What can Amazon’s search for a new HQ teach us about how to grow a city economy?

Amazon HQ, Seattle. Image: Getty.

Amazon’s announcement a few weeks ago that it will open a second US headquarters, and its invitation for cities to bid to become its new HQ, have sparked a lot of debate across the Atlantic. But the criteria set out by Amazon on what it expects from its new host city also offers interesting insights for places in the UK, and for the government’s industrial strategy.

It’s not often that a company explicitly states what it is looking for when it’s searching for a new location. But in announcing plans for its new HQ, Amazon did exactly that – setting out clear guidelines as to how bids from competing cities will be judged. In no order, it stipulates that the following conditions must be met by the successful city:

  • Appropriate office space – either already built, or land to build on;
  • Business friendly environment and tax structure – for business friendly, read low taxes and grants;
  • Appropriate labour force – a good supply of workers, measured in terms of the size (population centre of over 1m), as well as skill level (highly educated and a ‘strong university system’);
  • Strong transport links within the area – including a link to an international airport;
  • Strong digital infrastructure – fibre broadband and good mobile coverage from a number of providers;
  • Cultural and quality of life offer – a diverse population with good recreational and educational amenities to help attract and retain staff;

The document also sets out that Amazon only wants one bid per Metropolitan Statistical Area – which could be likened to a LEP or city region here – and that places bidding must have a population of at least 1m.

Of course, this is only one company (albeit a very big one – Amazon estimates the new HQ will create 50,000 jobs with an average wage of $100,000). Nonetheless, the list broadly chimes with the factors higher-skilled companies have named in conversations with Centre for Cities in recent years.

While Amazon doesn’t rank its criteria in terms of importance, it’s likely that the availability of a skilled workforce will be chief among them. As we show in our new briefing about why skills should be a key concern in the industrial strategy, British cities that can offer access to high-skilled workers and knowledge have been most successful at attracting high-paying, businesses and jobs.

Given the fundamental importance of skilled workers to a high-knowledge operation, there’s no reason to assume that Amazon would be any different. As such, improving skills-levels in UK cities has to be a top priority for local leaders and in the government’s industrial strategy.

But while skills are of the utmost importance, both the Amazon document and our recent What Investors Want report also illustrate that businesses and investors assess a wide range of characteristics when assessing the attractiveness of a particular city. Ultimately, firms are driven by their likely return or profit, and will be drawn to cities which offer them the best combination of skills, infrastructure, and a pro-investment city leadership with a strong record of delivery.

As such, improving transport, skills and housing should be top of the list for local leaders seeking to make their places more attractive to businesses. Crucially though, we found that this isn’t enough – city leaders also need to actively promote the advantages they offer, as well as focus on building stronger relationships with the private sector, and demonstrate a willingness to ensure big private sector projects get over the line.

What’s a little more surprising about Amazon’s criteria is that includes grants and subsidies as a key consideration. If we were talking about an Amazon warehouse, this demand would be expected. Such a facility would need access to lots of cheap land and workers, something which can be found in a large number of places, and so a sweetener would clearly help sway the decision. For example, this has been used by both the Scottish and Welsh Governments to attract Amazon warehouses to Swansea and Dunfermline.


But with the company’s new HQ, we’re talking about a higher-skilled operation. The clustering of high-skilled businesses in central London and Manhattan, two of the most expensive places to do business in the world, shows that high-skilled businesses are prepared to pay a premium for access to talent.

And it’s hard to see Amazon sacrificing this for the sake of some subsidies – indeed, it is unlikely the company’s decision to locate its UK HQ in Shoreditch resulted from similar interventions. The reality is that Amazon can only meet its need for a large skilled labour force, good transport links and a strong amenity underlines by locating in a major city.

This undermines a line of argument often put to us here at the Centre for Cities, which suggests that modern communications technologies allow big firms to locate anywhere. It also echoes a point made by Professor Michael Storper in his City Horizons lecture last September: that in the modern economy, firms like Amazon need cities as much as cities need firms like Amazon.

More broadly, it underlines the importance of cities to the economies of developed countries. In the UK, for example, economic activity isn’t evenly or randomly distributed across the country – it is clustered in cities.

For the industrial strategy to be successful in in raising prosperity and growth across the country, it therefore needs to focus on helping successful cities continue to thrive – and support struggling cities to overcome the challenges they face in boosting their economies.

Paul Swinney is senior economist at the Centre for Cities, on whose blog this article was first published.

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Is Britain’s housing crisis a myth?

Council housing in Lambeth, south London. Image: Getty.

