Why London dominates and what the rest of Britain should do about it?”

Evan Davis is the new presenter of the current affairs programme, Newsnight. He has been the presenter of BBC radio 4’s Today programme, the BBC’s Economics editor and the BBC’s presenter of the Radio 4 programme, The Bottom Line. Mr Davis gained a first class degree in PPE from King’s College, Oxford, and then went on to study at the Kennedy School of Government at Harvard University, obtaining an MPA.

Despite all this he is still most commonly known as the presenter of the BBC 2’s Dragons’ Den. He joked that his most frequently asked question was still who his favourite dragon is (which is Deborah Meaden!)

Mr Davis was giving a lecture entitled “ He was basing his lecture on his two programmes – Mind the Gap and London Versus the Rest. He began by explaining that in the models economists use, they ignore the “complicated stuff”, instead sticking to the simple basics and ignore factors such as human psychology. Mr Davis indicated his belief that the models economists use fundamentally are not accurate. In “real economics”, once a business gains momentum it doesn’t just stop like a model would suggest. Momentum drives success in the real world – there is no self-correction.

Mr Davis next went on to give numerous statistics about Greater London – Greater London has a larger population, population density and productivity (measured in output per hour) than any other city in the UK. Greater London is 30% more productive than its next UK competitor. Greater London has the highest business birth rate per year; also resulting also resulting in the highest business death rate.

It is responsible for one fifth of the UK’s output, more than Scotland, Wales and the West Midlands put together. Greater London hasn’t always been such a power house of course, but it recovered and rebounded from the economic crash far more quickly than anywhere else in the country.

“The London Formula” was Mr Davis’ next consideration. London sucks in talent and makes them productive. Counting talent as graduates, London has a 58% graduate rate compared to the UK average of 38%. Agglomeration economics means that businesses go to London to be in proximity of others. Proximity is key! Those any distance away from key business areas have a significant amount of trouble networking themselves in to the business world. Concentration of labour and skill works, as London shows. Industries clutter an area for many reasons such as collaboration, communication and competition. Ideas travel easily, so companies are willing to pay for proximity as it is so crucial to their success. It can also result in a knowledge spill over. Being close, increases the ease of networking – face to face is better than a Skype call from hundreds of miles away. This clustering also results in a consumptions economy, serving the needs of the concentration of business meaning more similar businesses want to be in the same place where the necessary services are.

Mr Davis talked about a stylised statistic. He said that if you double the population of a location, everyone becomes 5% more productive. Is this a national problem or a national strength? The knowledge industries are exceptional in London legal services, financial services and higher education. This is something which China cannot yet compete with. London is an asset to the country. Would it therefore benefit Britain to separate Greater London?

But why has this not happened in Birmingham? The custard factory is an example as to where Birmingham lost out. The Bird’s custard factory perfected the complex science of dry custard powder. Due to a mass of popularity, Birds needed to expand. However Birds were discouraged from doing this in Birmingham. Acts such as the control of offices act pushed activity elsewhere out of Birmingham and this moved South. Authorities tried to rebalance the country by the choking of this successful part. The method of separating out the successful part was tried in the 60’s and failed. By discouraging companies to expand where they please in the UK, they will just move country and lose the UK business and potential growth.

What should the country do? Proximity has a big effect and big cities are needed to act as engines for growth. Mr Davis next went on to describe the Zipf curve and comparing this to the spread of cities in the UK. Essentially the UK is missing a second and third city. We have multiple fourth cities according to Mr Davis, because there is such a gap between London and the next best city. Do we restructure the country by increasing the size of Manchester and Birmingham? Birmingham and Manchester could be the viable competitors to London if they are developed. Mr Davis conducted surveys which suggested Manchester should be the second city. Manchester would make sense; it is in the middle of a strip of cities in the Northern region. Between Liverpool and Leeds, it has better links in the minds of politicians. To increase Birmingham’s chances of becoming the second city, a bigger hub is needed to make development easier. The South East is the commuter belt. It has an efficient design and is capable of moving many people. Critical mass is needed and emphasis needs to be put on Birmingham. The stabilisers need to be cut off and brutality is needed. If assets are spread thinly then this just puts more emphasis on London.

The focus needs to be put on Birmingham for Birmingham to become the second city. As a nation we could do better at creating a second city.


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