Poor productivity and high housing costs are driving a “living standards exodus” from London

Good advice. Image: Getty.

As a Londoner, I think it’s fair to say that as a city we’re quite good at giving ourselves a pat on the back (though apparently self-loathing Londoners are a thing ,too). It’s often suggested that London is an economic powerhouse, productive, innovative and leaving the rest of the country in its wake. But new research by the Resolution Foundation suggests that London could do with a bit of self-examination, too.

London’s economy is different, and in a good way: the average worker in the capital produces a third more per hour than the UK average. As a share of the workforce, twice as many people work in professional, scientific or technical roles than in other major UK cities. London’s economy has grown faster than the UK as a whole since the crisis.

But wait. When it comes to productivity growth – probably the most pressing economic challenge facing the UK – far from racing away, London’s economy is actually holding the country back. Productivity growth in the capital has been negative since the crisis.

 

How can we reconcile these two stories of economic success and failure? The answer is that London’s economic growth has been entirely driven by increasing employment and hours worked, rather than productivity improvements. This economic shift has had a profound effect on the capital’s living standards over the last decade.

The positive side of London’s new economic growth model is that it has been very good for jobs. Employment is up 5 percentage points since 2011. The capital’s employment rate is at a record high, and closing in on the UK average for the first time since the late 1980s. At a time when other major cities – particularly Birmingham – face low employment challenges London is breaking that mould.

But there’s a flipside to this story of strong employment growth – the quality of new jobs created. The big growth areas in employment across London have been low-paying, low-productivity sectors such as hospitality (up 35 per cent) and administrative services (up 29 per cent). This helps to explain London’s recent productivity problems, and why it’s experienced the biggest pay squeeze of any region of Britain. Depressingly, typical hourly earnings in London are still 7 per cent lower than they were a decade ago.


So, in some senses, London’s economy since the crisis has been a bit like the UK’s on steroids:  lack of productivity growth, a sharp pay squeeze, but lots of jobs.

But just as important as these shared challenges are the relatively unique issues London faces, particularly for those on low-incomes. The most obvious one is housing (though this is now being exported to other cities across Britain).

It will not come as a shock to anyone to learn that housing is expensive in London. But to show just how much housing acts as a drag on living standards, it’s worth noting that it turns Londoners from having the highest incomes in the country (£28,600) to being below average the UK average (£21,350, compared to the UK figure of £22,250).

London’s other unique challenge is inequality. Income inequality is around 25 per cent higher in London, and wealth inequalities are even starker. London is now the only part of the country where the typical family has no net property wealth.

Faced with high housing costs and levels of inequality, the response of many Londoners is to leave. London’s population has exploded since the millennium, driven by international migration – but it’s actually a net exporter of people to the rest of Britain. The number of people leaving London climbed to 90,000 last year, driven by rising numbers of people in their early 30s moving out. The triumph of improving London’s schools over the last 20 years is being outweighed by the disaster that is housing. If London is complacent then this exodus will likely continue.

In the past the city glossed over its problems by pointing to the fact that on most metrics it was performing better than the rest of the country. Although in many respects this is still the case, it is less true than it once was. We shouldn’t stop the heady parties that are synonymous with the capital. But we could do with a bit more sober reflection too.

Stephen Clarke is senior economic analyst at the Resolution Foundation. You can read the full report here.

 
 
 
 

In a world of autonomous vehicles, we’ll still need walking and cycling routes

A Surrey cycle path, 1936 style. Image: Getty.

The CEO of Sustrans on the limits of technology.

We are on the cusp of dramatic changes in the way we own, use and power our means of transportation. The mobility revolution is shifting from an “if” to a “where” and when”.

There are two different futures currently being imagined. First up, a heaven, of easy mobility as portrayed by autonomous vehicle (AV) manufacturers, with shared-use AV freeing up road space for public spaces and accidents reduced to near zero. Or alternatively, a hellish, dystopian pod-world, with single-occupancy pod-armadas leading to an irresistible demand for more roads, and with people cloistered away in walkways and tunnels; Bladerunner but with added trees.

Most likely, the reality will turn out to be somewhere in between, as cities and regions across the globe shape and accommodate innovation and experimentation.

But in the understandable rush for the benefits of automation we need to start with the end in mind. What type of places do we want to live in? How do we want to relate to each other? How do we want to be?

At Sustrans we want to see a society where the way we travel creates healthier places and happier lives for everyone – because without concerted effort we are going to end up with an unequal and inequitable distribution of the benefits and disbenefits from the mobility revolution. Fundamentally this is about space and power. The age-old question of who has access to space and how. And power tends to win.  

The wealthy will use AV’s and EV’s first – they already are – and the young and upwardly mobile will embrace micro mobility. But low-income, older and disabled residents could be left in the margins with old tech, no tech and no space.

We were founded in 1977, when off the back of the oil crises a group of engineers and radical thinkers pioneered the transformation of old railway lines into paths that everyone could walk and cycle on: old tech put to the service of even older tech. Back then the petrol-powered car was the future. Over 40 years on, the 16,575-mile National Cycle Network spans the length and breadth of the UK, crossing and connecting towns, cities and countryside, with over half of the population living within two miles of its routes.


Last year, more than 800 million trips were made on the Network. That’s almost half as many journeys made on the rail network, or 12 journeys for every person in the UK. These trips benefited the UK economy by £88m through reduced road congestion and contributed £2.5bn to local economies through leisure and tourism. Walking and cycling on the Network also prevented 630 early deaths and averted nearly 8,000 serious long-term health conditions.

These benefits would be much higher if the paths on the entire Network were separated from motor traffic; currently only one third of them are. Completing an entirely traffic-free walking and cycling network won’t be simple. So why do it?

In a world of micro-mobility, AVs and other disruptive technology, is the National Cycle Network still relevant?

Yes, absolutely. This is about more than just connecting places and enabling people to travel without a car. These paths connect people to one other. In times when almost a fifth of the UK population say they are always or often lonely, these paths are a vital asset. They provide free space for everyone to move around, to be, and spend time together. It’s the kind of space that keeps our country more human and humane.

No matter how clever the technological interface between autonomous vehicles and people, we will need dedicated space for the public to move under their own power, to walk and cycle, away from vehicles. As a civil society we will need to fight for this.

And for this reason, the creation of vehicle-free space – a network of walking and cycling paths for everyone is as important, and as radical, as it was 40-years ago.

Xavier Brice is CEO of the walking and cycling charity Sustrans. He spoke at the MOVE 2019 conference last week.