London maintains a competitive advantage as a global business center, but faces challenges retaining this position long-term. While London has world-class assets in industries like finance, professional services, and technology, it requires massive investment in infrastructure to support projected population growth. However, London also risks inequality increasing, climate change impacts, and losing competitive advantage if the UK and Europe's economic integration weakens. Overall, London is well-positioned to remain competitive if it plays to its strengths in diversity and knowledge-based industries, but managing its expansion and relationships with other UK regions will be crucial.

1. Tough at the top? Can London
maintain competitive advantage?
Mark Beatson
Chief Economist, CIPD
Presentation to CIPD London conference*
16 March 2015
* This is an expanded version of the presentation delivered which includes some additional material and full references. Think of it as the
director’s cut.

2. London is a global business centre – one of the
elite
• Global Power City Index 2014
• Cities in Motion Index 2015
• PwC Cities of Opportunity Index 2014
• EIU Hotspots competitiveness rankings 2012 (behind New York)
• AC Kearney Global Cities Index 2014 (behind New York)
• fDi Global Cities of the Future Awards 2014/15 (behind New
York)
• Innovation Cities Index 2014(behind San Francisco-San Jose
and New York)

3. Can it stay there?

4. London has world class capabilities and assets
well suited for the innovation economy
• Finance and business services
• Legal and IP services
• Professional services
• Creative industries (including media and advertising)
• Global Fashion Capital 2014 (behind New York)
• Tertiary education sector (5 universities in Times Higher
top 100 – more than any other city)
• Diverse population
• Cultural assets
• Vibrant technology sector (3,200+ digital SMEs in Inner
East London in 2010 – Nathan, Vandore and
Whitehead, 2012)
• No. 7 (behind Silicon Valley, various US and Israel) but
in Europe – Global Startup Ecosystems Index 2012
“London is a special place, fertile with
creative influences. Tech City is a success
and will grow, not because of the Tech,
but because of the City – the humanity,
the rubbing together of cultures, the
tensions and beauties therein”.
Ben Hammersley, PM’s Ambassador to
Tech City in Nathan, Vandore and
Whitehead (2012)

5. London and the UK remain an attractive location
for mobile people, businesses and money
• English language
• UK still seen as good place to do
business
• UK an even better place to do litigation –
especially divorce and libel
• Mastercard Global Destination Cities
2014
• Importance to Ultra High Net Worth
Individuals in 2015 – people with $30+
million to spare (though expected to
drop behind New York by 2025) – Knight
Frank Research
“I’ve always believed that talent
attracts capital more consistently
and effectively than capital attracts
talent”
Michael Bloomberg quoted in EIU
Hotspots report

6. Which ought to mean London 2050 is bigger
(more people, although older) and better (richer)
• Population growth of 37% (3.1 million) 2011-2050. Population
should this year exceed its 1939 peak and is projected to be
over 11 million by 2050 (GLA, central population scenario)
• 4 times as many 90 year olds by 2050 (TfL)
• If growth is 2.5% p.a., employment increases from 4.9m to 6.3m
by 2050 (GLA, central scenario) – 69% of these in inner London
boroughs

7. But will it still be London? What will it be like to
live in and work in?
• London 40th in 2015 Mercer Quality of Living Survey (Vienna
No. 1) – designed for expatriate compensation, London edged
out on cost, infrastructure, safety
• London 91st in 2015 Numbeo Quality of Life Index (Canberra
No. 1) – London beaten by Winnipeg, Jeddah and Ahmedabad!
Result driven by expensive consumer prices, high property-
price-to-income ratio and middling safety, healthcare, traffic
commute and pollution ratings. Yet …
• Arcadis Sustainable Cities Index 2015 (behind Frankfurt) –
great businesses and social capital but creaking infrastructure
• 38.4% public green spaces (behind Sydney and Singapore) –
World Cities Culture Report 2013

8. What could possibly go
wrong?

9. London needs massive investment
• New runway capacity – by 2030 London runway
capacity used up, hence need for one new runway
(Airports Commission interim report)
• 35% more trips within London by 2050 – need to
expand public transport capacity by 70%
(Infrastructure Plan)
• Water pipes, replacement of Victorian sewerage
system, improvement of Victorian-speed broadband
• 48% more dwellings needed by 2050 (GLA)
• Population growth means more demand for
schools, hospitals etc.
• These require money – how will it be financed?
• Plus a lot of political capital - highly controversial
political decisions at national, London and local
level (airport capacity, railway lines, road capacity,
new housing)
What about HS2? It might not feel
like an investment designed with
London’s interests at heart, but:
a) Assumptions it will trigger a
renaissance in the Midlands and
the North – or a ‘rebalancing’ –
may be wide of the mark.
Quicker trains make it easier to
serve a national market from
London!
b) The cost (current estimate is £43
billion) is money that cannot be
spent on other investments.

