| |
|
|
London: The Clever Economy
In this essay, I am keen to address the phase the British economy is in; how it
is adapting to the loss of manufacturing; and why I urge a total lack of
complacency in the maintenance of London's economic strength. In it I
highlight:
• The value of London's economy to the whole of Britain
• The emergence of and London's world leadership in the Clever
Economy
• The threats that challenge London's economy from within and without
• The role the Mayor of London should not play in London's economy
• The need for flexibility in the future.
The London Economy
The London economy punches spectacularly above its weight in relation to any
other region or community in Britain. London's Financial Services sector,
alone, accounts for 17% of the country's Gross Domestic Product.
As the engine room of the national economy, as a generator of national wealth,
as an employer, as a driver of the housing market and tax receipts - let alone
as a flagship attracting international business, people and skills - the
importance of our financial district, which now reaches beyond the City of
London to Canary Wharf, the West End and even to Croydon and Lewisham,
can hardly be exaggerated.
London's economy, though, is far more than the importance of Financial
Services. Look at the number of Regional offices and headquarters based
here. Globalization has carved the world into three zones: the Americas; Asia
and the Pacific Rim; and Europe, Middle East and Africa, or EMEA in the
vernacular.
Within EMEA, London is the preferred centre for global companies - and not
just in Financial Services. London hosts EMEA offices for global companies in
oil and gas, media, pharmaceuticals, telecommunications, IT and mining. All
of these require high calibre personnel, as well as a host of other services and
expertise to be to be competitive. All these companies and sectors keep the
London economy buoyant, diverse and in high levels of employment.
The Mayor of London has a phenomenal responsibility - primarily in not doing
anything to hamper London's economic performance. If the office of Mayor is
conducted correctly, the London economy can be enhanced. Not by Nanny-knows-best, interventionist measures - but far more by removing as many
impediments to its progress as possible.
For many of these sectors, London is the world - let alone the EMEA - centre.
Although gratifying, leadership of any sector or market is a frighteningly
vulnerable position to be in, particularly in sectors as fast moving as financial
services, telecommunications and IT. Competitors look for every opportunity
to chip away at a lead here, at a client relationship there. One piece of
business lost to a rival, which allows them to develop and experiment with new
solutions, suddenly gives another player a track record and market position to
attract more business - and before you know it, the flow of business in an
entire sub-sector is taken away.
The London economy is under constant threat from other aspiring centres - in
Europe, Asia, the Far East and the United States. Our lead is not held by
divine right; it has been well and truly earned but it is forever subjected to the
ferocious forces of competition and ambition elsewhere. The plain and simple
fact is that other centres want our clients.
Relevant history of the British economy
Britain's economy, at various times, has ruled the world - in wool, in cotton, in
heavy industry, in ship building, in motor manufacturing and a host of other
industries and processes. In each case, our position as world leader - at the
time - felt absolutely unassailable and permanent.
And yet, tragically, because of competition from overseas, management that
wasn't imaginative enough to maintain competitiveness, cheaper labour
overseas, inflexible work forces and working practices, restrictions in planning
and development, or inadequate infrastructure, Britain lost its lead time and
time again. This has palpably happened in Britain's manufacturing sector
within the last thirty years.
Many economists in the 1980s believed that the loss of its manufacturing base
would spell the end of the British economy and lead to social unrest. So much
for the value of economists. What they never seem to take account of or
appreciate is human nature - human ingenuity's majestic ability to adapt. (It's
probably because they only ever talk about economies in aggregate and
analyse principally by the use of averages.)
Anyway, in the post-manufacturing phase of an economy, a sector moves
forward by making the most of its added-value services. For example, out of
the loss of mass production of cars, Britain is now among the world's leaders in
services to that sector: research, fuel technology, specialist construction, new
materials, development of car components and car design.
As shown one hundred years ago by the City of London, after its loss to
international ports of the shipping and physical trade in commodities, the City
capitalized on its expertise in professional services to the trading sector -
services and skills in areas like insurance, finance, banking, investment,
currency trading, etc.
In other words, after the manufacturing phase, it is the Clever Economy which
picks up the baton. The City led the way and, now, the rest of the economy is
having to follow.
The Clever Economy
Some economists call this post-manufacturing phase the Knowledge
Economy. But this does not fully grasp the attributes within it that are
contributing to its success or those that will mean it goes on succeeding.
Knowledge is changing all the time. Knowledge of something, today, will be
obsolete tomorrow. The half-life of knowledge is shortening every day.
In practice, the attribute that preserves Britain's leadership in this new phase of
economic development is that of being Clever. Clever enough to realize when
things need to be done differently; clever to understand the trends and new
forces at work in markets; and clever to invent and develop new solutions,
products and services for the benefit of clients.
