Why do businesses continue to cluster in London?

London! City of dreams! Image: Getty.

You don’t need to be an economist to know that businesses tend to cluster together in cities: 14th Century Ghent was famous for woollen cloth, 15th Century Florence for its fine arts and by the 16th Century Bordeaux was already a wine city. In the 17th Century, Delft was known for its pottery, while 18th Century Venice specialised in fun – opera, carnivals, fine food and ‘courtesans’ – and 19thcentury Manchester in cotton mills. In the 20th century, L.A. became the centre of the US film business, just as Detroit did for the car industry. 

As the understanding of the economics of urban agglomeration has spread, so city leaders and their economic advisers have come to see their job at least in part as preserving their city’s edge in one “cluster” or another or incubating new clusters.

This is a helpful way of thinking, but in the case of a global city like London it also has its limits. London is a teaming cluster of clusters. Yes, the city has particular strengths in creative industries, financial and business services, tourism and higher education, among other things. Each of these has its own particular set of opportunities and issues, and which demand particular attention from city leaders and policy makers.  But there are so many of these clusters in London, and they are so inter-connected, that it’s hard to make this a way of organising economic strategy.  

Last week Centre for London published a report that offers a different and perhaps more useful way of thinking about the capital’s economic specialism. The research looks at the role that headquarters play in the London economy. 

There are good reasons after all for any city to want to grow, attract and retain head offices. Headquarters create highly paid jobs and tax revenue and feed valuable professional and business service clusters. They attract a lot of business visitors. Bosses are less likely to move a headquarters to another city than they are a “second tier” function. Headquarters are “sticky”.  And headquarter functions, like strategy, governance, HR, comms and public affairs, are less vulnerable to automation than other business functions. 


Moreover, London’s headquarter economy has boomed. Between 2003 and 2018, London was the top ranked destination globally for foreign direct investment into head offices, measured by number of projects. The big multi-nationals have overwhelming chosen London as their European head offices. Employment in head office functions has grown faster than even fast growing and valuable sectors like accountancy and consultancy. Indeed, if London has a leading sector, it’s not financial, business or creative industries. It is headquarters. Headquarters are to London’s economy what steel-making was to Victorian Sheffield, or digital technology is to Silicon Valley. 

But the single most important factor in explaining the rise and rise of London as a headquarter city has been its ability to attract talent at every level of business – much of it from the EU.  In centuries past, businesses clustered together in cities because the goods needed in manufacture were cheaper in cities, and cities provided an accessible market for finished products. 

But the modern service industries in which London and other global cities specialise in don’t depend on raw goods or access to customers in the same way. They don’t rely heavily on raw goods and internet allows them to sell their services around the world.  What businesses are looking for in a head office destination is a good pool of highly skilled workers. As one property broker we spoke to put it, “Head office decisions are probably 90 per cent about people.” Finding a location that appeals to a modern skilled, and ultimately mobile workforce is therefore essential.  

Both the Conservative government and Jeremy Corbyn’s Labour party have prioritised preserving the free flow of goods in their approach to Brexit – in part because they are rightly worried about the damaging effect barriers to trade in goods would have in the UK’s poorer industrial heartlands.  But if we want to maintain London’s invaluable role as the world’s leading head office capital, we need to preserve the flow of talent as well.

Ben Rogers is director of the Centre for London.

 
 
 
 

What are Europe’s longest train journeys?

The Orient Express was a pretty long train. Image: Getty.

For reasons that aren’t clear even to me, a question popped into my head and refused to leave: what’s longer? Britain’s longest train joruney, or Germany’s?

On the one hand, Germany is quite a bit larger – its area is 70 per cent more than Great Britain’s. On the other hand, Great Britain is long, skinny island and Germany is much rounder – the distance from John O’ Groats to Lands End is over 1,400 km, but you never have walk over 1,000 km to cross Germany in any direction.

And it turns out these factors balance almost each other out. Britain’s longest train, the CrossCountry from Aberdeen in Scotland to Penzance in Cornwall, runs 785 miles or 1,263 km. Germany’s longest train, the IC 2216 from Offenburg in the Black Forest to Greifswald on the Baltic coast, is exactly 1,300 km. Germany wins by a tiny distance.

Except then I was hooked. What about the longest train in France? Spain? Italy?

So I did what anyone would do. I made a map.

The map above was all drawn with the Deutsche Bahn (Germany Railways) travel planning tool, which rather incredibly has nearly every railway in Europe. The data quality is better for some countries than others (the lines in France aren’t quite that straight in real life), and the measurements may be a bit off – it’s not always easy to find the length of a train service, especially when routes can vary over the year – but it gives us a good idea of what the routes look like.

