London’s employment prospects have improved greatly in a ranking of 46 city-regions across Europe and the capital’s performance is expected to be on par with Paris and well above Frankfurt, said an economics report out today.

London heads a list of six UK city-regions (the others are Birmingham, Manchester, Cardiff, Edinburgh and Glasgow) in terms of forecast employment growth over 2003-08, having been towards the bottom of last year’s league table, according to leading forecasters and analysts, Cambridge Econometrics.

London’s improved performance is announced in today’s update of the European Regional section of Cambridge Econometrics’ Knowledge Base, which contains analysis and forecasts for 46 major cities and over 250 European regions up to the year 2008.

The report is prepared by Cambridge Econometrics in collaboration with other leading European economic institutes.

“Most of the reason behind London’s improvement reflects the change in outlook for the international financial services on which it depends”, says Ben Gardiner, the director at Cambridge Econometrics responsible for co-ordinating the study. “Renewed growth is being underpinned by recovery in the City, especially in financial & business services, but also in areas such as hotels and catering as confidence returns among visitors to the capital.”

Further afield

Across Europe, the top performers for employment growth are Madrid (still benefiting from EC funding projects) and Athens (reaping the benefits from the backlog of projects in the run-up to the Olympic Games). Italian city-regions also figure quite highly, mostly because of labour market liberalisation leading to more part-time jobs.

London’s employment performance is expected to be on a par with that of Paris, and well above that of Frankfurt, particularly within financial services. Indeed, German cities face the risk of a further weakening of domestic demand, and many have slipped down the ranking for prospective output and employment growth.

The fastest-growing cities in terms of growth in value added are Moscow and the city-regions in the New Members, which are still expected to benefit from relocation of production and services, as both routine and medium-to- high-skilled functions are at risk from being moved further east to areas where foreign direct investment has long been established.

However, on-going restructuring in these economies, particularly in the traditional manufacturing industries, is expected to hold back overall job growth, even though opportunities exist in rapidly developing service sectors.