London absolutely embodies the Clever Economy. The Mayor of London and
the government of the country need to realize that they themselves are only
going to be clever if they do nothing to hamper its development. They are only
going to be considered as a benefit to the Clever Economy when they realize
that a) they do not know as much as the key players within it and b) when they
listen to them and help remove any possible impediments before they
materialize.
The attributes of the Clever Economy
The attributes of the Clever Economy are clear. Everyone and everything
within it have to be as flexible and ready to change as possible. Anything that
slows down ideas, research, testing, implementation, recruitment, marketing or
distribution creates business "friction or drag" and reduces relative
competitiveness with those rival business centres who operate without
restriction.
This flexibility applies to everything involved: the management, the work force,
legal services, banking, the development of supporting IT systems, as well as
people's physical ability to move about quickly to service the new ideas.
Areas of government influence over the Clever Economy
Government can have a bearing on the Clever Economy - and normally a
negative one. Those elements of the Clever Economy that can be influenced
or hindered by government include:
1) Regulation
2) Taxation
3) Education and Training
4) Planning and Office Space
5) Infrastructure
6) Environment
7) Transport and Communication.
1) Regulation
Regulation, in such an open and free moving market as Financial Services, is
nothing sort of suicide. Anything that creates business "friction or drag" - the
loss of freedom to act because of impediments in the way - is an invitation to
other financial centres around the world to take our clients and export our jobs.
As Mayor of London I will be vociferous in defending London's economy from
regulatory imposition, whether from Westminster, Brussels or a supranational
body. People should realize that we do not empower things by regulating
them.
2) Taxation
Taxation can be discussed in identical terms. I will be a noisy champion of all
stakeholders in London in resisting any new or even higher taxation, however
worthy the apparent cause. Taxation does not create growth - period.
Taxation does not empower.
3) Education and Training
In the Clever Economy, education and training are absolutely critical. If the
work force is not clever, it will not sustain London's pre-eminence. Just as
important to its citizens, being clever will be the surest way to economic
participation and their sought after quality of life. As Mayor of London I will
advocate education and training and support stakeholders' efforts to increase
and broaden the Cleverness Index of the work force.
4) Planning and Office Space
The emergence of London as a key financial centre in the 1990s created a
massive demand for new office space. This is far from fully satisfied, and
many of the firms that operate in the City would readily transfer to more
modern accommodation. The Mayor of London, the local boroughs and
Whitehall government could do far more to facilitate improvements.
Planning, in particular, is an area of excessive restriction and limitation. I
maintain a liberal attitude to planning and will encourage greater breadth of
planning application.
In one sense it is tragic that Sir Christopher Wren's proposed forerunner of a
Haussmann-style street layout was not adopted for London after the Great
Fire. While Paris required wide streets, to prevent unruly elements erecting
barricades, and straight streets, to enable canon to be fired down them to
disperse the mob, London's population was considered placid enough not to
need such a politically motivated design.
Thanks, therefore, to the enlightened behaviour of the British population,
London reverted to the original medieval street system, which survives today.
While this creates an element of charm, aspects like building, planning,
infrastructure and roads are far from flexible, let alone ideal.
Today, should a company wish to locate a regional headquarters in London,
with a staff of say 5,000 people, the City of London would struggle to
accommodate it. Canary Wharf has made a serious contribution to creating
appropriate modern office space, allowing London to capitalize on sizeable
international companies setting up in London. I have no ideological objection
to raising the height limit on planning applications there or in the City to help
enhance London's flexibility and, therefore, its competitive appeal to
international companies.
5) Infrastructure
The fabric and layout of London will continue to be a challenge to its economy.
Provision of utilities, telephone communications, waste disposal and other
basic services have a bearing on the appeal of establishing an office and work
force here.
Most of these are now provided by the private sector, and far more flexibly and
efficiently than the nationalized industries ever could; however, to the extent
that any of these are impeded by bureaucracy, planning or local administration,
I will champion all efforts to improve and revolutionize these services.
I believe passionately that there is still scope for a modern-day Joseph
Bazelgette to propose and implement a revolutionary change to the way our
infrastructure and basic services are delivered. I would be proud to nurture
someone of this kind on my watch as Mayor of London.
6) Environment
Environmental awareness has gained enormous political weight recently,
largely thanks to the leader of my Party. My approach to this in London is
simple. People do not want to live in a poor atmosphere - with pollution,
exhaust, airborne dust, etc - and measures to contain these make sense. But
this argument has become extraordinarily unbalanced and unequal between
different groups.
What is the point of busting a gut to control individual energy consumption and
carbon emission at the inconvenience and cost of lifestyle to the individual
when we have airliners flying over London every 90 seconds undoing any of
the good? More ridiculous is letting other parts of the world contribute as much
damage to the atmosphere in a couple of days as we would hope to save in a
year under an oppressive set of restrictions.
