London is going to be hit particularly hard by the recession

When you look at these figures from Time magazine you realise how hard hit this country, and London especially, is going to be by this recession:

“In 2007 financial services accounted for 10.1% of the U.K.’s gross domestic product, up from 5.5% in 2001. Add in professional services linked to finance, such as accounting, law and management consulting, and the total rises to 14%. And that’s for Britain as a whole. For London, finance has been even more important: it accounts for almost one-fifth of the city’s total output, perhaps as much as one-third if professional services are included. That’s far more than for even New York City, where financial services account for about 15% of its economy.”

One of the dirty secrets of the Brown era is how Britain indulged in regulatory and tax arbitrage to keep the City booming, using that money to cover up the deficiencies of the rest of the economy. Now, this has come back to haunt us. The next government really is going to have to think seriously about what Britain’s comparative advantage is.