City of London Corporation
Economic Development Research Programme Review of 2014
EU
263.4bn
Economic Development Research Programme Review of 2014
Introduction City of London research is commissioned to be independent,
Domestically, growth in local economies remains a primary
accurate and evidence-based. Our intention is to inform and
concern, with big questions still to be answered, from the benefits
support practitioners and policymakers both inside and outside
of regional devolution of fiscal powers, to the role of key industries
the City of London Corporation, often working in partnership with
in supporting sustainable jobs and investment for growth around
others including relevant trade associations. The research, the
the country. In 2014 the City of London economic research
product of an active engagement with our stakeholders and
programme aimed not simply to respond to developments but to
collaborators, looks at the performance trends that affect the
shape and drive the policy debate around many of the major
City, London and the UK’s success as a competitive provider of
issues that impact both London and the UK. It is a wide brief,
professional and financial services to the global economy.
ranging from London’s role as a leading contributor to the nation’s finances – making a net £34 billion contribution to the
The global economy still shows little sign of a return to the heights
public purse in 2013/14, to the impact of the European
of 2007, with the International Monetary Fund (IMF) warning
Commission’s proposed financial transaction tax on savings and
that the world’s economy may never see the levels of growth
regulatory reform across the European Union, as well as the
experienced pre-recession. In Europe, fear of recession has
infrastructure needs of a changing City, and the challenges
stalked many economies, with eurozone growth sluggish and
facing the burgeoning social investment market.
even Europe’s economic powerhouse, Germany, experiencing weaker growth. The US is performing better, but worldwide,
This year we have published four different types of report. Our
Japan’s duel approach of monetary stimulus and fiscal
‘Research Reports’ address an overarching research theme or
discipline has failed to turn around its economy significantly, so
set of issues in depth, generally involving new primary research or
far, while Russia, on the back of collapsing oil prices, has warned
substantial review of existing research. ‘Special Interest Papers’
of tough times ahead. Growth in China, by its standards, is also
look at a specific issue to generate discussion and inform debate,
under pressure.
and our ‘Practitioner Policy Papers’ focus on technical subjects of particular interest to practitioners in industry sectors. Our
Conversely, the UK is able to report a more favourable position
‘Periodical Research’ provide a look ahead at the economic
than its European peers with expected economic growth of
outlook for the whole of London, in addition to a detailed look at
3.2% positioning it as the fastest-growing G7 economy, although
the City of London and Central London economies.
detractors question whether this growth is sustainable in the face of stubborn levels of national debt and weaker global growth.
1 Economic Development Research Programme Review of 2014
Key Areas City Industries In terms of the topics addressed the economic research
Net firm migration played an important role for the City economy
programme for 2014 covers five key thematic areas:
from 2008 to 2012, says The Impact of Firm Migration on the City of London, bringing in a positive inflow of 200 businesses and an
n City Industries
increase of over 13,500 jobs.
n Competitiveness and Infrastructure n International Markets, EU and Regulation
The attractiveness of the capital to businesses was doubtless one
n Corporate Responsibility and Community
of the reasons that helped make London the biggest regional net
n Economic Forecasts
contributor to the nation’s finances at £34 billion in 2013/14. London’s Finances and Revenues further adds that London’s tax contribution has risen by 27% in real terms since 2004/05. The role that financial services played in that figure was significant and Total Tax Contribution of UK Financial Services (Seventh Edition) finds that the sector paid in the region of £65.6 billion in tax receipts, or 11.5% of total UK Government tax receipts in the year to March 2014. The diversity of the City’s offer is highlighted in The City Arts and Culture Cluster: Economic Impacts and Developments which details an economic impact of £247 million in 2013/14 from the City’s arts and culture cluster, which includes places like St Paul’s Cathedral, the Barbican, and the Museum of London.
Publications 2014 n The
Impact of Firm Migration on the City of London Finances and Revenues Total Tax Contribution of UK Financial Services (Seventh Edition) The City Arts and Culture Cluster: Economic Impacts and Developments
n London’s n n
2 Economic Development Research Programme Review of 2014
Competitiveness and Infrastructure
International Markets, EU and Regulation
With the long term future of the UK’s aviation capacity under
With recovery from the latest financial crisis still fragile, Financing
intense debate, The Economic Impact of Short Term Airport
Europe’s Investment and Economic Growth warns that even as
Capacity Options looks at the principal short term measures
Europe’s banks are being restored to health, the consequent
submitted to the Airports Commission to enhance airport
downsizing of their balance sheets risks the largely bank-based
capacity. Mixed mode operation is considered to be the most
intermediation channel between savings and investment being
likely option to deliver the most significant GDP benefits, although
insufficiently extensive to support a full recovery of investment
the report points out that none of the measures will provide the
demand when it finally returns.
necessary step change in capacity in the longer term. From a regulatory perspective, two studies focus on the Aviation isn’t the only infrastructure issue under debate as
ramifications of the proposed EU financial transaction tax (FTT).
concerns grow around the challenges London must face to meet
Implications of a Financial Transaction Tax for the European
its future energy demands in a sustainable and reliable way. The
Regulatory Reform Agenda warns that the FTT, in its current
Future of London’s Power Supply finds that significant remedial
design, is likely to conflict with rather than complement a number
action is needed in the face of rising electricity demand and
of key regulatory initiatives aimed at increasing financial stability
rising prices.
in the financial services sector. There is also a warning that the FTT will have an impact on household savings in The Effects of a
Having the right mix of office space available in the City is
Financial Transaction Tax on European Households’ Savings.
another driver of future growth, particularly in the serviced offices sector. Serviced Offices and Agile Occupiers in the City of London
Away from the EU regulatory agenda, London RMB Business
predicts that demand in this sector is likely to be strong, offering
Volumes 2013 finds that 2013 was a good year for renminbi
an attractive model for both occupiers and landlords.
(RMB) trade finance in London, proving the capital’s success in establishing a leading position in both RMB trade finance and foreign exchange trading for RMB. The wholesale financial services sector had a similarly good year, reports The Importance of Wholesale Financial Services to the EU Economy 2014.