As Mayor of London, I want to see improvements to the environment driven by
the direct benefit likely to be felt by Londoners. Of course, any meaningful
measure will involve a cost of some form. But I will not allow Londoners to be
punished for some sanctimonious, conscience-driven futile campaign when it
risks London losing any of its competitive economic advantage.
In essence, until there is material sharing of this challenge by all countries
around the world my environmental concerns will be consumer-orientated
rather than ideological. However, I will be right behind reasonable measures
proposed to directly improve the air quality and Londoners' quality of life, or the
creation of green spaces and areas in which to get away from it all and relax.
7) Transport and Communication
Finally in this essay, I come to the key issue affecting London's economy - that
of transport and communication. There is no one who does not agree with
how maddening it is to get around London. Traffic jams, over-crowded trains,
slow movement of business loads, the excessive time that needs to be allowed
to get to an airport, or simply around the Capital, are issues of miserable, every
day experience for millions of people.
If there were a magic wand, someone would have waved it by now.
Nevertheless, as I have set out in my fuller essay on this subject, I will make a
priority of commissioning the most comprehensive analysis of London's
transport and communication systems, asking the best brains in the world to
dissect our capital and recommend solutions to set up London's transport
system for the next 20 years.
I do not expect such a radical approach to be an easy sell; however, whatever
is recommended by me as Mayor of London will be balanced primarily by what
is best for developing the long-term economic participation of more of our
citizens.
London's Economy has no room for complacency
Having addressed the key issues in which government can act to create
business friction or drag, there is one issue that is totally within the control of
the operators in the City of London. Its Brand of integrity. The greatest
damage the City could do to itself is to gain a reputation for malpractice.
Since Big Bang, the arguments on preventative measures have run between
government regulation and self-regulation. Neither is avoidable; neither is
perfect; neither is perfectly policeable - but most agree that the understanding
of the issues and the handling of them are better done by self-regulation. In
the main, it has worked well: the Brand of London's integrity is highly regarded.
As Mayor of London, I would strike a bargain with the City. I will speak up for
preventing regulation from Westminster or Brussels and stay out of any
induced call for externally imposed regulation - so long as the City does
nothing to damage its own or London's international reputation as a place to do
business.
I have no intention of being London's Eliot Spitzer. But if in the light of some
serious transgression it is judged that a cleansing operation is needed, I would
not hesitate to lead it if London's economy were likely to be safeguarded.
The need for flexibility in the future
From its early days London has grown into the greatest city in the world. It
started as a series of villages which became joined together as the city spread
outwards. In many places that village atmosphere still holds proud; people talk
of coming from Hampstead or Greenwich or Newbury Park, and so on. I
believe that we should do everything possible to build on that pride and to
reintroduce the idea of local identity, much as I have discussed in the
Cosmopolitan Community.
But we need to go further than that. The world is changing at a mind-blowing
pace. Technology is allowing us to do much more than ever before. More of
us are working from home or using the technology to work as we travel.
In other countries and cities they are thinking about how technology will
change their lives. In Malaysia they are building the Multi-Media Super
Corridor, a high tech solution to future employment. In Estonia they have
developed e-government.
In London I believe that we should be thinking along similar lines. We do not
have the space for a 'super corridor', but we do have the brains to work out a
way of building ICT centres, perhaps based upon our existing village structure.
After all, the Financial Services sector is now spread between the City, Canary
Wharf, the West End, Croydon and Lewisham; perhaps this trend is worthy of
further development?
We should be looking at the future progress of business; some people are
predicting that trading floors will be obsolete within a few years. Does that
mean more people will work from home? How will it affect transport in
London? What new infrastructures should we be planning? How will it impact
on communities? How can we keep London globally competitive as a
business centre?
I am convinced that it is the duty of every Mayor of London to be thinking up to
20 years into the future. Again, I will want to engage the best brains and come
up with innovative solutions that will continue to make London the place to live,
work and do business.
Summary
London has demonstrated how an economy can harness the ingenuity of its
citizens. As a result, Britain has an economic powerhouse to be proud of.
However, London is challenged by other centres every day of the year - just
like we were challenged in sectors we have led in before, like manufacturing,
heavy industries, motor car manufacturing, etc.
As Mayor of London, I would advocate the best possible environment for
evolutionary development of the London economy. Nothing should prevent a
totally flexible approach to its operation - in labour laws, planning, recruitment
of skills and their retention in Britain, taxation, transport, and the Capital's living
environment.
This is the best defence against London losing its world leadership and
position in the Clever Economy to other hungry business centres.
|
| |
|
