It’s a KIBS thing: Are some British cities going backwards?

Knowledge-intensive business services, 1890s style. Image: Hulton Archive/Getty.

The latest instalment of our series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Britain’s cities. 

We haven't talked about KIBS in a while, have we? Let's talk about KIBS.

"Knowledge Intensive Business Services" are, basically, the high-skill, high-value bit of the modern economy. In short, you can break an economy up into extraction, manufacturing, agriculture, and services. It's the latter that generates most of the wealth in advanced economies, but not all services are equal: there is much more money to be made in accountancy, say, than there is in retail. At any rate: if you want your city to be rich, you generally want more of those delicious KIBS.

So this, on the whole, is a bit worrying:

In the first half of the decade, KIBS fell as a share of the economy in no fewer than 23 of the 63 cities in our database. And not all of these cities are places you'd associate with economic problems, either: they struggling cities like Dundee, Swansea and Burnley, but also richer ones like Edinburgh, Aberdeen and Milton Keynes.

The decade started rather bumpily, so I checked if this as just a recession thing by checking if the pattern held if you started counting in later years. Starting the clock in 2013, things were different. Now there were 27 cities where the KIBS had shrunk. Right.

So what's going on? Couple of theories. One is that they've lost some good jobs: in the smaller of these economies (Slough, Worthing), the loss of one significant company is probably enough to make a noticeable dent in the figures. Another possibility is that they haven't lost KIBS jobs – might even have gained them – but that other, generally less productive sectors have grown faster.

What is clear is that there is, perhaps surprisingly, no obvious link with incomes. Check out this scatter graph which plots the change in KIBS with the change in weekly wages. There is, and I'm being charitable here, no correlation whatsoever. It’s a correlation coefficient of 0.04, which is basically invisible.

Click to expand.


Which suggests that maybe seeing the share of your economy devoted to KIBS shrink by 2 per cent really just doesn't matter that much. Perhaps there are other well-paying jobs replacing them, which aren’t classed as KIBS because there’s a quirk of the data. More likely, I suspect, there’s a mismatch between the two datasets: the KIBS one shows what happens inside a city’s economy, whereas the wages one includes people who live there but work elsewhere. What happens in Worthing is probably less important to its residents than what happens in London.

And yet, and yet... Here's another scatter graph showing weekly wages against KIBS. Unlike the last one, though, this isn't change over time: it's the figures for a single year, 2015.

Click to expand.

That very definitely is a correlation: a coefficient of 0.66, which is pretty bloody strong.

So: KIBS-heavy cities do still do a lot, lot better: perhaps the changes in that earlier dataset are simply too small to have much of an impact.

The lesson here seems to be that a city can see the share of its economy devoted to high-value business services shrink a little without consequence. But if it starts dropping like a stone, people are going to get a lot, lot poorer.

Anyway, to sum up, I'm sure Brexit will be completely and utterly fine.

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

Want more of this stuff? Follow CityMetric on Twitter or Facebook


Which nations control the materials required for renewables? Meet the new energy superpowers

Solar and wind power facilities in Bitterfeld, Germany. Image: Getty.

Imagine a world where every country has not only complied with the Paris climate agreement but has moved away from fossil fuels entirely. How would such a change affect global politics?

The 20th century was dominated by coal, oil and natural gas, but a shift to zero-emission energy generation and transport means a new set of elements will become key. Solar energy, for instance, still primarily uses silicon technology, for which the major raw material is the rock quartzite. Lithium represents the key limiting resource for most batteries – while rare earth metals, in particular “lanthanides” such as neodymium, are required for the magnets in wind turbine generators. Copper is the conductor of choice for wind power, being used in the generator windings, power cables, transformers and inverters.

In considering this future it is necessary to understand who wins and loses by a switch from carbon to silicon, copper, lithium, and rare earth metals.

The countries which dominate the production of fossil fuels will mostly be familiar:

The list of countries that would become the new “renewables superpowers” contains some familiar names, but also a few wild cards. The largest reserves of quartzite (for silicon production) are found in China, the US, and Russia – but also Brazil and Norway. The US and China are also major sources of copper, although their reserves are decreasing, which has pushed Chile, Peru, Congo and Indonesia to the fore.

Chile also has, by far, the largest reserves of lithium, ahead of China, Argentina and Australia. Factoring in lower-grade “resources” – which can’t yet be extracted – bumps Bolivia and the US onto the list. Finally, rare earth resources are greatest in China, Russia, Brazil – and Vietnam.

Of all the fossil fuel producing countries, it is the US, China, Russia and Canada that could most easily transition to green energy resources. In fact it is ironic that the US, perhaps the country most politically resistant to change, might be the least affected as far as raw materials are concerned. But it is important to note that a completely new set of countries will also find their natural resources are in high demand.

An OPEC for renewables?

The Organization of the Petroleum Exporting Countries (OPEC) is a group of 14 nations that together contain almost half the world’s oil production and most of its reserves. It is possible that a related group could be created for the major producers of renewable energy raw materials, shifting power away from the Middle East and towards central Africa and, especially, South America.

This is unlikely to happen peacefully. Control of oilfields was a driver behind many 20th-century conflicts and, going back further, European colonisation was driven by a desire for new sources of food, raw materials, minerals and – later – oil. The switch to renewable energy may cause something similar. As a new group of elements become valuable for turbines, solar panels or batteries, rich countries may ensure they have secure supplies through a new era of colonisation.

China has already started what may be termed “economic colonisation”, setting up major trade agreements to ensure raw material supply. In the past decade it has made a massive investment in African mining, while more recent agreements with countries such as Peru and Chile have spread Beijing’s economic influence in South America.

Or a new era of colonisation?

Given this background, two versions of the future can be envisaged. The first possibility is the evolution of a new OPEC-style organisation with the power to control vital resources including silicon, copper, lithium, and lanthanides. The second possibility involves 21st-century colonisation of developing countries, creating super-economies. In both futures there is the possibility that rival nations could cut off access to vital renewable energy resources, just as major oil and gas producers have done in the past.

On the positive side there is a significant difference between fossil fuels and the chemical elements needed for green energy. Oil and gas are consumable commodities. Once a natural gas power station is built, it must have a continuous supply of gas or it stops generating. Similarly, petrol-powered cars require a continued supply of crude oil to keep running.

In contrast, once a wind farm is built, electricity generation is only dependent on the wind (which won’t stop blowing any time soon) and there is no continuous need for neodymium for the magnets or copper for the generator windings. In other words solar, wind, and wave power require a one-off purchase in order to ensure long-term secure energy generation.

The shorter lifetime of cars and electronic devices means that there is an ongoing demand for lithium. Improved recycling processes would potentially overcome this continued need. Thus, once the infrastructure is in place access to coal, oil or gas can be denied, but you can’t shut off the sun or wind. It is on this basis that the US Department of Defense sees green energy as key to national security.

The ConversationA country that creates green energy infrastructure, before political and economic control shifts to a new group of “world powers”, will ensure it is less susceptible to future influence or to being held hostage by a lithium or copper giant. But late adopters will find their strategy comes at a high price. Finally, it will be important for countries with resources not to sell themselves cheaply to the first bidder in the hope of making quick money – because, as the major oil producers will find out over the next decades, nothing lasts forever.

Andrew Barron, Sêr Cymru Chair of Low Carbon Energy and Environment, Swansea University.

This article was originally published on The Conversation. Read the original article.