Publications 2014
Publications 2014
n T he
n F inancing Europe’s Investment and Economic Growth n The Effects of a Financial Transaction Tax on European Households’ Savings n Implications of a Financial Transaction Tax for the European Regulatory Reform Agenda n London RMB Business Volumes 2013 n The Importance of Wholesale Financial Services to the EU Economy 2014
n n
Economic Impact of Short Term Airport Capacity Options T he Future of London’s Power Supply S erviced Offices and Agile Occupiers in the City of London
3 Economic Development Research Programme Review of 2014
Corporate Responsibility and Community
Economic Forecasts
As social enterprises in the UK continue to grow, issuing a financial
As the UK’s economic recovery gathers pace, the City of London
promotion is one way in which they can access finance.
is poised to add 41,000 jobs to the UK economy by 2023 says
Marketing Social Investments: An Outline of the UK Financial
The Economic Outlook for the City of London. Overall the total
Promotion Regime explores and offers guidance on the practical
employment supported by the City in 2013 was estimated at
application of the UK Financial Promotion Regime for social
435,000, which is equivalent to 18% of all jobs in Central London.
enterprises. It concludes that the current regime creates barriers
It’s expected that the City will continue to grow at above
both for investors and investees.
average rates, reinforcing its position as a key driver for the London and UK economies.
Another way for social enterprises to access funds is via institutional investor groups. The good news, according to New
The Central London region, made up of eight boroughs, also
Specialist Sources of Capital for the Social Investment Market is
has a disproportionate impact on the UK economy, finds The
that there is an increasing willingness to engage as institutional
Economic Outlook for Central London, with the region expected
investors become more interested in achieving social impacts as
to contribute 319,000 extra jobs from 2014 to 2023. By 2023, Gross
well as financial returns. Other businesses looking to new forms of
Value Added for Central London is expected to be over 40%
funding and ways of working include cultural institutions with
larger in real terms than the current level. This equates to average
many, according to Cultural Innovation and Entrepreneurship in
growth of 3.5% per annum over the next decade, in line with the
London, turning to cultural entrepreneurship to plug the gap.
average recorded over the historic period from 1991 to 2013.
The management of City workers’ health in the workplace is also explored in Best Practice in Promoting Employee Health and Wellbeing in the City of London, finding that while many firms’ approaches are effective, workplace health programmes can still be improved.
Publications 2014
Publications 2014
n M arketing Social Investments: An Outline of the UK Financial Promotion Regime n Cultural Innovation and Entrepreneurship in London n New Specialist Sources of Capital for the Social Investment Market n Best Practice in Promoting Employee Health and Wellbeing in the City of London
n T he Economic Outlook for the City of London n The Economic Outlook for Central London
4 Economic Development Research Programme Review of 2014
City Industries
32% Income tax 22% NICS 13% VAT 13% Corporate and business rates 3% Stamp duty 3% Council tax 14% Others
ÂŁ65.6bn
5 Economic Development Research Programme Review of 2014 City Industries
The Impact of Firm Migration on the City of London January 2014 Research Report Published in electronic and hard-copy format Business migration is a crucial part of the City’s evolving
n What is the impact of Tech City?
character. This study, prepared by TBR and commissioned by
Across Tech City (an area defined by a geographical location
the City of London Corporation, explores the characteristics and
to the north of the Square Mile, including an element of overlap
trends of the business population within the City of London over
with the City), business start-ups have exceeded closures over
a nine year period from 2003 to 2012. It pays particular attention
the 2003 to 2012 period. In 2012, there were 21,100 businesses
to firm migration and the implications for the business population
in Tech City employing 243,000 people and contributing £17.4
and economy of the City. The study finds that net firm migration
billion to the UK economy. The rate of job losses however
brought in 200 more firms and 13,500 jobs to the City in 2012 than
increased in 2008 and remained high through to 2012.
there were in 2008, at the start of the global downturn. n What clusters exist in and around the City? With an average output per employee of £105k (compared to £38k
There are four key business clusters - financial services,
for the UK as a whole), the City accounts for just 4% of businesses
insurance, professional services, and technology, media and
in London but nearly 16% of its economic output. To explore the
telecommunications (TMT). The financial services and insurance
nature of change within the business population in the City of
clusters dominate – financial services lead the way in size with
London over the nine years from 2003 to 2012, and how important
87,000 employees, professional services has 79,800 employees,
firm migration has been, six key questions were addressed, with a
and insurance has 50,500 employees. However the professional
particular focus on the recession years of 2008 to 2012.
services and TMT clusters have also grown over 2003 to 2012, suggesting a diversification in the City’s business offer.
Importance of firm migration n What is the retail offer provided by the City? n How is the profile of the City’s business community being
Based on levels of activity and retail variety, the strongest offers
changed by migration over time?
within the City’s retail sector are restaurants, bars and
From 2008 to 2012 the City lost over 2,300 firms and 5,000 jobs but
pubs, retail sale of clothing, other retail sale, and hairdressing and
gained nearly £2.7 billion in output as firms became ‘leaner and
other beauty treatments. While the retail offer in the City is strong
meaner’. Looking at the impact of firm migration however –
it has yet to reach pre-2008 levels.
this was responsible for a positive inflow of 200 businesses, an increase of over 13,500 jobs, and a gain of £3.5 billion in output
Leading the recovery
over this period.
The City has benefitted from inward migration, and remains a vibrant business location in terms of the number of firms, and
n What types of businesses are occupying serviced premises?
employment and output that its businesses generate. While
The number of businesses using serviced premises has increased
overall firm numbers and employment are yet to recover to 2008
markedly, from 700 in 2003 to 2,400 in 2012. Some of this rise might
levels, economic output is high and has exceeded the 2006
be linked to the increased provision of serviced premises which
peak of £119 billion, suggesting that the City is helping to lead
can act as a gateway for young, dynamic firms.
the economic recovery for London and the UK more widely.
n What type of office space is attractive to new entrants into the City? The average size of premises taken up by firms migrating into the City is 8,830 ft² (820m²). The general pattern is for firms moving into the City from serviced premises to select smaller premises than migrants from non-serviced premises.
