Why do some businesses prefer cities, while others flock to suburbia?

Some suburbs. Image: Getty.

Britain is home to 2.5m private sector businesses and 21m private sector jobs. These businesses and jobs aren’t spread evenly throughout the country – they are located in very specific places.

But why, when they could locate anywhere, do they cluster? Our new report Trading places: Why firms locate where they do answers that question. And the answer has big implications for the government as it crafts its new industrial strategy.

In the report we carve the country up into four areas – city centres, suburbs, hinterlands and rural – and look at the amount and type of businesses and jobs in each.

City centres see the most acute clustering of economic activity: 8 per cent of private sector businesses and 14 per cent of private sector jobs cluster on just 0.08 per cent of the landmass of Britain.

The opposite is the case for the rural economy. Rural areas make up more than 50 per cent of Britain’s landmass, but only 13 per cent of businesses and only 10 per cent of jobs are located there.

Figure 1: Distribution of businesses and jobs across the four geographies, 2015. Click to expand. Source: ONS (2016), Business Structure Database 2015; ONS (2016), Census 2011, origin-destination data (WU02UK); Centre for Cities’ own calculations.

As well as seeing a difference in scale, there is also a difference in the types of businesses that are attracted to different areas. This is especially the case for “exporting” businesses: those firms that export their goods or services either to some other part of Britain or abroad.

Britain’s service exporters tend to locate in cities, while goods exporters are more inclined to locate in the hinterlands (see Figure 2). These patterns are particularly acute for higher-skilled exporting businesses: we estimate that 32 per cent of Britain’s high-skilled jobs in service exports are located in city centres.­

Figure 2: Where businesses in different sectors choose to locate, 2015. Click to expand. Source: ONS (2016), Business Structure Database.

Recent years have also seen a change in the make-up of the export base (see Figure 3). Across all four areas, the goods-exporting sector has declined, while the service-exporting sector has grown – and this growth has been strongest in the suburbs.

The shift in the make-up of the export base of Britain observed since 1998 means that we are likely to see an increasing concentration of economic activity in cities.

Figure 3: Percentage change in the number of businesses and jobs by industry across four geographies, 1998-2015. Click to expand. Source: ONS (2016), Business Structure Database.

This very distinct geography of businesses and jobs plays out because of the benefits of agglomeration. Cities – and city centres in particular – offer access to knowledge, infrastructure and deep pools of workers, and so are particularly attractive to service-exporting businesses.


But they also have higher costs – costs of office space and congestion. Lower-skilled, more routinised businesses – such as call centres and more traditional manufacturers – tend to prefer cheaper premises over access to knowledge. And so they tend to prefer a suburban or hinterland location.

The geography of Britain’s jobs and firms means that supporting growth in our cities will become increasingly important for improving the performance of the national economy. This means that the new industrial strategy being prepared by Theresa May’s government should look to make the most of the benefits and reduce the costs of doing business in cities, as well as better linking cities with their surrounding hinterlands so that more people have better access to the job opportunities that are being created in cities.

Of course, there is great variation between cities too – particularly in their ability to attract and retain high value service jobs. The second report in this project, to be published later in the year, will explore the variation in the export base of different cities, and how their ability to attract investment from services exporters, has had a big impact on their ability to provide high quality jobs.

Ilona Serwicka is a reseracher at the Centre for Cities, on whose blog this article was originally published.

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

 
 
 
 

The IPPC report on the melting ice caps makes for terrifying reading

A Greeland iceberg, 2007. Image: Getty.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) – the UN body responsible for communicating the science of climate breakdown – released its long-awaited Special Report on the Ocean and Cryosphere in a Changing Climate.

Based on almost 7,000 peer-reviewed research articles, the report is a cutting-edge crash course in how human-caused climate breakdown is changing our ice and oceans and what it means for humanity and the living planet. In a nutshell, the news isn’t good.

Cryosphere in decline

Most of us rarely come into contact with the cryosphere, but it is a critical part of our climate system. The term refers to the frozen parts of our planet – the great ice sheets of Greenland and Antarctica, the icebergs that break off and drift in the oceans, the glaciers on our high mountain ranges, our winter snow, the ice on lakes and the polar oceans, and the frozen ground in much of the Arctic landscape called permafrost.

