London needs a bolder relationship with its immediate neighbours

Greater, Greater London. Image: Google.

It’s a classic tale of urban growth: people and businesses move out to find cheaper space, cities absorb other towns in their commuter belt, and politics have to catch up.

For London, this creates challenges at very large scale. The city is core to a much greater economic region, the Wider South East, which is home to over a third of the country’s population and jobs. This Southern Superhub has done well economically: in the last five years, it made up for 53 per cent of service sector jobs creations in the UK. A record number of people commute across the London boundary, and many London firms have offices, suppliers and clients in other Wider South East cities.

The challenges of high living costs, low pay and crowded transport are also straddling boundaries. The government has calculated that the Wider South East will need 1.5m homes by 2026 – but most local authorities inside and outside London have struggled to meet previous, lower housing targets. As cash-strapped local authorities feel unable to accommodate rapid change, the relationship between London and its neighbours has in some places turned sour.

Housing is by far the most contentious topic. Both sides have blamed each other over “whose growth” it is, and whether they are doing enough to accommodate it. Several neighbours are annoyed that London has ruled out changes to its greenbelt land, when they are reviewing their own to find space for housing. Some at the Greater London Authority are frustrated that several other councils have blocked attempts to collaborate over housing and transport investment.

Until recently, London mayors have not really focused on engaging surrounding jurisdictions in their decisions. They have no legal requirement to agree any strategy with neighbours, and to avoid being seen as reliant on them, all three London mayors decided that the city should accommodate all of its growth. This aligned nicely with the interests of most towns outside, who saw “London overspill” as a threat to their identity.

The economic geography of London and its wider region. Image: Centre for London.

The government did not seek to spark conversations about the region’s future either. Its funding is very centralised and formulaic. Large projects are, more often than not, delivered without a regional outlook: London’s neighbours did not contribute to Crossrail, and the new Lower Thames crossing was not seen as a project of regional importance.

But politics is starting to catch up. Among local political leaders, there is more awareness that London and its neighbours are too connected and dependent for councils to tackle challenges on their own. They also feel remarkably underpowered to address them – they have little control over how they raise and spend public money – and hope that speaking with a common voice will grab government attention.

Several local authorities have been partnering to draft economic and transport strategies, and to make a joint case for greater investment. A group of political leaders representing London and the rest of the Wider South East also meet regularly to strengthen dialogue on shared issues, and this year the Mayor is taking part in their annual summit.

But there are difficult decisions ahead, and we think it’s time for this initiative to step up its ambitions. The Wider South East political group needs to evolve into a forum where decisions can be made, and common asks are taken to government. It needs to become more strategic, and draft a vision for the whole region – an industrial strategy for the Southern Superhub.

Government could do much to support, by rewarding collaboration with additional financial and political freedoms, and long-term infrastructure investment. Reshaping the Minister for London into a senior minister for the Wider South East would be a good start.

Sceptics note that having 156 local authorities speak with a single voice is close to impossible. But the urgency of challenges facing the region, and the progress made in the last few years, suggests that much could be achieved with the right government incentives.

Nicolas Bosetti is a senior researcher at the Centre for London. He tweets as @nicolasbosetti.

Next-door Neighbours has been jointly published by Centre for London, the capital’s dedicated think tank, and the Southern Policy Centre, the think tank for central southern England.

 
 
 
 

“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.


You can read the Centre for Cities’ full report here.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

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