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London today looked to have put the worst of the Lehman Brothers crisis behind it just a year after the collapse of the investment bank.
A survey showed business activity in the capital hit an 18-month high in August, fuelling hopes that the recession is drawing to a close.
The dramatic failure of Lehman sent the global economy into a tailspin and sparked the most vicious slump since the Great Depression.
Shares around the world plunged in the aftermath of the shock but have rallied sharply in recent months, boosting business in the City of London and Canary Wharf.
The FTSE 100 index hit a low of 3512 in March, but last week smashed back through 5000. It was down 28.56 to 4982.91 today. Global stock markets have also enjoyed a healthy recovery.
However, shocking figures from the London High Street today served as a timely reminder that the road to recovery will be long and painful.
Unemployment also rose sharply last month in the capital.
The British Retail Consortium (BRC) said sales in London last month were 5.9% lower than a year ago as shoppers tightened their belts.
“These results don't suggest the recovery is under way,” said BRC director general Stephen Robertson.
Economic researchers at Markit were more upbeat after a survey showed business activity in London expanded at its fastest pace in 18 months in August.
The so-called Purchasing Managers' Index, where anything above 50 represents growth, rose from 52.1 in July to 54.2 in August.
Activity in the south-east was also at an 18-month high with the index rising from 53 to 53.8.
The recovery in both London and the south-east is lagging just behind the rest of the UK where the index hit 54.3 last month.
Markit economist Tim Moore said: “The phrase a rising tide lifts all boats' seems apt for the UK regions at present, with a broad-based rebound in economic conditions under way amid a flood of monetary easing and fiscal stimulus packages.”
Firms continued to shed staff last month with Londoners losing their jobs quicker than anywhere else in the UK. Moore said demand remained “fragile as the economy begins to pull out of recession”.
The influential Ernst & Young Item Club also warned that increases in house prices in recent months were “a false dawn” and said values will not return to their 2007 peak for at least another five years.
Hetal Mehta, senior economic advisor to Item, said: “Price rises largely reflect the acute shortage of available properties, with many homeowners either trapped in negative equity or reluctant to sell for fear of locking in the losses of the past two years.
“A small number of cash-rich buyers have supported prices, but the supply of these funds is limited, which means prices are likely to dip again in the first half of next year.”
Reader views (4)
Keith Price, Luton England
The strange thing is Keith, that everyone else (incuding the OECD and IMF) think the opposite is true and we are in a much worse situation than other european countries. The only reason there is a slight upturn at the moment is because this inane government have just printed £150 billion; what do you think will happen when that runs out? They can't print more? All the idiot Brown is doing is postponing the big crash which will happen early next year. If he'd let this recession run its course instead of meddling then things would be looking a lot rosier. Brown has successfully screwed things up not just for us but for our children and their children.
- Margy, London
Black October rules; OK?
- Ted, London
Thanks alot for your comment Gordon (masquerading as Keith) - but shouldn't you actually be spending your time trying to come up with a plan to save the country from bankruptcy ?. Have you actually noticed that public spending is out of control ? did you ever intend to pay the money back....or just keep spending and hope noboddy notices. As we all know spending is easy - saving is...well hard. Ah well there's an election coming up so I suppose you'll just keep spending.
- David, Ealing , UK
Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton England