Net firm migration has brought in 200 more firms and 13,500 more jobs to the City in 2012 than there were in 2008
6 Economic Development Research Programme Review of 2014 City Industries
London’s Finances and Revenues November 2014 Research Report Published in electronic and hard-copy format How much does London contribute to the UK’s public finances?
public spend across the UK in nominal terms, relative to economic
This report, produced by the Centre for Economics and Business
output London’s public expenditure is the lowest regionally,
Research (Cebr) and published by the City of London Corporation,
reflecting the balance of private to public sector activity.
estimates London’s net fiscal surplus at £34 billion in 2013/14. London’s contribution plays a key role in helping to finance public
n Austerity measures and changing economic situations have
spending, investment and service provision across the UK, as well as
significantly reduced public expenditure on a per head basis in
supporting jobs and growth across the country. The study also finds
London; public sector current spending fell by 5.1% in London
that London has consistently provided a higher fiscal contribution
between the 2009/10 peak and 2012/13 in real terms. This
than any other region since 2006/07, reflecting its role as the UK’s
compares to a 2.3% decline for the rest of the UK.
major financial and business centre. n London’s economy has performed well since the 1990s, Key findings
consistently achieving an economic growth rate above 2.5%
n Looking back over the previous decade, since 2004/05 London
since this period, reflecting its concentration of high productivity
has consistently contributed a fiscal surplus to the UK. London’s
growth industries such as financial and professional services, and
surplus has changed over time, reflecting London and the UK’s
the information and communications sector.
economic cycle over the period, ranging from £11 billion during the economic recession in 2009/10, to an estimated £34 billion in
n London’s estimated real term growth for 2014 is 4.2%. Although
2013/14, surpassing its previous peak of £29 billion in 2007/08.
this growth is projected to slow in the coming years, the rate is predicted to remain close to the 3.0% mark for the years to 2020,
n As the UK’s leading financial and business centre, London
compared to just less than 2.0% at the UK level.
plays a key role in generating tax revenues for the Exchequer, at an estimated £127 billion in 2013/14, or 21% of the UK’s total tax
London’s future tax contribution
take. London’s tax contribution has risen by 27% in real terms since
Looking ahead, London’s tax contribution is expected to
2004/05. The majority of this tax take is comprised of employee
increase by 81% by 2034/35, concludes the study, reflecting the
income tax and national insurance contributions (representing
continued forecasted economic recovery through increased
a total of 60%), with VAT and corporation/business taxes also
employment, consumer spending and business growth. Over the
representing a large proportion (15% and 12% respectively) in
same period, London’s public spending as a share of economic
2013/14.
output is projected to fall from 29% in 2013/14 to just 23% by 2034 – indicating a very healthy private sector. Taken together, these
n Offsetting the strong growth in London’s tax revenue
findings suggest London will continue to support UK economic
contribution, its share of public expenditure is also higher than any
growth through its contribution to output, employment, and UK
other UK region in absolute terms, totalling £93 billion in 2013/14.
public finances.
This reflects investment in London’s infrastructure to maintain its competitiveness as a global city, and one-off events such as the London Olympics. London’s relatively large population also affects its share of expenditure; on a per head basis, London’s public expenditure is £11,000 per person. Whilst this is the highest level of
Proportion of London tax receipts by type, 2013/14 Source: HM Treasury, ONS, Cebr analysis
32% Income tax 22% NICS 13% VAT 13% Corporate and business rates 3% Stamp duty 3% Council tax 14% Others
32% Income tax 22% NICS 13% VAT
7 Economic Development Research Programme Review of 2014 City Industries
Total Tax Contribution of UK Financial Services (Seventh Edition) December 2014 Research Report Published in electronic and hard-copy format The seventh edition of this report, authored by PwC and published
Financial services and tax – key findings
by the City of London Corporation, shows that the UK’s financial
n T he sector paid an estimated £65.6 billion, or 11.5% of total
services sector continues to make a substantial, and also very
UK Government tax receipts (including both taxes borne and
stable contribution to the UK Exchequer. The study finds that the
taxes collected). This represents a rise of 0.9% over the estimate
financial services sector contributed £65.6 billion in taxes during
of the contribution of the UK financial services sector in 2013
the year to 31 March 2014, equivalent to 11.5% of the UK’s total
(£65.0 billion).
tax receipts, almost reaching the pre-crisis level of £67.8 billion in
n 1 .1 million people (3.7% of the UK workforce) were employed
2007. The make-up of tax contributions has changed significantly
by the financial services sector. Estimated employment taxes
since then however. The study finds that corporation tax, which
increased to £30 billion, or 11.5% of Government receipts of
fluctuates with profit and the economic cycle, now accounts for
pay as you earn (PAYE) and national insurance contributions
a smaller proportion of the tax take, while the proportion from more stable sources of revenue such as employment taxes and
(NIC). n E mployers’ NIC is the largest tax borne (34.8%) for the
irrecoverable VAT has increased, reflecting changing Government
survey participants, followed by irrecoverable VAT (26.9%).
tax policy, resulting in increased tax predictability.
Corporation tax is the third largest tax borne at 17.1% of the total.
Now in its seventh year, a record number of financial services
n T he changing profile of the tax system is illustrated by the study;
companies took part in the survey (45), representing 41.6% of total
in 2007 for every £1 of corporation tax paid £1.45 was paid in
UK industry employment. The sector as a whole employs 1.1 million
other taxes, in 2014 the figure was £4.85. The absolute amount
people, representing 3.7% of the UK workforce.
of irrecoverable VAT has increased by 76% since 2007, while employers’ NIC has increased by 23%.
