London will be the "fastest" European city to recover from the economic crisis

London will be the European city to rebound the  "fastest" from the crisis, although its economy has been "hit hard by the global recession," its growth as a global financial hub in the medium term will even exceed that of New York or Tokyo, according to a report on prospects for the economy made by London based 'Oxford Economics'. 

The study, published by international real estate consultancy Savills, anticipates a growth in London GDP of 3.4% annually between 2010 and 2012, which will be exceeded only by Stockholm and Frankfurt. It anticipates that between 2012 and 2020 London will be the fastest growing city in Europe with an accelerated GDP growth of 5% in 2012 and with an average of 4% over the next eight years. 

Oxford Economics points out, however, that London's economy suffered from the severe global crisis, with a decline in employment of 8% and a 4.5% contraction of GDP. "The policies again pose a major threat, but London will emerge as the city with the fastest growth in Europe," they said.  

Among the risks that London will face in the next few years, the report warned of the diversion of funds to the Asia Pacific region and the "potential significant policy errors" that can occur. "Taxation, transport infrastructure and the regulatory environment are the areas where political intervention could damage London's prospects," they add. 

The head of International Investment and Capital Markets of Savills, John Rigg, said the crisis in subprime mortgages led to "a seismic shock for all three global financial capitals, and its impact and implications were" potentially cataclysmic". "However, concerted central bank action and the fall in sterling, combined with London's intrinsic attractions are causing a rapid recovery in certain markets," he said. 

Particularly, Rigg said that there was "a flood of new overseas investors seeking London and UK real estate based on confidence." Thus, he stressed that London is "very unique" and it is up to those in government to ensure that any new medicine for the financial services industry " does not kill the patient."

The report concludes that even if growth of the financial sector is weaker than in the past, "London's combination of skills, capital, market access and flexibility should ensure that non-financial activities step up to fill the growth gap".