What if… London is at its peak compared to UK
We’ve recently finished some work for Yorkshire Futures on how Yorkshire and Humber might look in 2030. The reports – summary and full – have just been published, and there has been coverage in the Yorkshire Post. For various reasons, YF wanted a core scenario which represented “what if the prevailing trends continue to prevail over the next 20 years?” This led us to a set of alternative futures based on what would happen if some of the current dominant assumptions turned out to be wrong. One of these was that London’s influence on the UK would start to decline.
There are quite a lot of signals, some quite strong, that this might be the case.
The classic sign that a city or region is reaching the limits of its economic success, at least for the time being, is that its public infrastructure is no longer able to sustain the city. (This is argued, for example, by Rosabeth Moss Kanter in her book World Class). In London, we already see this in the desperate attempts to recruit ‘key workers’, and to house them, the creaking transport infrastructure, the falling proportion of children going to state schools. These are problems of wealth, certainly, but they are the ‘balancing loop’ (in causal loop terms), which slows the growth in the system.
The second is the attractiveness of London, especially to recent graduates, which supports the skills base. Unlike most other European countries, London has an allure – skilled people want to have spent some time working in the city – but that could change (or shorten) through the combination of housing costs relative to salaries and the implications this has for commuting times. We’re already seeing quite substantial migration within the UK from London to other regions. (It’s true that the gap can be filled through skilled migrants from elsewhere in the EU, but it’s an imperfect solution: the skills and attitudes that enable them to move here also make them more likely to move on again.)
The third factor is the position of the financial services sector in underpinning the London economy. It’s fairly clear that the ‘credit crunch’ or ‘credit freeze’ was not a short-term glitch in market conditions, but a significant structural readjustment. It’s also becoming pretty clear (although this needs a longer post on another day) that the boom in financial services was not an inevitable result of people getting wealthier, but a response to a set of policy decisions to liberalise financial makets. We may not return to the reasonably tightly regulated financial markets of the post war period up to the 1970s, but the world’s central bankers look likely going to impose tighter controls to try to reduce the risk of wholesale financial system collapse.
And one of the consequence of all of this is that manufacturing is likely to become more influential in its share of the economy and the attention paid to it by policy makers. And although the south-east has a significant share of higher value manufacturing this is more spread out across the UK than the higher value (i.e. more speculative) financial services sector.
As a scenario, this seems plausible. The countervailing version would see London as centre of economic attraction for the English, and later, British economy, going back over hundreds of years, with the brief period following the Industrial Revolution when other cities gained dramatically in wealth as a 100-year aberration mostly cause, at least in its early stages, by access to energy.
The other two alternate scenarios, by the way, were a low carbon world (what if we get some national and local leadership which encourages harder choices on carbon reduction?) and one which was socially divisive (what if inequality within the region becomes stark enough to challenge social and political institutions?). This scenario included internal refugees from elsewhere in the region being rehoused because repeated flooding had made them homeless.