Taxes borne and taxes collected The study’s methodology makes a distinction between taxes borne and taxes collected. Taxes borne are all the taxes levied on a company, which form part of its costs and will affect its financial results. They include corporation tax, employers’ national insurance contributions (NIC), irrecoverable VAT, and business
n £ 27,200 was paid on average in employment taxes for each financial services employee. n F inancial services also makes a significant contribution to the UK’s long run competitiveness, accounting for 4.7% of capital investment by UK businesses. n W ithin financial services, banks are the largest payers of tax as
rates. Taxes borne are a company’s direct contribution to tax
well as the largest employers – while representing just short of a
revenues. Taxes collected include employee income tax and NIC
third of the survey participants, they pay 71.9% of taxes borne
administered through the payroll, and the insurance premium
and 59.5% of taxes collected.
tax charged to customers. These are the taxes of employees and customers respectively, but are collected from them and paid over to the Government on their behalf by companies. Taxes collected are generated by a company’s business activity and are part of its indirect contribution to tax revenues.
Total taxes from financial services in 2013/14
£65.6bn
8 Economic Development Research Programme Review of 2014 City Industries
The City Arts and Culture Cluster: Economic Impacts and Developments December 2014 Special Interest Paper Published in electronic and hard-copy format The City of London’s world-leading arts and culture cluster had an
This year’s findings, says the report, provide continuing proof of
estimated economic impact of £247 million on the Square Mile
the value that arts and culture organisations bring to the City and
economy – supporting the equivalent of 6,830 full time jobs – in
more widely to London, beyond their obvious cultural merit. Key
2013/14, according to this research by BOP Consulting. The impact
to their economic impact is the fact that it is shared across the
on the wider London economy was £269m – supporting the
suppliers in their supply chains and among the (predominantly)
equivalent of 7,270 full time jobs over the same period. Published
hospitality and leisure businesses that benefit from the expenditure
by the City of London Corporation, the study shows that the arts
triggered by audiences visiting arts and culture organisations in
and culture organisations in the City have been able to maintain
the City. This ability to bring in audiences – totalling 8.5 million
and grow interest in their offer, with audience numbers increasing
people in 2013/14 – illustrates the key role of the City arts and
by almost 10% over the last two years.
culture cluster in reinforcing the reputation of the City of London as an attractive business centre.
Arts and culture for the purposes of this research are defined as activities and practice related to cultural and natural heritage,
Future considerations
performance and celebration, and visual arts and crafts.
Looking ahead, concludes the study, there is a potential period
The cluster includes St Paul’s Cathedral, the Barbican Centre,
of transition as the City considers aspirations for the development
the London Symphony Orchestra, Guildhall School of Music and
of a ‘cultural hub’. This involves both a way of working and a
Drama, Museum of London, Tower Bridge, and the Tower of
sense of place - more partnership between the arts and culture
London, among others. It does not include open spaces, sports
organisations, moving towards a closer working relationship, with
or retail institutions/practices/activities within the City.
co-production and shared ambitions for culture in the City in the future. At the same time, the ‘hub’ would also aspire to
Assessing the economic impact
be a very real place, on the north-western corner of the City,
By measuring organisation expenditure and audience numbers
which is a destination for cultural consumers from across London
the key findings include:
and beyond.
n T he cluster organisations together brought in an estimated
There is also the impact of Crossrail to consider, which
8.5 million visitors in 2013/14, an uplift of 9.9% from 2011/12,
could increase visitor numbers to the City by as much as
and the value of ticket sales for these organisations rose by
991,000; creating potential new audiences for the City arts and
11% to £55.5 million.
culture institutions.
n A total economic impact in the City of London of an estimated £247 million in 2013/14. n P ut another way, the economic impact of the City arts and culture cluster resulted in Full Time Equivalent (FTE) jobs supported in the City rising from between 6,530 and 7,030 FTE jobs in 2011/12, to between 6,600 to 7,060 FTE jobs in 2013/14. n T he overall economic impact in London is estimated to be £269m in 2013/14.
£269m The estimated net economic impact of the City arts and culture cluster on the whole of London. Supporting the equivalent of 7,270 full time jobs
9 Economic Development Research Programme Review of 2014
Competitiveness and Infrastructure
10 Economic Development Research Programme Review of 2014 Competitiveness and Infrastructure
The Economic Impact of Short Term Airport Capacity Options February 2014 Special Interest Paper Published in electronic and hard-copy format As the need for additional UK airport capacity comes under
Options which offer reduced delays
close consideration by the Airports Commission, York Aviation
These options relate to measures such as improvements to the
reviews the potential economic benefits of the principal short
use of runways, ground movements at airports, or the flow of
term capacity enhancing proposals submitted to the Airports
passengers through terminals. They will not ultimately increase
Commission. However, the report concludes that in the longer
capacity at airports but could reduce delays and therefore airline
term, more ambitious capacity enhancement measures will
costs, making new destinations viable. An average one to two
be needed if London is to retain a competitive position as a
minute delay reduction across all of the London airports could
global aviation hub.
result in journey time savings of up to £220 million.
The main short term airport capacity options
Options which have the potential to lead to some
The Airports Commission has outlined a number of categories for
redistribution of traffic
making the best use of existing airport capacity in the short and
This concerns options that improve the relative attractiveness of
medium term. These include:
one airport over another and include access improvements at Gatwick and Stansted, and regulatory changes. These do not
n Measures to increase capacity at airports, specifically Heathrow. n Measures which might lead to redistribution of flights between airports. n Surface access options.
ultimately increase capacity at airports but users of Gatwick and Stansted will experience reduced journey times relating to surface access improvements. Annual journey time saving benefits from improved rail access could be £53 million for Stansted and £76 million for Gatwick.
n Environmental measures. Conclusions: measures will not provide the necessary Capacity uplift options
step change
Examples here include the use of mixed mode at Heathrow
There would be economically beneficial effects from the
and the development of a reliever airport at Northolt. This could
implementation of the key short term options being considered
result in an increase in air traffic management (ATM) capacity
by the Airports Commission. However, these benefits are
at Heathrow of 10% to 17%, with an even greater number of
necessarily limited by the small scale of the improvements being
passengers able to use Heathrow, their preferred airport. The
proposed and none of the measures, says the study, provide a
economic benefits could equal £206 million in total gross value
step change in the capacity of the airports serving London or in
added (GVA), with direct, indirect and induced employment
their attractiveness.
of 3,400. Marginal capacity uplift options These focus on changes to air traffic control procedures leading to estimated increases in ATM capacity at Heathrow of between 1% and 3%. This could result in a small increase in passengers in the London system. The total GVA impact could equal £70 million with 1,200 related jobs.
