Only London and south-east to make "positive contribution" to the economy in 2013

London and the south-east are the only regions that will make a positive contribution to the economy in 2013, a study by Oxford Economics has shown.

According to the research, London and the Home Counties will make up for more than a third of the UK’s total tax income in 2013.

The Olympics and the Diamond Jubilee celebrations will increase the capital’s VAT receipts from £16bn in the last financial year to £17.2bn this year.

The research also showed that London’s resilient housing market boosted property taxes.

Economists said that Britain’s increasing reliance on London is attributed to higher welfare bills elsewhere. The study points out that while state hand-outs made up for only 11.7% of the capital’s economy, it accounted for 30% of the Welsh economy and 29% of the north-east.

Speaking to The Sunday Times, senior economist Helen McDermott said that by 2025, the south-east is expected to be in surplus by £50bn and the rest of the UK will be in a £40bn deficit.

“As such, London generated over 30% of the overall increase in VAT despite only accounting for 16-17% of the tax base,” she said.

“On our estimates, most UK regions were in deficit even during the peak years of growth in the early half of the last decade.”