Volkswagen battery plant will drive economy, increase consumer confidence says economic think tank

The London economy will be driven, at least in part, by the construction of the Volkswagen battery plant in nearby St. Thomas. That’s one of the key highlights in the Conference Board of Canada’s economic outlook for the London region.

“It will cause many positive ripple effects throughout the local economy. Not only in manufacturing, but also in sectors such as construction, transportation, and warehousing. The opening of the plant will increase consumer confidence and business confidence, and potentially attract more investment to the metropolitan area,” explained economist David Ristovski, the author of the Major Cities Insights: London report.

The outlook says the local economy is on course to expand by 1.7 per cent this year, and by 2.5 per cent in 2025. It’s a decline from 3.2 per cent growth in 2023, when the region and country emerged from the economic and social impacts of the pandemic.

Land is cleared for the Volkswagen battery plant in St. Thomas (Source: St. Thomas Economic Development)

“There was just a huge growth spurt in economic activity throughout 2023. There was a bit of a bounce-back. Now what we’re seeing is just a bit of a slowdown,” said Ristovski.

The Conference Board report says demand for housing and other big-ticket items will continue to be sluggish, as households grapple with inflation. Furthermore, the impact of recent interest rate cuts won’t be seen for several months, said Ristovski.

On the positive side, arts and entertainment along with accommodation and hospitality will continue to grow.

“It’ll start to incentivize individuals, not only to spend on more expensive goods and services, but also incentivize those to go out and continue spending,” said Ristovski.

As for employment, the report says job levels are on course to grow 1.5 per cent this year, and another 1.3 per cent in 2025. The unemployment rate will average 6.2 per cent in 2024, and 6.0 per cent in 2025.

For London Mayor Josh Morgan, the economic forecast comes as no surprise.

“Significant increases in our ability to start housing projects, which will ramp up over time. And the general strength in the London economy that has been relatively resilient to a number of slowdowns, with positive trends as well in unemployment and employment rates,” said Morgan.