More ambitious capacity enhancement measures will be needed in the longer term if London is to remain a competitive hub
11 Economic Development Research Programme Review of 2014 Competitiveness and Infrastructure
Serviced Offices and Agile Occupiers in the City of London October 2014 Special Interest Paper Published in electronic and hard-copy format The serviced office market in the City of London is likely to
fast growing start-ups, in fact they often provide a second (and
remain strong in the long term according to this report by
semi-permanent) step on the ladder, and often accommodate
Ramidus Consulting.
relatively small, steady-state businesses. n C orporate occupiers also use serviced office space to
What is a serviced office?
supplement their long-term leasing with flexible space.
Serviced offices provide operational flexibility for businesses, with
n T he average length of stay is between 18 and 24 months, while
‘easy in, easy out’ terms. They offer predictable and competitive
some occupiers remain considerably longer, with three to five
all-in costs, convenient service provision, including high quality
years being not uncommon.
information and communications technology (ICT) services, and relieve businesses of the capital expense associated with
Operators position themselves by quality and style
establishing a new office.
n T he operator market is segmented in terms of quality, style
The market is young, though fast maturing and expected to grow
n D ifferentiating features tend to revolve around management,
and price. n The City’s serviced office sector houses an estimated 2,250 businesses and 18,000 workers. n Between 1995 and 2014 the serviced office market in the City has grown from 25 centre sites to 85, and the square footage has quadrupled.
quality of the working environment and level of service. n T he most common offer is a 12-month licence, with a fixed desk rate, payable monthly in advance, with one month’s deposit. n A typical desk cost in the City is £550-£700 per month, including VAT, although premium products can be twice that rate.
n There are 10,437 small occupiers in the City, of which 8,173 (78%) occupy conventional leased space, and 2,264 (22%) occupy
Future trends
serviced office space.
Demand is expected to grow in this sector based on three principal
n If the number of small occupiers in the City was to grow by
sources: strong growth in the number of small, knowledge-based
10% over the next decade, and the proportion of small occupiers
businesses in London; corporate occupiers becoming used to
accommodated in serviced offices rose from its current 22% of the
supporting their core property needs with flexible space; and small
total to 35%, then the market for serviced offices would grow by
businesses opting for a different approach given the diminishing
77% by 2025.
supply of small and short term office space in the conventional
n This is in addition to potential demand from the growth of core
leasing market. Long term prospects are strong as the serviced
and periphery business models from corporates; new business
office market adapts and evolves.
formation and in-movers and representative offices. For this reason, it is a cautious prediction to expect the market for serviced offices to double in size within the next decade. The scale and maturity of occupiers is surprisingly diverse n T he study estimates that around 40% of occupiers operate within business services and professional services; around 20% are financial and insurance companies, with a similar proportion in ICT, and the remainder in ‘other’ sectors. n Around 70% of serviced office space is occupied by SMEs. n While serviced offices are generally thought of as ‘a first step’ on the commercial property ladder, and a natural fit for agile,
The City’s serviced office market is set to double by 2025
12 Economic Development Research Programme Review of 2014 Competitiveness and Infrastructure
The Future of London’s Power Supply April 2014 Special Interest Paper Published in electronic and hard-copy format London faces considerable challenges in ensuring that its future
demand levels before an increase above current levels by (at
energy demands can be met in a way that is both sustainable
the latest) the early 2030s.
and reliable. Increased demand for power is strongly linked
n In contrast, London demand growth is expected to increase in
with economic growth, and as London’s economy grows, so
both the short and longer term with peak demand forecast to
its demands for energy will increase. This report sets out the
increase by 27% by 2030.
issues that London’s economy faces in meeting the challenges posed by growing energy needs. These include the policies and
Potential impacts
legislation likely to impact on the UK and London’s future energy
n Wholesale electricity prices are forecast to rise significantly in
requirements; the drivers and predictability of London’s future electricity demand growth; as well as the potential impacts including rising electricity prices, a changing energy generation mix, increased demand levels, and network reinforcement.
the period to 2030. n The move to a decarbonised electricity sector will require significant investment in new capacity, including back-up generation for intermittent renewable sources. n Increasing annual and peak demand levels in London are likely
In the short term, overall demand for electricity in the UK is expected to decline. However by contrast in London, total electricity demand is expected to rise by over 5% by 2020. It is expected that over the longer term London is also likely to be an
to result in a requirement for significant reinforcement of the UK Power Networks’ London network. n Household and business electricity bills are forecast to rise significantly in the next 15 years.
area with significant uptake of electric vehicles and the potential for significant non-fossil fuel heating.
Risks and opportunities for London A number of initiatives have already been put in place within the
Policy and legislative framework
London context, to respond to the ambitious climate change
The key aspects of the current policy and legislative framework
targets and rapidly changing policy environment, which will
relevant to this area include:
directly affect energy demand and supply. The Mayor of London
n The UK Government has committed to reducing greenhouse
has developed an action plan together with London-specific CO2
gas (GHG) emissions to at least 80% below 1990 levels by 2050. n A raft of Government policies and initiatives has been put in place to contribute to improvements in energy efficiency and
reduction targets. The London Plan will help to set the agenda for future development requirements, including the need for zero carbon new buildings in the future.
support low carbon generation. n The Mayor of London has developed a number of strategies
Despite positive steps in the right direction, concludes the report, it
designed to deliver London’s contribution to the targets.
seems clear that further work will be required from all stakeholders over the coming years to ensure that London, is prepared to meet
Electricity demand growth
this considerable challenge.
