00Foreword
Throughout its modern history, London has been a centre of growth, innovation and activity. Even at times of population decline, its economy continued to grow, driven by rising worker productivity. This was true in the 1970s and early 1980s – often seen as some of the city’s darkest times in economic terms. But as this thought-provoking report from the Centre for Cities highlights, despite higher overall output (driven by a growing population), productivity per worker in London slumped from a rate of 3.1 per cent per annum between 1998 and 2007 to just 0.2 percent in the period since the global financial crisis of 2008. This loss of growth has literally come at a price; amounting to over £50 billion in 2019 alone – much more than the fiscal surplus the city produced for the rest of the UK in the same year.
The factors that lie behind this decline in value added are not straightforward to isolate. But the report highlights a number of factors that its authors believe are worthy of serious consideration. The first is the fact that our “superstar sectors” – such as finance, professional services and information and communications have simply not grown as quickly as in other competing economies – or indeed when compared with London’s historical growth rates. Of course there are exceptions to this, and I know many businesses in the City are performing well, but as a general trend this is a deeply worrying finding, not least because it threatens our long-term competitiveness. Secondly, the authors note that the increasing cost of commercial real estate and the comparative growth of this sector as a share of the London economy may have “crowded out” other, more productive sectors. Finally, an affordability crisis in housing – not just for key workers – but also those in medium to higher paid jobs may be a factor in our collective loss of productive capacity. A scarcity of housing may well have deterred talent from overseas and led to those wishing to stay in London after studying here being forced to leave.
The report recommends changes to policies covering amongst other things, immigration, fiscal devolution and land use planning. Some of these, such as a shift towards a more zone based approach to development or easing restrictions on the greenbelt, protected views and conservation areas will be debated. Others, such as extending graduate work visas to five years and providing greater powers and resources for London government should surely be considered mainstream in a mature democracy. But whatever your views, I believe the report is a welcome wake up call to all those concerned with securing growth, competitiveness and employment in London and the country as a whole.
The EC BID area which I chair, takes in the tall tower cluster of the City and is home to the most economically productive area in the UK and probably of the whole of Europe. We were delighted to support this research – the first piece of a series that we are involved with.
Whilst the analysis and recommendations are very much those of Centre for Cities, we welcome the report as a valuable contribution to the debate we believe we need to be having, on how to drive productivity in London and the UK as a whole. EC BID and our sister organisations continue to work in partnership with London government to deliver a high-quality environment, a vibrant city offer, excellent transport links and of course, we are committed to delivering the ESG agenda. But without growth and the prosperity and taxes that flow from it, those efforts will be underfunded and undermined.
On behalf of EC BID, I would like to thank the report’s authors, Stuart Bridgett and Guilherme Rodrigues for their hard work in pulling this thought-provoking report together. I do hope you enjoy reading it.
