Specialisation & Internationalisation

Distribution of economic activity in the GSE by main sectors.

Historically, the downtown of major cities is where the most highly-skilled and highly-remunerated work was done — think: Wall Street, the City, etc. But as space has run out in the core, secondary centres such as Canary Wharf and La Défense have sprung up to meet the needs of increasingly globalised firms operating in everything from financial services to consultancy. And while these seemingly subsidiary centres are often built on reclaimed or rebuilt land that was considered undesirable (except, typically, by the people who were already living there), they are still very much a part of the `world cities’ and the relocations are relatively modest in terms of geographical and transportational distances.

What is less well-known — at least on a conscious level — outside of planning circles is that this process has now extended much, much further into the hinterlands of the very largest cities. It has, for instance, become increasingly obvious that the ‘London economy’ does not end at the M25. In fact, various types of specialised, highly-paid employment were springing up all across the Greater Southeast of England

Collectively, this behaviour is termed ‘polycentricity’ (i.e. many-centres), but for individual firms it’s simply the relocation of some (or all) functions from the main city centre (e.g. The City) to somewhere either suburban or in a subsidiary city elsewhere in the region. Below is a figure drawn from my doctoral research showing the dispersion of six key sectors as well as the degree to which firms in each those sub-regions are `internationalised’ (as measured by telecommunications usage).

Distribution of economic activity in the GSE by main sectors.

While the figure is necessarily  a simplification of the `true’ employment picture, it does make clear that there are some quite distinct behaviours on display:

  • As you might expect, Logistics sites are often found near major transport infrastructure and most especially infrastructure with a strong international component. This sector is also a heavy consumer of real estate and so you tend to see the largest developments in areas where land is cheap (East Anglia and so forth).
  • Rather more surprising is the distribution of ICT (Information and Communications Technology) activity. Or, in other words, high-tech work. Internationalised firms — many of them global firms with head offices in America — are strongly concentrated to the West of Greater London around the M25 and out as far as Reading. Beyond that there is still a great deal of ICT activity, but it is relatively less internationalised, as is the concentration around Cambridge. There is a small ICT grouping in Central London that, I suspect, is connected to the distinction between software as a service (central) and software as a product (West of London). Unfortunately, the level of detail in the NOMIS employment data doesn’t really allow me to get at this finer distinction.
  • Even more striking is the distribution of R&D work; whereas the majority of sectors show important `clumping’ together in space, R&D activity is widely dispersed and there is little obvious connection between the level of internationalisation and the location of the office. So in contrast to ICT, where proximity to Heathrow seems like a good proxy for predicting international calling activity, in this sector it’s very much down to the individual site — you can, for instance, see the impact of a major pharmaceutical research site (now closing) in Sandwich. My reading and research in this area suggests that a lot of major R&D employers are actively trying to avoid being too close to their competitors — it’s much easier to avoid sharing confidential knowledge if you’re not meeting your friends from a competing firm down at the pub. This is very different model from the one that politicians are usually trying to copy: Silicon Valley.
  • Living within the M25 I tend to equate financial services activity with the City and Canary Wharf. In the back of my head I knew that there was `back office’ activity in other areas, but it wasn’t top-of-mind for me. Looking at this map it became rather clear that there is a lot of activity happening elsewhere in the Greater Southeast. Croydon is a major back-office site, but so are Redhill and parts South towards Gatwick. The existence of major insurers in places like Norwich and Ipswich is also picked up rather strongly here. I’ve not yet examined the interaction between these areas, but I suspect that we’ll see very strong links binding together some of these highly-specialised sites.
  • Advanced Producer Services (APS) is a kind of catch-call term for a range of activities that help producers to produce, but which are often too highly-skilled to qualify as simple out-sourcing or temping. Think: management consultancy, HR services, etc. This group is particularly interesting since they depend on the other groups for business; they therefore have two locational options open to them: pick somewhere from which it’s easy to reach many possible clients; pick somewhere close to your primary clients. Here, specialisation should be a good predictor — the more specialised your client-base, the more likely you are to opt for somewhere close to your clients. There are three areas which show high levels of internationalisation: central London (global consultancies and accountancies for the most part), the M25, and to the north and east. Elsewhere, international calling activity is much lower, but the orientation towards transport infrastructure persists. The lack of finely-detailed employment data here keeps me from really digging into the patterns of location right now, but I think that the importance of access is really obvious, as is the tendency for specialised subcentres of APS activity near larger agglomerations of particular industrial groups.
  • Cultural activity is what most planners mean when they talk about the ‘Creative City’ (the reasons that I feel this is an oversimplification can wait for another post), and it’s always associated with our ‘coolest’ cities such as London and New York. Interestingly, although the centre of, for instance, the arts scene in London has shifted towards places like Hackney, you won’t see this in the data. Partly because it’s out-of-date, and partly, I would guess, because young artists will tend to be doing something else in order to pay the bills. What does come out really strongly here is that internationalisation is associated with large employers (the Beeb, Soho editing firms, etc.) and only when they are based within Zones 1-3. Beyond this, cultural employment seems to exist primarily as more locally- and regionally-oriented services.

So where does this leave us? I think that it’s especially important to note that a ‘good’ location means different things to different sectors — for some sectors an attractive location is one that is easily accessible to car-based commuters and offers a good quality-of-life (usually measured as good schools and cheap housing) to its employees, while for others the hustle and bustle is absolutely integral to doing business. I think it’s equally worth noting that businesses are not randomly distributed around the GSE and so it won’t be easy to induce companies to make radical moves or to form Silicon Valley-type social-technical hubs without a lot of work.

By way of example, a lot has recently been made of East London Tech City. I’m not going to suggest that these offices will never open but I am profoundly sceptical of whether they’ll have anything like the impact that Number 10 hopes:

  • First, these are all large tech firms with headquarters in America. Getting from East London to a flight from Heathrow is profoundly difficult and will only get somewhat easier when CrossRail finally comes on stream.
  • Second, the majority of work will be done from specialised offices so the type of exchange that happened in informal venues across Palo Alto during the early days of SV (and which set up the dynamic that persists today) is unlikely. Or, at least, unlikely to have anything like the resonance that it does on the other side of the Atlantic.
  • Third, what’s in it for the little guy? The real vibrancy of SV is in the foment of small firms and breakaways, but I can’t see how Intel, Google, Cisco, and Facebook are going to be enabling this. They’ll want to keep innovation in-house, not spread it around.
  • Fourth, what’s in it for East London? The Shoreditch phenomenon is based on small, indigenous businesses (principally advertising and design) clustering together and eliminating occupying space previously used by a furniture manufacturing cluster. I don’t see many senior engineers at Qualcomm wanting to live on Upper Clapton so the net effect of all of this development on the local community (in terms of employment, integration, etc.) I expect to be modest.

I would be very happy to be proved wrong on the East London Tech City, but the history of what the French call ‘grand projets’ is, at best, deeply mixed. Often, the impact is no more than skin-deep.