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Economics > Transactions >

City Limits? The Future of London

Paper ID: 500 Last updated: 31/01/2012 09:08:31
Criteria: bullet Impact:  Likelihood:  Controversy:  Where: Domestic/National When: 3-10yrs How Fast: Years
0 people thought this paper expanded their thinking bullet
Keywords: bullet cities, urbanisation, growth, regeneration

Summary bullet

London is second only to New York in terms of its ability to attract and use resources and generate wealth. [1], [2] Maintaining this position will require creating an environment for economic growth, innovation, employment and the ability to attract international firms. However, the success of a city also requires a distinctive brand: [3] a combination of place, ambition, policy vision, civic pride and business climate.

Discussion bullet

London’s economy is one of the largest in the world, [4] with a GDP greater than that of Switzerland, Belgium or Sweden. [5] This is in part due to London’s pre-eminence as a commercial hub: in 2007 and 2008 it was judged to be the world’s leading financial centre, just ahead of New York and well ahead of its other main competitors. [6]

In 2005, London was the sixth-largest urban economy in the world by GDP and has been projected to rise to fourth-largest by 2020, driven mainly by growth in business and financial services. [7] However, by 2020 major cities in emerging-market economies such as Mumbai and Istanbul are likely to be the fastest-growing. Major financial and business names may have started to consider locations elsewhere. [8]

London’s success is founded on a diverse range of market participants, a highly skilled workforce, a well developed regulatory system, an advantageous location and time zone and the prevalence of English as the language of business. This is reflected in the fact that many companies have relocated to London, which is now the leading centre outside the US for hedge funds and private equity. [9] To maintain this position will require building on existing strengths and will require a workforce that is more flexible, better educated and more productive. [10], [11] Indeed, it has been suggested that by 2014, 50% of jobs will require degree-level qualifications. While London’s economic success has been built predominantly on the financial services industry, the growth of the 24/7 society has meant the expansion of more labour-intensive industries such as personal services. As a result, demand for service-sector workers is also felt keenly in London. [10], [11]

Existing forecasts for London’s economic future have tended to suggest that finance and business sectors in central London would be the most significant contributor to economic growth to 2020, contributing anything up to 440,000 jobs. Entertainment, leisure and retail services are thought likely to account for the majority of other jobs created. However, existing forecasts may have to be reconsidered in light of the 2008 crisis in the financial sector. [11]

London’s population is estimated to grow from 7.51 million in 2006 to 8.05 million in 2016 and to 8.33 million in 2026, largely as a result of high numbers of births and low numbers of deaths. London is also a young city: a typical London borough has an average age of 36. [12] A growing population means sustained pressure on public services and infrastructure, particularly housing and transport. A young population comprising single, young professionals and childless couples also means that households are smaller than the national average. [13]

While GLA estimates suggest that there will be more than 300,000 new households in 2016 compared with 2001, [14] this does not account for the declining numbers in households or the existing shortfall in accommodation. Larger numbers of smaller households may create significant demand on the limited space available in London. This trend will mean addressing the twin challenges of providing sufficient housing of adequate standard and in ensuring those able to join the housing market can be accommodated effectively. [11]

Increasing housing demand will also be influenced by a growing income disparity amongst the London population. Areas of inner and suburban London may undergo gentrification [15] but there will be an overall shortage of housing leading to increased use of temporary accommodation solutions.
Projections suggest that by 2025 there will be 800,000 more people and 900,000 additional jobs in London, by which time there are expected to be an additional four million daily journeys in the city. As a result of the projected fall in car use, an estimated five million additional journeys will need to be supported by public transport, walking and cycling. [16] In the 2007 London Business Survey, almost nine in ten employers (86%) said they had problems with the transport system and only one in four (28%) considered the system at least adequate. [17] Missed meetings, late arrivals in the morning and reduced morale among commuters all lower business effectiveness. [16]

The challenges of service provision will have to be played out in a city affected by the unavoidable effects of climate change. The effects of climate change could be more unstable weather patterns, greater numbers of storms and more concentrated rainfall with hotter summers and warmer, wetter winters. [18] A related issue is that of flooding, which, despite the presence of the London barrier could begin to affect significant areas of the city. [19], [20], [21]More direct impacts caused by declining air quality, increased summer electricity demand and comfort in buildings and public transport could also result from London suffering an 'urban heat island' effect. [22] While fewer deaths may occur as a result of climate change, [23] higher temperatures could also lead to higher rates of mortality caused by higher temperatures in summer. [24] Climate-related effects will also impact on the positioning of economically productive areas such as the financial sector, and could generally lead to business disruption. [25]

