We are already the largest public-sector investor in business advice and support services in London but we need to simplify them to make them more accessible. With a £13 billion annual budget we are one of the largest spenders in London, and I would ideally like to help companies' cash flow by bringing down the time we take to pay our bills towards 10 days. I am considering ways of making procurement easier, reducing the red tape for companies that work for us. I am looking at ways to help small companies improve their access to credit, such as loan guarantee schemes.

I am determined to help hard-pressed Londoners in these times of adversity. By rigorous cost control at City Hall, I will help households make ends meet by freezing my share of the council tax. I am seeking efficiencies in our transport system to keep fares as low as possible. I am developing ways of ensuring that house building continues despite the collapsing market, to help Londoners get the homes they need. We are investing £600 million in skills training, to ensure Londoners are equipped to get into or back into the labour market. We are talking to the Government about launching welfare to work schemes. We are working on energy efficiency programmes that will save Londoners and London businesses millions in energy bills.

The Economic Recovery Action Plan, as we develop it over the coming months, will help the London economy and Londoners weather the storm. Although we are in for a bumpy ride, if we handle this right, we can come out of the slump in a stronger position than before. London is the world's greatest city, and I am determined it will remain so.