10. What if London, the rest of the UK and Europe
drift apart?’
• Growth likely to be higher if London and other UK
cities work as a ‘system’– but what if competition
trumps co-operation?
• London has a diversified economy but it relies on
open markets, trade and freedom of movement
(goods, capital, people) – which exposes it to
financial crises? If so, expect ‘rebalancing’ to
make a comeback
• Decentralisation/devolution/disintegration of UK
power structures introduces instability?
• What if values diverge?
• Likelihood of prolonged difficulties in Eurozone – a
brake on UK and London growth, but also
prevents competition emerging from Frankfurt and
Paris?
• What if the single market fragments? What if the
UK left the EU?
‘London is the UK’s only world city. It is
relatively small compared to some other
world cities and can continue to grow.
Furthermore, the UK would not be well
served if it does not continue to grow. We do
not accept the argument sometimes made
(especially in a business cycle downturn
when the north-south divide increases) that
London’s growth occurs at the expense of
other UK cities. Economic growth is not a
zero sum game, and this is just as true in
thinking about the geographical location of
activity within one national economy as in
the context of international trade and
growth’.
Coyle and Rosewell (2014)

11. What about inequality?
• UK city with greatest wage inequality in 2010 (Gini coefficient and
90/10 percentile ratio) – (Lee, Sissons and Jones, 2013)
• London has lots of high earners, a relatively high median wage and the
National Minimum Wage has less impact than in many other parts of the
country. Living costs (especially housing costs) may also be higher for the
low waged in big cities.
• London’s employment structure is ‘hourglass-shaped’/’wasp-
waisted’:
• UK city (behind Reading & Bracknell) for skills bias (job distribution
skewed to highly skilled)
• UK city (behind Guildford & Aldershot and Reading & Bracknell) for
job polarisation (high and low paid jobs with few in the middle)
• Contrasting fortunes of inner and outer boroughs – Outer London
has had less job growth, lower business start-up rates.
• Contrasting fortunes within boroughs

12. And climate change?
No sea level rise by 2050 20cm sea level rise and
20cm subsidence by 2050
– no adaptation
Annual loss to flood
damage ($m)
% of city GDP Annual loss to flood
damage ($m)
1st Ghuangzhou-Guangdong 11,928 1.32 254,721
2nd New Orleans 1,583 1.21 161,141
3rd Mumbai 6,109 0.47 107,285
Dubai 286 0.11 4,180
New York-Newark 1,960 0.08 7,914
Hong Kong 140 0.00 1,269
Tokyo 58 0.00 61,737
London 13 0.00 65
Singapore 2 0.00 27
Source: OECD, http://www.oecd.org/greengrowth/greening-cities-regions/citiesclimatechangeandgreengrowth.htm#flood ‘optimistic’ scenario

13. Yes, it’s tough at the top … but a relegation dog-
fight is even tougher (and less rewarding)
• London is well placed to stay ahead of the competition
• This means playing to its strengths – diversity, creativity and
knowledge-based industries drawing on talented people from all
over the globe
• Managing London’s expansion will be expensive, involve some
tough decisions and require finesse and generosity – both in its
relationships with the wider UK and in creating opportunities for
all Londoners new and old
• That’s how we keep London special!

14. References
AT Kearney (2014), Global Cities, Present and Future.
Airports Commission (2013), Airports Commission: Interim Report.
Arcadis (2015), Sustainable Cities Index.
Coyle, D and Rosewell, B (2014), Investing in City Regions: How does London interact with the UK system of cities and what are the implications of this relationship? Government
Office for Science Foresight report.
Economist Intelligence Unit (2012), Hotspots: Benchmarking Global City Competitiveness.
fDi (December 2014/January 2015), Global Cities of the Future 2014/15 Winners. www.fDiIntelligence.com
GLA Intelligence (2013), Population and Employment Projections to support the London Infrastructure Plan 2050.
Hedrick-Wong, Y and Choong, D (2014), Mastercard 2014 Global Cities Destination Index.
Innovation Cities Index 2014. Source: 2thinknow Innovation Cities™ Program: www.innovation-cities.com
IESE University of Navarra (2015), Cities in Motion Index.
Institute for Urban Strategies (2014), Global Power Cities Index.
Lee, N, Sissons, P and Jones, K (2013), Wage inequality and employment polarisation in British cities, Work Foundation/Joseph Rowntree Foundation.
Mercer Quality of Living Survey http://www.imercer.com/content/quality-of-living.aspx
Nathan, M, Vandore, E and Whitehead, R (2012), A tale of Tech City: the future of Inner East London’s Digital Economy, Centre for London.
Numbeo quality of life rankings http://www.numbeo.com/quality-of-life/rankings.jsp
PwC (2014), Cities of Opportunity 6.
Startup Genome (2012), Startup Ecosystem Report 2012.
World Cities Culture Forum/Mayor of London (2013), World Cities Culture Report 2013.

15. Thank you
To find out more:
Visit our Megatrends web page http://www.cipd.co.uk/cipd-hr-
profession/whats-new/megatrends.aspx
Read the blogs
http://www.cipd.co.uk/blogs/members/m.beatson/default.aspx
@MarkBeatson1
m.beatson@cipd.co.uk