The latest sign of the UK capital’s growing power is a study published this week by the professional services firm Deloitte showing that London has more people employed in highly-skilled sectors than any other city in the world. The 1.5m people working in such areas as banking, the law, digital media and software development is comfortably ahead of the 1.2m in New York and the 784,000 in Los Angeles.
This finding, along with others reported in the Financial Times of 11 November, is another blow to those who believe that the financial crisis should have prompted a “rebalancing” of the economy. Instead, as the 2013 UK Competitiveness Index, one of the other studies featured in the FT report, indicates, Britain’s economic competitiveness and growth capacity is becoming increasingly, rather than less, concentrated in London and particularly the City. It is also a boost to Tech City, the concentration of digital start-ups on the edge of the Square Mile and that is winning increased attention around the world.
Such evidence is little surprise to seasoned city watchers. For example, Richard Florida, an academic at New York University and Toronto University’s Rotman School of Management, writes in the October 2013 issue of The Atlantic magazine that the collapse of Wall Street was expected to bring the whole city down with it. Noting that, just a year after the onset of the crisis, he had predicted that New York would prove to be one of America’s most resilient places, he adds that the city “retained its perch as a preeminent global financial center”. Admittedly, there had been a reduction in the importance of the financial industry. But, far from being catastrophic, this had merely provided the spur and space for other industries to grow. As in London, many of those new industries have been in technology.
Quitting the business park
Florida sees this development as indicative of a new trend – the move of technology companies away from suburban business parks alongside major roads and into more downtown districts. He reports how even Silicon Valley is losing its allure, with many companies – established as well as start-ups – opening buildings in downtown San Francisco. While accepting that the likes of Google and Apple will still need out-of-town sites, he suggests that the desire for creativity – reported here and elsewhere – is driving a return to “the urban core”.
This analysis forms part of a report on “The Boom Towns and Ghost Towns of the New Economy” which identifies a number of growth centres based on the country’s “knowledge metros”. And this is where the experience of New York and London diverge. While the former is one – admittedly the pre-eminent one – of many cities in a vast nation, the latter is head and shoulders ahead of the other cities in a much smaller country. London is a truly global city, while the likes of Birmingham and Manchester lag far behind.
This situation has prompted the Royal Society for the encouragement of arts, manufactures and commerce (RSA) to establish a City Growth Commission chaired by Jim O’Neill, the former Goldman Sachs executive credited with coming up with the term “Brics” for the best-placed emerging economies. The commission aims to report next autumn with recommendations for boosting economic growth in Britain’s lesser cities on the grounds that “urbanisation” is the megatrend of the age. O’Neill [in an article in the FT of 28 October] quotes research indicating that by 2015 70 per cent of the world’s population will be urban and says that research by the management consultancy McKinsey shows that, while mid-tier cities are currently home to only 7 per cent of the world population, by 2025 they will generate 19 per cent of global growth.
Although not intending to take a stance on the High Speed 2 rail link between London and the North, the report will look at improving infrastructure – both technological and physical – around main cities. It will also look at ways in which cities might be able to raise their own funds and have other means of control over their destiny through more substantial devolution.
Given that Britain is comparatively small and that – even without HS2 – it is possible to travel between London and most parts of the country within a day, the aim of creating regional centres might be difficult to achieve. Even the regional structure of Germany – with its local banks and businesses – can be seen to be a result of political history rather than economics.
Moreover, as Florida describes, even in America not all regional cities are successful. Detroit is the most obvious example of a city that lost out when an old-style industry fell on harder times. Birmingham played a similar role to Detroit in Britain’s car industry and has suffered similarly – if not as spectacularly. Newcastle and Liverpool are other cities that have been hit hard by the decline of industries which once made them wealthy. And you could go even further back, to those towns in East Anglia once rich but now barely viable.
It is not all bleak. There has been some revival in cities outside London and there and elsewhere in the world urban planners are taking more interest in citizens’ interests in designing living and work spaces. The results include less dense living spaces, more cycle routes and the rest.
But in the end the key factor in a city’s success is its ability to create high-wage jobs. What the success of London, New York and a few others seems to suggest is that – as in other areas – nothing succeeds like success. The wealth and energy of these places makes them ever more attractive to the well educated, talented people that all places need in order to succeed. Certain cities in America are realised that by creating knowledge centres (and offering better lifestyles) they can persuade some people to resist the lure of the bright lights on the coasts. Whether the cities in the slipstream of London can do likewise remains to be seen.
Future of Business focuses on the trends that are shaping the business decade ahead. Over the last two years we have provided original content and commentary on over 100 business topics. You can sign up to receive new briefings direct to your inbox. Future of Business is produced by indexB, a business research and communications network that helps companies to influence the way other companies behave.