Let’s start with the UK. The Aberdeen to Penzance route isn’t really for people who want to go all the way across the country. Instead, it’s a way to link together several railway lines and connect some medium-to-large cities that otherwise don’t have many direct services. “Cross-country” trains like these have existed for a century, but because they crossed multiple different company’s lines – and later, multiple British Rail regions – they tended to get ignored.

 

That’s why, when it privatised the railways, the government created a specific CrossCountry franchise so there was a company dedicated to these underused routes. If you want to get from Edinburgh to Leeds or Derby to Bristol, you’ll probably want a CrossCountry train.

The usual route is Edinburgh to Plymouth, but once a day they run an extra long one. Just one way though – there’s no Penzance to Aberdeen train. 

The longest train in Germany is weird – at 1,400 km, it’s substantially longer than the country itself. On the map, the reason is obvious – it takes a huge C shaped route. (It also doubles back on itself at one point in order to reach Stuttgart).

This route takes it down the Rhine, the biggest river in west Germany, and through the most densely populated patch of the country around Cologne and Dusseldorf known as the Ruhr. Germany’s second and third longest trains also have quite similar routes – they start and end in remote corners of the country, but all three have the Rhine-Ruhr metropolitan area in the middle.

You’re not meant to take the IC 2216 all the way from north east to south west – there are much more direct options available. Instead, it’s for people who want to travel to these major cities. They could run two separate trains – say, Offenburg-Dusseldorf and Griefswald-Cologne – but making it a single route means passengers benefit from a bit more flexibility and helps DB use its rolling stock more effectively.

France’s longest train exists for a very good reason. Most of France’s high-speed lines radiate out from Paris, and it’s very hard to get around the country without going to the capital. Usually to get from Marseille on the Mediterranean to Nantes near the Atlantic, you’d need to take a TGV to Paris Gare de Lyon station, then get the Métro across the city to Gare Montparnasse.

Once a day though, this TGV avoids this faff by stopping in the suburb of Juvisy and turning around without going into the centre. This lets passengers travel direct between the coasts and reduces the traffic through Paris’s terminals in the rush hour. The exact length of this route isn’t clear, but Wikipedia says it’s about 1,130 km.

Spain’s longest train is very different. This is the Trenhotel sleeper service from Barcelona to Vigo, and it’s pretty fancy. This is a train for tourists and business travellers, with some quite luxurious sleeping cabins. But it is a regularly scheduled train run by the state operator Renfe, not a luxury charter, and it does appear in the timetables.

Being dry, hot and quite mountainous in its middle, most of Spain’s cities are on its coast (Madrid is the one major exception) and as a result the train passes through relatively few urban areas. (Zaragoza, Spain’s 5th largest city, is on the route, but after that the next biggest city is Burgos, its 35th largest,) This is partly why overnight trains work so well on the route – without many stops in the middle, most passengers can just sleep right through the journey, although there are occasional day time trains on that route too if you want to savour the view on that 1,314 km journey.

Finally, there’s Italy. This is another sleeper train, from Milan in the north to Syracuse on the island of Sicily. It goes via Rome and travels along the west coast of... wait, it’s a train to the island of Sicily? How, when there’s no bridge?

Well, this train takes a boat. I don’t really have anything else to add here. It’s just a train that they literally drive onto a ferry, sail across the water, and then drive off again at the other side. That’s pretty cool.

(As I was writing this, someone on Twitter got in touch to tell me the route will get even longer in September when the line to Palermo reopens. That should be exciting.)

So those are the longest trains in each country. But they aren’t the longest in Europe.

For one thing, there are some countries we haven’t looked at yet with very long trains. Sweden has some spectacular routes from its southern tip up into the Arctic north, and although the Donbass War appears to have cut Ukraine’s Uzhorod to Luhansk service short, even Uzhorod to Kharkiv is over 1,400 km. And then there are the international routes.

To encourage the Russian rich to take the train for their holiday, Russian Railways now run a luxury sleeper from Moscow to Nice, passing through France, Monaco, Italy, Austria, Czechia, Poland, Belarus and Russia. This monster line is 3,315 km long and stretches across most of the continent. That’s got to be the longest in Europe, right?

Nope. Incredibly, the longest train in Europe doesn’t actually cross a single border. Unsurprisingly, it’s in Russia, but it’s not the Trans-Siberian – the vast majority of that’s route is in Asia, not Europe. No, if you really want a long European train journey, head to Adler, just south of the Olympic host city Sochi. From there, you can catch a train up to Vorkuta on the edge of the Arctic Circle. The route zigzags a bit over its 89 hour, 4,200 km journey, but it always stays on the European side of the Ural mountains.

Bring a good book.

Stephen Jorgenson-Murray often tweets about this kind of nonsense at @stejormur.


All maps courtesy of Deutsche Bahn.