The ecological footprint of London is already huge, estimated at 125 times its physical area. [78] London and its local authorities have a key role in tackling climate change at a local and city wide level through effective planning and community leadership.[[11] Increasing numbers of people and economic growth could increase the already enormous footprint, but this may also provide an opportunity to transform London into a sustainable and low-energy community. The effects of climate change may also create considerable demand for environmentally friendly solutions and services: consumers and employees are increasingly considering environmental issues when making decisions about their life and work. Combating climate change effectively will also probably require persuading individuals to change behaviours and adopt measures to improve energy efficiency. [26]

Economic growth, availability of housing and efficiency of transportation systems are all key ingredients in addressing the issues of societal inequality and cohesion. Poverty rates in the UK and London have risen continuously since the late 1970s, a trend accompanied by a rise in the geographical segregation of the poor from the rich. [27] Furthermore, the most geographically segregated social groups are those that are so wealthy they can afford to exclude themselves from the schools, hospitals, cleaning, childcare, recreation and other norms for most people in society.

London could be prone to ‘ghettoisation’ in the future. [15] Twenty London Boroughs are among the 50 most deprived local authorities in the UK and the increasing disparity in wealth and other quality of life indicators between the richest and poorest in London is an important consideration for social cohesion in the future. Currently there is substantial internal variation in terms of economic growth, skills and a strong correlation between socio-economic status and health among London boroughs. Boroughs with lower skill profiles also tend to be poorer and clustered in the north and east. Higher skilled boroughs tend to be in the south-west and outer south-east. In some parts of east London, the population is too thinly spread to support essential services. [28]

By 2026, 55% of the city’s population is predicted to be Black Caribbean, Indian or members of ‘other’ groups (e.g. from eastern Europe). [29]
Migration looks likely to continue to increase levels of religious and cultural diversity in London. Greater numbers of minority communities could create societal divisions and tension, whether as a result of ill-feeling about access to services such as council housing, or caused by more direct conflict such as gang warfare. [30] At the same time, increased cultural diversity could lead to greater connectedness and belonging. [31]

The Carnegie Trust suggests that two main social trends will influence how people choose to live to 2020. Too great a concern with individualism may lead to a poorer sense of community and fragmentation of values, whereas a focus on wellbeing may have the potential to limit individualism through encouraging a more holistic way of living. [31]

Technology could be the medium through which either an emphasis on individualism or wellbeing emerges. Advances in technology have the potential to create a two-tier society based on unequal access to new technologies, but new forms of technologically-assisted communication may build and connect communities not only with each other but with decision-makers and politicians. It is possible that technological change may also transform markets and impact on information sharing and use and communications. [32]

Furthermore, in a labour market in which a greater proportion of people than now will be self-employed, it is suggested that up to 80% of the workforce could be teleworkers, working from home at least some of the time. The infrastructure supporting homeworking (portable computers, Blackberries) - while encouraging a “less sharp separation of work and home” [33] - may also favour the better off, more highly skilled people able to negotiate flexible working arrangements.
Cities are not just responsible for production, they are also spaces that enable interaction and exchange - the modern-day agora. [34] In a dense and connected city, “problems are visible enough to demand attention” [28] and the harmful effects of inequality and segregation may be better dealt with. Interaction and the possibility of forming dense and varied connections within cities is a source of strength and growth for cities and their regions. [35]

Enabling this kind of productive interaction requires structuring the city in a way that facilitates and the development of trust and shared culture. This may derive from the built environment or the provision of entertainment and culture. If proposals from the Mayor’s London plan are realised, the focus of London’s leisure entertainment will be more strongly on local town centres. [14] These town centres will be multi-purpose incorporating residential areas, health centres, and educational establishments along with restaurants, bars, cinemas and cultural venues such as theatres and libraries. Parts of suburban East London in particular lack these sorts of facilities which may be developed as part of the regeneration activity that is part of preparation for the Olympics. [36] Indeed, the Olympics provides an opportunity for investment in infrastructure for the long term productive capacity of London. [37]

Implications bullet

Although currently a leading city brand, some suggest that “brand London is turning into a disaster.” [38] Sustaining and developing the London brand requires consideration of the implications of existing trends and solutions to potential problems with a focus on what might make residents and citizens “feel proud to be brand ambassadors” for London. The following is a consideration of some of the elements of what a successful London brand might look like.