n To meet 2050 carbon targets there is likely to be a significant increase in UK electricity demand (29%-60%). n The speed and extent of demand growth is likely to be driven by the expansion of electricity use to non-traditional sectors, such as domestic heating and electric vehicles. n The main uncertainty relates to the timing of demand growth, with forecasts suggesting an initial decline in national electricity
London’s demand for power is expected to increase by 27% by 2030
13 Economic Development Research Programme Review of 2014
International Markets, EU and Regulation
EU
263.4bn
14 Economic Development Research Programme Review of 2014 International Markets, EU and Regulation
Financing Europe’s Investment and Economic Growth June 2014 Practitioner Policy Paper Published in electronic and hard-copy format Published by the City of London Corporation, the International
bond markets are still relatively underdeveloped in Europe,
Regulatory Strategy Group (IRSG), TheCityUK, and Paris
with bond markets accounting for 20% of total debt finance in
Europlace, this report – authored by Llewellyn Consulting – sets
Europe, versus 50% in the US. Europe’s venture capital markets
out to identify key shortcomings of the European financial system,
have also not advanced as they have done in the US.
and offers broad policy recommendations that would contribute
n Long-term investors need to play a greater, and in some cases a
to more efficient, as well as potentially more secure, financing of
more direct, role. Insurance companies, pension funds, mutual
investment. It concludes that fixing the banks alone is insufficient
funds, and similar investors, such as large family offices and
when a broader and more diversified financial sector is needed;
sovereign wealth funds, have the potential to play a greater role
particularly one with well developed capital markets to provide a range of funding possibilities for SMEs and place infrastructure investment as a priority.
in funding the real economy, both near-term and longer-term. n The banking ‘sell-side’ can do more to stimulate and underwrite long-term investment. By establishing, underwriting, and developing market structures, and promoting liquidity and
Four episodes over the last quarter of a century offer lessons of
price transparency, sell-side activities can potentially play an
fundamental significance when the report comes to consider the
important role in stimulating investment in traditionally more risky
desirable structure of a financial sector: Japan’s lost generation of the 1990s; the Asian crisis of 1997; the Russian default and long-term
and illiquid assets such as infrastructure and SMEs. n Market-based credit intermediation will need to play a more
capital management crisis of 1998; and the 2008 global financial
prominent and stable role in financing. The size of bank balance
crisis. With recovery from the latest crisis still fragile, the report warns
sheets, and the risk concentrated on them, will be reduced over
that even as Europe’s banks are being restored to health, the
time. More ‘market-based’ sources stand to help fill the vacuum,
consequent downsizing of their balance sheets is restricting banks’
and alternative sources of finance are set to grow substantially.
abilities to act as an intermediation channel between savings and
Collateral is likely to be a key issue going forward. Central banks
investment. Further, banks’ future ability to lend may be insufficient
and other policymakers will need to adapt.
to support a full recovery of investment demand when it finally
n Securitisation warrants being both revived and expanded. To
returns. This highlights the importance of encouraging a wide-
attract long-term investors, and to spur loan origination by the
ranging and diverse financial system, providing a range of finance
(broadly-defined) banking sector, securitisation offers much
options to encourage SME growth and infrastructure investment.
potential. The European securitisation market, at around €1.5 trillion, is less than a quarter the size of the US market.
Key conclusions n F ixing the banks is insufficient. A broader and more diversified
Breadth and diversity are the ultimate aims
financial sector is needed. Within that, providing a range of
There is, says the report, much that can be done to create a
funding possibilities for SMEs and infrastructure investment is
more diverse and comprehensive financial system, encompassing
a priority.
more market-based intermediation and a greater and more
n T here is considerable scope, and much that can be learned
productive role for long-term investors, and which embraces the
from existing systems. In so doing, Europe would adopt a number
best practices of other jurisdictions, not least the US. But only by
of the more positive aspects of other financial systems, not least
pursuing a broad-based and flexible approach will existing market
that of the US, so as to achieve a financial system that has both
failures in Europe be addressed comprehensively and satisfactorily,
an internationally competitive banking system and a greater
and the investment and overall macroeconomic potential of the
degree of overall diversity.
region realised.
n E urope’s capital markets warrant being developed, and nontraditional sources of finance tapped. Equity and corporate
15 Economic Development Research Programme Review of 2014 International Markets, EU and Regulation
Implications of a Financial Transaction Tax for the European Regulatory Reform Agenda January 2014 Special Interest Paper Published in electronic and hard-copy format This research considers the extent to which the financial
Shadow banking
transaction tax (FTT), proposed by the European Commission, is
The FTT could drastically reduce the securities lending market,
compatible with a number of significant financial sector initiatives.
leading to an increase in the risk of settlement failure and the
The study concludes that the FTT, in its current design, is likely to
mobility of collateral, thereby conflicting with the shadow banking
conflict with, rather than complement a number of key regulatory
objective of promoting financial stability.
initiatives aimed at increasing financial stability in the financial
Short selling
services sector.
The FTT could lead to an increase in the risk of settlement failure which is in conflict with the short selling objective to reduce
The FTT is a proposal to tax each secondary financial transaction
settlement risk linked with naked short selling.
involving shares, bonds and the entering into and secondary
Undertakings for Collective Investment in Transferable
trading of derivatives involving financial institutions from
Securities (UCITS)
participating member states (the residence principle), or
The market fragmentation of the EU caused by the FTT would
instruments issued in participating member states.
have adverse consequences for the UCITS market - so far, one of the biggest success stories in harmonisation and integration in the
Basel III
market for financial services in the EU, rendering some business
There is likely to be a conflict with liquidity and capital policy, as
models of investment funds unviable. Retail and institutional
the FTT could decrease market liquidity of high-grade securities
investors may also switch to instruments not subject to the FTT,
and will tax funding models, reducing the ability of banks to
causing distortions in the market.
strengthen their capital positions as a result of higher costs.