The cryosphere is shrinking. Snow cover is reducing, glaciers and ice sheets are melting and permafrost is thawing. We’ve known this for most of my 25-year career, but the report highlights that melting is accelerating, with potentially disastrous consequences for humanity and marine and high mountain ecosystems.

At the moment, we’re on track to lose more than half of all the permafrost by the end of the century. Thousands of roads and buildings sit on this frozen soil – and their foundations are slowly transitioning to mud. Permafrost also stores almost twice the amount of carbon as is present in the atmosphere. While increased plant growth may be able to offset some of the release of carbon from newly thawed soils, much will be released to the atmosphere, significantly accelerating the pace of global heating.

Sea ice is declining rapidly, and an ice-free Arctic ocean will become a regular summer occurrence as things stand. Indigenous peoples who live in the Arctic are already having to change how they hunt and travel, and some coastal communities are already planning for relocation. Populations of seals, walruses, polar bears, whales and other mammals and sea birds who depend on the ice may crash if sea ice is regularly absent. And as water in its bright-white solid form is much more effective at reflecting heat from the sun, its rapid loss is also accelerating global heating.

Glaciers are also melting. If emissions continue on their current trajectory, smaller glaciers will shrink by more than 80 per cent by the end of the century. This retreat will place increasing strain on the hundreds of millions of people globally who rely on glaciers for water, agriculture, and power. Dangerous landslides, avalanches, rockfalls and floods will become increasingly normal in mountain areas.


Rising oceans, rising problems

All this melting ice means that sea levels are rising. While seas rose globally by around 15cm during the 20th century, they’re now rising more than twice as fast –- and this rate is accelerating.

Thanks to research from myself and others, we now better understand how Antarctica and Greenland’s ice sheets interact with the oceans. As a result, the latest report has upgraded its long-term estimates for how much sea level is expected to rise. Uncertainties still remain, but we’re headed for a rise of between 60 and 110cm by 2100.

Of course, sea level isn’t static. Intense rainfall and cyclones – themselves exacerbated by climate breakdown – can cause water to surge metres above the normal level. The IPCC’s report is very clear: these extreme storm surges we used to expect once per century will now be expected every year by mid-century. In addition to rapidly curbing emissions, we must invest millions to protect at-risk coastal and low-lying areas from flooding and loss of life.

Ocean ecosystems

Up to now, the ocean has taken up more than 90 per cent of the excess heat in the global climate system. Warming to date has already reduced the mixing between water layers and, as a consequence, has reduced the supply of oxygen and nutrients for marine life. By 2100 the ocean will take up five to seven times more heat than it has done in the past 50 years if we don’t change our emissions trajectory. Marine heatwaves are also projected to be more intense, last longer and occur 50 times more often. To top it off, the ocean is becoming more acidic as it continues to absorb a proportion of the carbon dioxide we emit.

Collectively, these pressures place marine life across the globe under unprecedented threat. Some species may move to new waters, but others less able to adapt will decline or even die out. This could cause major problems for communities that depend on local seafood. As it stands, coral reefs – beautiful ecosystems that support thousands of species – will be nearly totally wiped out by the end of the century.

Between the lines

While the document makes some striking statements, it is actually relatively conservative with its conclusions – perhaps because it had to be approved by the 195 nations that ratify the IPCC’s reports. Right now, I would expect that sea level rise and ice melt will occur faster than the report predicts. Ten years ago, I might have said the opposite. But the latest science is painting an increasingly grave picture for the future of our oceans and cryosphere – particularly if we carry on with “business as usual”.

The difference between 1.5°C and 2°C of heating is especially important for the icy poles, which warm much faster than the global average. At 1.5°C of warming, the probability of an ice-free September in the Arctic ocean is one in 100. But at 2°C, we’d expect to see this happening about one-third of the time. Rising sea levels, ocean warming and acidification, melting glaciers, and permafrost also will also happen faster – and with it, the risks to humanity and the living planet increase. It’s up to us and the leaders we choose to stem the rising tide of climate and ecological breakdown.

Mark Brandon, Professor of Polar Oceanography, The Open University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.