The engine of the London economy in recent times has been the financial services industry. The challenge for the future will not only be to rebuild London’s economic engine, but to diversify and recognise other areas of opportunity.

While the banking and finance industries may undergo significant contraction in the short term, a new, more sustainable architecture may emerge that finds a place for highly regulated and capitalised global banks alongside a new breed of boutique agencies that provide mergers and acquisitions advice and asset management and shun activities with a high captial requirement. [39]

London may need to reinvent itself as it is faced with competition from global cities such as Mumbai and Beijing. This will also mean understanding a new era of ‘globality’, [40] a world in which ‘globally integrated’ businesses [41] move people and jobs around the world “based on the right cost, the right skills and the right business opportunities.” [42] In this environment, location is increasingly important: “The more things become mobile, the more decisive location becomes.” [35]

London may discover that its competitive advantage lies in being part of a mega-region stretching to Leeds, Manchester and Liverpool. [35] Significant improvement of transport links may enable commuting and connectivity over larger distances, making the idea of London as a central hub or a larger mega-region more of a reality.

In order to make this happen London will have to avoid reverse brain drain, for example the shift of financial talent to “increasingly influential hubs of finance in Asia, the Middle East, Europe, and Latin America” which could presage a more fundamental shift with lasting implications in the capital markets and elsewhere. [43]

On a more local level, there is a major question around whether London residents without appropriate skills qualifications can survive in a more global marketplace, and whether certain, more deprived London boroughs can achieve long-term sustainability in terms of balancing local skills and local jobs. [44] This may mean complementing the inflow of skilled migrants with improved standards in education, skills and training supported. This may be encouraged by better relationships between employers and education providers alongside policy measures such as the raising of the school leaving age. [11]
Economic diversification in London may focus particularly on creative occupations [45] and the development of ‘high culture’ partly as a result of an economic environment that accommodates and supports freelance business and small scale enterprise. The use of innovative funding schemes such as microfinance [46], 79] and local voluntary networks [47]may create an environment that encourages not only entrepreneurship but also social responsibility. [48]

A successful London may have to guard against segregation between the centre and the periphery; the commercial and cultural pull of the centre may be difficult for outer boroughs and suburbs to compete with. However, the rise of home working and improved transport networks may make the difference between outer and inner London seem less obvious particularly with the success of a more distributed array of multi-purpose local town centres. [14] Within the city, unequal gentrification processes and ‘demographic inversion’ [49] in which the city centre once again becomes home to the well-off rather than the poor could balkanise London, creating entrenched areas of geographical, physical and social segregation, with deprived urban areas suffering spiralling ‘negative value’ effects. [50] Community based regeneration schemes could increasingly draw on open source communities of architects, designers and citizens across the world [51] to share ideas to generate workable, sustainable models for regeneration while better promoting and supporting the use of already successful models. [52] For example, schemes such as mixed tenure housing and community based housing associations [53] offering more sustainable models of rented housing alongside affordable housing schemes are able to regenerate areas of ‘negative value.’ This could be particularly important for elderly people that remain in inner city areas and tend to be at the poorer end of the spectrum, living in rented accommodation. These schemes may also bcome increasingly important in guarding against the polarising potential of ‘human churn’, maintaining a balance between newcomers and more established residents who provide the ‘social glue’. [11]

Provision of public space such as ‘living streets’ [80] that create cohesive communities [81] through the creation of local attachments and ‘social glue’ may be another increasingly important way of countering ‘human churn’ and the potential for segregation. Housing development will have to deal creatively with ensuring availability, density and sustainability. Making more deprived parts of London more desirable areas to live in may increase the density of those communities enabling the support of essential services and making it more likely that “problems are visible enough to demand attention.” [28] However, a London of high growth and rapidly growing population may struggle to provide public services leading to more market-driven and third sector provision. Citizens groups campaigning on particular issues, particularly around social justice and service provision, could become more common, providing leadership, organisation and an agenda for community change. [54] These groups may even begin to fill the gap left by decreasing public provision.

