On 26th June the Greater London Authority (GLA) ran a seminar on the possible effects of the credit crunch in the capital. So are we looking at a repeat of the recession of the early 1980s or is it just a ‘blip’ in an upward trend? If it is a downturn what impact will this have on employment?
Well, the experts seemed unanimous that it is not a blip. They vary in the severity of downturn they predict, but the prevailing opinion (and the one currently supported by GLA Economics) is a comparatively ‘benign’ downturn, rather than full blown recession.
It started with the US ‘sub-prime’ loan crisis. Financial institutions stopped lending to each other with none of them wanting to be the last one holding the risk, in a sort of toxic pass-the-parcel game. Consequently they are now more nervous about lending to us as well with mortgage rates and the costs of corporate borrowing going up.
The two sectors all agree will be affected by the downturn are the financial services sector and construction. Estimates of job losses in financial services vary from 500K in a full recession to 130K in a downturn, with something like one half of losses in London. In construction it has already been reported that new house building in 2008 will be at less than half the 2007 level and many large developments due to start in 2010 onwards are on hold. One prediction was house prices to fall by 25% over the next three years.
If we avoid recession Connexions clients looking for work might avoid the worst effects of the difficulties in the financial services sector. Many of the junior admin jobs they enter will be in business services, rather than finance itself and this sector is predicted to hold up better. Construction, however, is already decreasing in terms of employment of central London residents and for the next couple of years entry is likely to be even more difficult.
If the downturn is worse than currently predicted the loss of employment could be felt across more sectors. Retail is currently holding up well but could be badly affected by a full recession.
On the positive side 2010-11 is when most are predicting the upward trend will return – when those starting a two or three year FE or HE course in autumn 2008 will be leaving.