02Cities are places to play as well as to work
An inherent advantage of cities is that they provide both scale and density — many businesses, jobs and people clustered in one place. These qualities make cities attractive to businesses.
Scale provides businesses with many potential employees from which to hire, who choose to live in cities because they offer a wider choice of job opportunities. Density is especially important for businesses that benefit from the network of knowledge that cities, and city centres in particular, provide.2 It is high-skilled businesses that export their goods and services that have most to gain, as explained in Box 3. Being located alongside like-minded firms makes it easy for them to share knowledge and work together, boosting their productivity.
It is for this reason that the UK economy is concentrated within cities, and why high-skilled exporting businesses in particular are based in urban locations.3 Since these are the firms that contribute most to productivity growth,4 cities play an especially important role in the national economy.
Cities are able to play an important role as places of consumption as well as places of production. The inherent benefits of a city allow it to support a greater number of amenities. Density and scale create a large market of customers — from within and beyond city borders — that sustains amenities. The fixed costs of setting up amenities can be spread across many customers. Box 4 illustrates how the scale of London supported the emergence of theatres in the 16th Century.
These arguments hold especially for city centres and their high streets. The funnelling of people into these central locations provides an opportunity to sell them goods and services. It is for this reason that high streets emerged in the first place, because the flow of people provided a market.
Box 3: The role of exporting businesses in city economies
There are two types of private sector business:
Local services sell directly to consumers. They include estate agents and amenities such as hairdressers and cafes. As a result, their location decisions are determined predominantly by where their customers live, work or trade from. They are also known as ‘non-tradable’ businesses.
Exporting businesses, such as investment banks, advertising agencies and manufacturers, sell their products or services outside their local area to regional, national, and international markets. Unlike local services, these exporting businesses are not tied to one local market. They are also known as ‘tradable’ businesses.
Exporting businesses are important for three reasons:
They generate income independent of the performance of their local economy, because they sell to other markets.5
They tend to be more productive than local services firms and are drivers of productivity increases over time. For example, while a hairdresser is as productive as 50 years ago, a worker in a car factory is now many times more productive.6
Exporting businesses have a multiplier effect on jobs in local services. The better they perform, the higher the local disposable income in the economy, so the higher the demand for the goods and services of local services such as shops and restaurants. All exporting businesses have a multiplier effect, but it is much bigger for high-skilled exporters than for low-skilled exporters. For example, for every 10 new high-skilled exporting jobs created between 1995 and 2015 in urban Britain, 17 new jobs were generated in low-skilled local services.7
For the purpose of this research, exporters and local services are defined using Standard Industrial Codes (SIC).8 We use these to identify jobs in sectors that have the potential to sell to markets beyond their local area.
Box 4: The emergence of theatres in 16th Century London
In Triumph of the City9 urban economist Edward Glaeser explains how cities made the first theatres possible. Up until the 1500s, drama troupes travelled around the country performing. By constantly moving to new locations, the actors could access enough viewers to support themselves.
But by the 16th Century, the growth of London provided a permanent base for actors. The city’s size gave them access to large enough audiences – even in a fixed position – to make ends meet. Not only was the city’s size important for finding customers, it also helped actors meet and work together in a time before drama schools.
When looking at all amenities, cities do not seem to play this role. Instead, amenities follow the distribution of the population. Cities are home to 56 per cent of all amenities in Great Britain, which is in line with the 54 per cent of the population who live in cities.
But when amenities are broken down into a number of categories, differences start to emerge, and the benefit of an urban location becomes clear. This can be seen in four ways.
1. Cities are home to more specialist amenities
In 2018, cities were home to 65 per cent of all specialist amenities, such as cinemas, restaurants and theatres (see Figure 1). These amenities were particularly clustered in city centres, which accounted for 19 per cent of these amenities, despite being home to less than 2 per cent of population.
This is particularly the case for performing arts venues, as Figure 2 shows. In total, 81 per cent of these venues were city based in 2018, and over half were based in city centres.
In comparison, 55 per cent of day-to-day amenities are in cities, which is again in line with the distribution of the population. Looking at more specific amenities, beauty salons and retail follow a similar pattern, with 56 and 57 per cent respectively in cities. This is because the vast majority of these amenities are day-to-day (such as hairdressers and clothes shops) rather than specialist (such as tattoo studios).
An exception is the location of museums and galleries, which includes historic houses. Despite being specialist amenities, these are predominantly located outside cities. This is because their locations are often set by factors other than the ability to maximise customers, such as their proximity to a historical site.
2. Cities are home to more premium amenities
Premium amenities — those selling more expensive goods and services, such as designer retailers or Michelin-starred restaurants — are more concentrated in cities than the population. This can be illustrated by looking at the distribution of specific food and drink amenities: fast food and restaurants.
Cities offer slightly greater access to fast food — a cheaper way to eat, on average — than other parts of the country. Cities house 59 per cent of these amenities, as shown in Figure 3. But restaurants — a more expensive way to eat — are much more city focused. Over two-thirds of the country’s restaurants are located in a city and one in five restaurants is in a city centre.
3. Cities offer a greater variety of amenities
The range of amenities on offer in cities is wider than in other parts of the country. The fact that cities house more specialist and premium amenities than other parts of the country shows this, but it can also be further illustrated by looking specifically at the variety of places to eat available in cities.
In particular, cities offer consumers a greater variety of cuisines. In cities, 40 per cent of places to eat provide British food. The five next most common options account for 36 per cent, so nearly a quarter of places to eat provide less common cuisines, such as Indonesian, Argentinian and Korean.
In contrast, in the rest of the country the majority of places to eat provide British food, and just 6 per cent provide cuisines outside of the top six.
City centres are more diverse than suburbs. While ‘other’ cuisines account for 21 per cent of all restaurants in suburban locations, this rises to 29 per cent in city centres.
4. Cities are also able to support larger amenities
The average number of employees employed by an amenity tends to be larger in cities than elsewhere. This is particularly the case for museums, galleries and sports facilities. The average city-based museum employs 17 workers, compared with 11 workers elsewhere in the country, as shown in Figure 5. Access to a city’s large population means venues can attract large enough audiences to recover fixed costs.
Groceries are the only type of amenity with larger shops outside of cities. This is likely due to the number of small convenience stores in city suburbs and the scope for out-of-town supermarkets to be much larger due to cheaper
Data on employment for city centre amenities is not available.
- Cities are not just important as places of production, but also as places of consumption. Their density and scale means they can house amenities beyond the day-to-day amenities provided in all parts of the country.
- Cities house more specialist and premium amenities than other places. They also offer consumers a greater variety of options for how to spend their leisure time, and can sustain larger venues and amenities than towns and rural locations.
- City centres are especially well placed to play this role. As a result many more specialist and premium amenities, such as restaurants and performing arts venues, cluster in them.
- While, in general, cities are able to play host to a range of amenities, there is variety in the amenity offer seen across cities. This section looks at the scale of this variation and the reasons why it occurs, in order to shed light on the link between a city’s economy and its amenity offering.