Those communities that have both density and effective service provision are more likely to attract economic opportunity, a key driver of trust and cohesion. Without adequate economic opportunity, the potential for civic unrest could grow substantially and London could experience the kind of riots seen in the Parisian suburbs [55] and the towns of Oldham, Bradford and Burnley in 2001. [56] Re-energising existing deprived areas is likely to be a key priority for London. The next two decades could therefore witness a growth in cultural and community activity and the development of new attractions outside the traditional tourist districts of central London. The regeneration effects of the Olympics and the ongoing appeal of East London for a burgeoning creative community could make previously undesirable Stratford and Canning Town major hubs of nightlife and the creative industries.

Regeneration efforts which rely exclusively on iconic architecture, leisure and tourism without consulting the residents of the area in question could increase social division and erode trust and civic pride. Future regeneration may have to talk to citizens more effectively, perhaps through new representative and consultative structures like "assemblies of hope", networks of individuals who could get together to help shape the city's future. [57] These mechanisms may help urban planners and regeneration projects consider new perspectives on civic problems. Planning projects may have a gender bias and something as simple as street design could make travel easier, make women feel safer and have real benefits for the desirability of local areas and perceptions of crime. [58] Furthermore, ensuring all voices are heard in these more consultative processes will mean listening to the most excluded members of society. [59]
The arts are a particularly effective tool in affecting and involving at-risk youth and the homeless, particularly in urban environments. [60] London may develop outreach programs along the lines of the UN’s Messenger of Truth [61] or Toronto’s Sketch program [62] to strengthen the sense of community.

While measures to address climate change are important, it may be that changing the paradigm for how we create sustainable cities takes up to 150 years. [63]

On the personal level, citizens may be encouraged through increased use of ‘green’ subsidy and taxation to move beyond simple solutions, such as effective insulation, to more complex solutions such as renewable energy systems, use of micro-CHP (combine heat and power) systems, community micro-generation or as suggested in the GLA carbon scenario to 2026, connection to district heating, considered the most economically viable choice. [64]
These approaches may be complemented by social marketing strategies built around core concepts such as Jaime Lerner’s principles of 1) Separate waste 2) Use the car less 3)Work close to where you live or live close to your work that have transformed Curitiba. [65]

Ideas London could consider include widespread rooftop photovoltaic systems, [66] painting roofs and roads white [67] to offset global warming, or flooding areas of cities to create "munificent pool[s]" that process ‘gray water’ and sewage. [68]

Massive transport investment and a prohibitive congestion charge could accompany a move towards personal urban mobility systems. [69] Such models combine distributed energy generation and smart grids [70] where cities act as distributed power plants with product-service systems [71] such as the Velib [72] scheme in Paris or even Zipcar [69] vehicles complete with social networking software telling drivers where their friends are and how to get there. These forms of distributed infrastructure could smooth the peaks of demand for the more traditional system of the metro and the bus. [73] This would form part of a broader movement to develop intelligent infrastructures where science and technology are applied to a range of areas such as transport and health and utilities such as water and energy.

Early indicators bullet

London is recognised as the leader of the UK mega-region
Gang violence becomes a feature of the exurbs
Urban heat islands and flash floods become staples of the London climate
Failure of the Thames Barrier
Growth of gated communities in Southern London
The congestion charge makes driving impracticable for all but businesses and the very rich

Drivers & Inhibitors bullet

Making London's outward growth sustainable, keeping the centre and periphery well connected
Availability and affordability of housing
Maintaining sufficient population density for effective service provision
Sustaining the success of the financial services industry or developing alternatives
Availability, affordability and connectivity of public transport
Quantity and skill level of migrants
Effects of climate change on health and infrastructure (housing, transport)
Levels of trust and inequality

Parallels & Precedents bullet

7/7 2005 bombings
2003 Paris heatwave[1][2][3][5][6][7][8][9][10][4][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25][26][27][29][28][30][31][32][33][34][47][35][36][37][38][39][40][41][42][48][43][44][46][74][45][49][50][53][51][52][55][56][54][57][58][59][60][61][62][75][63][66][67][68][64][65][70][71][72][69] [73]

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