Long-term finance
Monetary policy operating framework
The FTT could result in an increase in the cost of capital which is
The FTT counteracts the European Central Bank’s (ECB’s) post-
likely to also affect the price and availability of long-term finance.
crisis efforts to wean Eurozone banks off ECB liquidity and into
The micro and macro impacts
secured funding markets, as the FTT taxes secured funding,
The FTT is likely to have a number of negative micro impacts,
pushing banks back towards ECB liquidity provision.
concludes the study, including increasing the cost of trading,
European Market Infrastructure Regulation (EMIR)
increasing financial market fragmentation and volatility, and
The cascading effect of the FTT (taxing each leg of an overall
distorting competition within the EU. Macro impacts include
transaction) is likely to weaken incentives for the use of central
increasing the cost of capital and reducing the availability of
counterparties that EMIR tries to establish, increase the cost of
firms to borrow from financial markets, leading to an overall
trading in over the counter (OTC) derivatives, and increase costs
dampening effect on the economy.
for non-financial firms looking to hedge risk through derivatives. Markets in Financial Instruments Directive (MiFID II/MiFIR) The fragmentation of the EU common market – i.e. the FTT Zone and non-FTT Zone member states – is in conflict with the overall MiFID objective of harmonising and integrating the market. Recovery and Resolution Directive (RRD) The FTT is likely to add complexity to recovery and resolution that could undermine the objectives of the RRD to some degree.
The FTT may conflict with other regulatory initiatives to increase instability in financial services
16 Economic Development Research Programme Review of 2014 International Markets, EU and Regulation
The Effects of a Financial Transaction Tax on European Households’ Savings February 2014 Special Interest Paper Published in electronic and hard-copy format This study, prepared for the International Regulatory Strategy
The cascade effect
Group (IRSG), published by the City of London Corporation and
The inclusion of intermediaries within the scope of the FTT
authored by London Economics, considers the impact of the
significantly increases the tax incidence, creating a cascade
proposed financial transaction tax (FTT) on European households’
effect. In particular, it is typical for the transfer of an equity or
savings arising through its effect on the value of equity and debt
bond between end-investors to attract ten instances of the
holdings. The effect of the FTT is considered in six European Union
tax, equivalent to 100bps. The impact on the value of savings is
member states, four that plan to participate in the tax – Germany,
significantly reduced when the effective tax rate is only 20 basis
Italy, Spain and Slovakia – as well as the UK and Luxembourg, non-
points, i.e., all the financial intermediaries in the trading chain are
participating states likely to be affected by the tax. The impact
exempt from the tax. For example, the loss in the value of savings
on household savings is expected to be more significant in those
is reduced to 3%-4% of the value of the initial equity and debt
countries that plan to introduce the tax than the non-participating
holdings in the case of Germany, Italy and Spain.
countries, although the effect is also dependent on the mix of debt and equity assets households own.
Immediate impact on savings and longer-term macroeconomic effects
The relevance of capital markets for European households
The immediate loss in the value of household savings expected
Households hold various types of financial assets whether through
as a result of the introduction of the FTT is a multiple of annual
insurance and pension funds or via direct investment in financial
household savings in some member states, concludes the report.
markets. Saving through financial assets is therefore an important
If the tax was introduced in Spain for example, households would
part of retirement provisioning, making the functioning of capital
have to save for an entire year in order to restore the value of their
markets through which households save of significant policy
savings to the level prior to the introduction of the tax; in Italy, they
interest. If the FTT is introduced, says the study, an instantaneous
would have to save for eighteen months.
price adjustment will occur, thereby negatively affecting the value of household equity and debt holdings.
Furthermore, households may not respond to the loss in value of their savings by increasing their savings rate. If they do not
Financial impact of the FTT on savings
increase their savings rate, savings may be permanently lower
For countries that implement the FTT, the impact on the value of
due to the introduction of the FTT. Reduction in the value of
household savings is likely to be greater. For example, it could
household savings will restrict consumption over the long run,
amount to reductions of nearly €205 billion in Italy, over €150
meaning that the level of GDP for participating member states
billion in Germany, and almost €80 billion in Spain, in some cases
could be up to 0.8% lower in the long run, as a result of the decline
reducing the value of portfolios by up to 16%. In non-participating
in the value of savings from imposing the FTT.
member states such as the UK and Luxembourg, the value of savings will be less affected, with estimated reductions of €4.4 billion and €0.4 billion respectively, because fewer transactions will come within the scope of the tax.
The FTT would lead to a reduction in the value of equity and debt holdings of E4.4bn in the UK
17 Economic Development Research Programme Review of 2014 International Markets, EU and Regulation
London RMB Business Volumes 2013 June 2014 Policy Practitioner Paper Published in electronic and hard-copy format Published by the City of London Corporation and written by Bourse
More recently, the March 2014 agreement on renminbi clearing
Consult, this report presents the results of a quantitative survey of
and settlement in London signed by the Bank of England and the
London business in renminbi (RMB) denominated assets during
People’s Bank of China represents a significant development,
2013. While, for the first time in years, RMB had a decreasing value
which has brought clarity regarding the short term plans for
relative to other currencies, business continues to grow strongly,
settlement of RMB business transacted in London. The Cross-border
highlighting London’s role as a leading international financial
Interbank Payment System (CIPS) could, if adopted, offer a global
centre and proving the competitiveness of UK-based banks in
solution to settlement of RMB involving remote memberships and
offshore RMB activities including trade finance and particularly
allowing foreign banks to settle through a national/international
foreign exchange and risk management.
clearing system. The timetable for this has, however, become progressively less clear, possibly as the complexities of designing
Despite concern from some around the performance of
such a system in an environment with currency controls became
China’s financial markets in 2013, China’s drive for financial
more apparent.
reform has continued unabated, says the report. The UK has also benefited from this drive for reform, becoming the major non-Asian
The March agreement removes much of the uncertainty
centre for Chinese financial activity and a world leader in offshore
surrounding new developments for the settlement of RMB volumes
RMB trading.
from the UK. It confirms that there will be a single, officially appointed clearing bank in London through which RMB business
The London RMB market
will be settled. While this solution lacks the comprehensiveness
There was strong growth in the use of RMB in trade finance by
of the proposed CIPS system, it is to be welcomed as a practical
corporations in London during 2013. The total amount of RMB
solution for meeting the increasing need of London banks to settle
denominated trade financing in 2013 was nearly ¥43 billion,
RMB business directly from their UK entities.
a 10% increase on 2012, with the most significant growth seen in export financing.