I’ve been banging on about the need for Britain to build more houses for so long that I can no longer remember how or when it started. But at some point over the last few years, the need to build more homes has become My Thing. People ask me to speak at housing events, or @ me into arguments they’re having on Twitter on a Sunday morning in the hope I’ll help them out. You can even buy a me-inspired “Build More Bloody Houses” t-shirt.

It’s thus with trepidation about the damage I’m about to do to my #personal #brand that I ask:

Does Britain actually have enough houses? Is it possible I’ve been wrong all this time?

This question has been niggling away at me for some time. As far back as 2015, certain right-wing economists were publishing blogs claiming that the housing crisis was actually a myth. Generally the people who wrote those have taken similarly reality-resistant positions on all sorts of other things, so I wasn’t too worried.

But then, similar arguments started to appear from more credible sources. And today, the Financial Times published an excellent essay on the subject under the headline: “Hammond’s housebuilding budget fix will not repair market”.

All these articles draw on the data to make similar arguments: that the number of new homes built has consistently been larger than the number of new households; that focusing on new home numbers alone is misleading, and we should look at net supply; and that the real villain of the piece is the financialisation of housing, in which the old and rich have poured capital into housing for investment reasons, thus bidding up prices.

In other words, the data seems to suggest we don’t need to build vast numbers of houses at all. Have I been living a lie?

Well, the people who’ve been making this argument are by and large very clever economists trawling through the data, whereas I, by contrast, am a jumped-up internet troll with a blog. And I’m not dismissing the argument that the housing crisis is not entirely about supply of homes, but also about supply of money: it feels pretty clear to me that financialisation is a big factor in getting us into this mess.

Nonetheless, for three reasons, I stand by my belief that there is housing crisis, that it is in large part one of supply, and consequently that building more houses is still a big part of the solution.

Firstly I’m not sold on some of the data – or rather, on the interpretation of it. “There is no housing crisis!” takes tend to go big on household formation figures, and the fact they’ve consistently run behind dwelling numbers. Well, they would, wouldn’t they? By definition you can’t form a household if you don’t have a house.

So “a household” is not a useful measure. It doesn’t tell you if everyone can afford their own space, or whether they are being forced to bunk up with friends or family. In the latter situation, there is still a housing crisis, whatever the household formation figures say. And there is plenty of anecdotal evidence to suggest that’s the one we’re living in.

In the same way I’m not quite convinced that average rents is a useful number. Sure, it’s reassuring – and surprising – to know they have grown slower than general prices (although not in London). But all that figure tells you is the price being paid: it doesn’t tell you what is being purchased for that payment. A world in which renters each have their own property may have higher rents than one in which everyone gets one room in an over-crowded shared flat. It’s still the latter which better fits the label “housing crisis”.

Secondly, I’m entirely prepared to believe we’ve been building enough homes in this country to meet housing demand in the aggregate: there are parts of the country where housing is still strikingly affordable.

But that’s no use, because we don’t live in an aggregate UK: we live and work in specific places. Housing demand from one city can be met by building in another, because commuting is a thing – but that’s not always great for quality of life, and more to the point there are limits on how far we can realistically take it. It’s little comfort that Barnsley is building more than enough homes, when the shortage is most acute in Oxford.

So: perhaps there is no national housing crisis. That doesn’t mean there is not a housing crisis, in the sense that large numbers of people cannot access affordable housing in a place convenient for their place of work. National targets are not always helpful.


Thirdly, at risk of going all “anecdote trumps data”, the argument that there is no housing crisis – that, even if young people are priced out of buying by low interest rates, we have enough homes, and rents are reasonable – just doesn’t seem to fit with the lived experience reported by basically every millennial I’ve ever met. Witness the gentrification of previously unfashionable areas, or the gradual takeover of council estates by private renters in their 20s. 

A growing share of the population aren’t just whining about being priced out of ownership: they actively feel that housing costs are crushing them. Perhaps that’s because rents have risen relative to wages; perhaps it’s because there’s something that the data isn’t capturing. But either way, that, to me, sounds like a housing crisis.

To come back to our original question – will building more houses make this better?

Well, it depends where. National targets met by building vast numbers of homes in cities that don’t need them probably won’t make a dent in the places where the crisis is felt. But I still struggle to see how building more homes in, say, Oxford wouldn’t improve the lot of those at the sharp end there: either bringing rents down, or meaning you get more for your money.

There is a housing crisis. It is not a myth. Building more houses may not be sufficient to solve it – but that doesn’t meant it isn’t necessary.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and also has a Facebook page now for some reason. 

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