The rise of the robots: Here are four big disruptions facing London’s economy

Coming soon to a coffee shop near you. Image: Getty.

Disruption is nothing new for London. In the past 70 years, the city has transformed from a declining imperial capital to one of a handful of “global cities”. And during this time London’s economy has proved itself to be astonishingly resilient – to financial booms and crashes, to global economic shifts, to terrorism and instability.

But times are changing. Technology is enabling more and more complex non-routine jobs to be automated, and Brexit and pay pressures could accelerate its adoption, shaking up London’s labour market. 

In fact, there are four big changes set to hit London’s workers in the coming years.

1. Lower and medium skilled jobs could be automated

Around a third of London’s jobs have high potential for automation in the next 20 years. This could have an impact on around a million low- and medium- skilled jobs in the capital, from taxi drivers to warehouse workers, shop assistants to secretaries.

And just as the secretarial and administrative occupations that once looked like solid middle-class employment 50 years ago rapidly disappear, bookkeeping and accountancy jobs may be soon to follow them.

2. Brexit could act as a catalyst for increasing the speed of automation

But automation is not automatic.  Employers need to make the decision to invest in software and machinery rather than wages.

Brexit could tip the balance and make the business case stack up. Around 15 per cent of London’s workforce are overseas EU/EEA citizens, and some of the industries which are more susceptible to automation in London – restaurants, hotels, construction – are particularly dependent on EU workers. Net migration has fallen since the referendum in 2016: should immigration policies tighten post-Brexit, the capital could see labour shortages in key areas of its workforce.

Staff shortages may begin to bite before automation is technically and commercially feasible. While this shortfall would most likely lead to wage inflation, and a welcome relief for low-paid workers, it might at the same time strengthen the case for and accelerate automation.


3. As jobs disappear, new jobs will be created

At the same time, demand for jobs involving social and creative intelligence – such as personal fitness instructors, care workers and designers – may grow. Centre for London’s analysis indicates that new jobs are most likely to be created in finance and insurance, and information and communication, which are specialisms for the capital, as well as public services and manufacturing.

But while automation may create new jobs, there is a difference in scale from their industrial era predecessors. Digital businesses need fewer employees to generate a large turnover than traditional industry often required.

Take this stark comparison. In 1962, when their annual sales surpassed $1bn, Kodak Eastman employed 75,000 people in production sites across the world. When Facebook passed $8bn, today’s equivalent of this threshold, it employed only around 6,300 people.

We may need to start thinking about how London and the UK manage to enhance social inclusion, at a time when fewer people are in full-time employment.

4. Londoners won’t enter ‘jobs for life’ – and will need new skills to reflect this

We’re quickly seeing that jobs are no longer for life: a change that automation has deepened. At the same time, it’s said that 65 per cent of future jobs have not yet been created. Businesses are increasingly finding themselves looking for transferable skills – rooted in things like project management, problem solving and customer service – rather than specific academic or technical skills.

These four big changes will transform the way people work in London over the coming years. At the end of the day robots will always be robots. But we all need to recognise that our jobs are likely to change. This means throughout our careers, it’s likely we’re going to need to learn new skills and retrain.

Employers will need to work with government, schools and colleges to ensure that workers are equipped with the social and creative skills that the jobs of the future will demand, and to strengthen London’s human capital.

Amy Leppanen is communications officer at the Centre for London.

 
 
 
 

What the West Midlands’ local industrial strategy means for other cities

West Midlands mayor Andy Street and Prime Minister Theresa May learn a little something. Image: Getty.

Back in May, the West Midlands won the race with Greater Manchester to publish the first local industrial strategy. No doubt both will become the benchmark for other areas to follow as they produce their own strategies. But if these or other strategies are to be successful, they will need to focus on making their areas more attractive to highly productive businesses.

As with the national strategy, the purpose of the local industrial strategies is to improve the productivity of the economies that they cover. While the prevailing thought is that poor productivity is the result of a “long tail” of unproductive businesses, a point referenced in the West Midlands’ strategy, our previous work has shown how this isn’t the case. And looking at the West Midlands and Greater Manchester specifically shows this to be true for these areas too.

The charts below look at the distribution of businesses according to their productivity for the West Midlands, Greater Manchester and cities in the Greater South East. They show two key things.

Source: ONS, Annual Business Survey.

The first is that the long tai’ in all areas is dominated by local services businesses such as cafés, bars and hairdressers. And there is very little difference in the distribution of these businesses, meaning they do not explain the difference in productivity between the areas as a whole.

The second is that the difference between the areas is in the distribution of exporting businesses – those that sell beyond their local market – such as advertisers, finance businesses and software developers. While Greater Manchester has a higher share of higher productivity exporters than West Midlands (the distribution is more skewed to the right in the chart), both lag well behind cities in the Greater South East of England.

This difference is not because exporters in the West Midlands and Greater Manchester are performing below par, but because the nature of the activities is different, with highly productive, innovative activities more likely to locate in the Greater South East than elsewhere. So the challenge for both areas is to make themselves more attractive to this type of activity (such as software design), rather than the lower skilled exporting activities (such as back-office functions for a bank or data handling company).


This has been increasingly happening in Manchester in recent years.  Bet365 have opened a city centre office in Manchester to locate its tech team, rather than at its headquarters in Stoke. Siemens engineers its wind turbines in the city that are then built in Hull. And JLR is to open a software, IT and engineering centre there too.

But the chart above and overall productivity figures for the city region show that even with these moves there is still a considerable gap. And so the challenge for the local industrial strategies will be to identify the specific barriers that prevent more investment from these types of exporting activities.

This holds true for many other places too, especially in the north of England. They will no doubt take great interest in the local industrial strategies of West Midlands and Greater Manchester, and take inspiration from them.

But if they want their own strategies to be useful, they must be clear in how the actions that they propose – be it investment in skills, transport or commercial space, for example – will help them be more attractive to higher productivity exporters in the future than they have in the past.

Paul Swinney is head of policy & research at the Centre for Cities, on whose blog this article first appeared.