Future development Another interesting area of development for London, finds the
As in previous years, the main strength of London’s RMB volumes
research, is the Renminbi Qualified Domestic Institutional Investor
in 2013 was in foreign exchange trading, with an increase in all
(RQDII) scheme, which allows Chinese institutions to invest in foreign
products and a particular emphasis on spot and other deliverable
markets in support of the stated policy of increasing Chinese
forex instruments. Trading in deliverable products increased
holdings of foreign assets. London can play a major role in assisting
by over 140% on 2012, to reach an average daily value (ADV) of
Chinese institutional investors as the natural gateway for their
US$18.7 billion.
foreign investment flows and in this context a London quota for RQDII would be highly effective.
For the first time trading in deliverable products exceeded that of non-deliverables, reflecting a trend away from non-deliverables,
The future development of the RMB bond market and the
which correspondingly declined in volume in 2013. Total RMB
RQDII quota might, therefore, be suitable areas for further
forex trading in 2013 averaged US$25.3 billion per day, a 50%
discussion and cooperation between the UK and Chinese
increase on 2012.
authorities, the study concludes.
Policy developments The second half of 2013 saw a particularly significant development with the granting of a specific Renminbi Qualified Foreign Institutional Investor (RQFII) quota for London in October 2013. This development has been recognised as offering major opportunities for the UK to build upon its existing role in the global RMB market.
18 Economic Development Research Programme Review of 2014 International Markets, EU and Regulation
The Importance of Wholesale Financial Services to the EU Economy 2014 November 2014 Special Interest Paper Published in electronic and hard-copy formats Wholesale financial services provide finance for firms, investors,
services grew at the slower pace of 1.3% on average annually,
institutions and public bodies, as well as making a significant
growing from €250.7 billion in 2008 to €236.4 billion in 2013,
contribution to the European Union (EU) economy as a whole.
whereas GDP growth was 1%, demonstrating the effects of the
According to this report prepared for the City of London
economic downturn over the period.
Corporation by London Economics, the gross value added (GVA) of the EU wholesale financial sector amounted to €263.4
The distribution of wholesale financial services across the EU28
billion in 2013, equivalent to 1.5% of EU28 member states’ total
Among the member states with the five largest wholesale finance
GVA. The UK accounts for 35% of the total, with France and the
sectors, the UK accounted for 35% of total EU28 wholesale
Netherlands accounting for 11.9% and 11.3% respectively, and
financial services GVA followed by France, Italy and the
Italy contributing 10.6% of the total. The research adds that over
Netherlands (which each accounted for between 10.5% and
the period 2001 to 2013, the GVA of wholesale financial services
12% of EU wholesale financial services GVA). Germany
has risen, as has the level of EU GDP, indexed to 2001 prices.
accounted for 7.5% of the total EU GVA produced by wholesale
Wholesale financial services GVA has grown faster than GDP over
financial services.
this period, however the rates of growth have differed significantly for both in accordance with the time period; pre-crisis growth
The contribution of wholesale financial services to
being much faster than post-crisis growth.
national economies The size and contribution of the wholesale financial sector to
Measuring the EU’s wholesale financial sector
total GVA produced by the economy of a member state varied
For this study, the wholesale financial sector refers to the provision
greatly across the EU in 2013. In the case of Luxembourg, the
of financial and insurance services to corporate clients, investors,
wholesale financial sector accounted for more than 21.1% of
institutions and public sector bodies, as opposed to retail financial
total GVA produced domestically. For Cyprus, Ireland, Malta,
services provided to individuals. The focus of this report is on gross
Netherlands and the United Kingdom, the share of wholesale
value added (GVA) generated by the wholesale financial sector
finance services in total domestic GVA ranged from 4% to 6.1%.
at the EU level, as well as the contribution of wholesale financial
For Austria, Belgium, Denmark, France, Italy, Portugal, and
services to each member state’s economy. GVA measures the
Sweden, the share of wholesale finance services in total domestic
contribution to the economy of each individual producer, industry
GVA ranged from 1.5% to less than 3.8%. In all the other member
or sector, and for the economy as a whole, where GVA is equal to
states, the share of wholesale finance services in total domestic
gross domestic product (GDP) net of general indirect taxes and
GVA was less than 1%.
subsidies. The evolution of EU28 wholesale financial services pre- and post-financial crisis According to the analysis, during the pre-crisis period, the GVA of EU28 wholesale financial services grew at an annual average rate of 8.8%, at slightly more than double the rate of EU28 GDP, which was 4.2% over the same period. Wholesale financial services GVA rose from €135.3 billion in 2001 to €254.8 billion in 2007. In contrast, during the post-crisis period, the GVA of wholesale financial
EU
263.4bn
The GVA of the EU28 wholesale financial sector
19 Economic Development Research Programme Review of 2014
Corporate Responsibility and Community Family offices
Insurers
Pension funds
Housing associations
Charitable organisations
Faith-based organisations
Corporations
University endowments
20 Economic Development Research Programme Review of 2014 Corporate Responsibility and Community
Marketing Social Investments: An Outline of the UK Financial Promotion Regime June 2014 Research Report Published in electronic and hard-copy format This report, authored by Bates Wells Braithwaite and published by
These challenges include:
the City of London Corporation on behalf of the Social Investment
n The complex and multi-layered nature of the Financial Promotion
Research Council, provides an overview and guidance on the practical application of the UK ‘Financial Promotion Regime’, and considers its implications for social enterprises and retail investors.
Regime in application, which creates uncertainty and is in itself a challenge for investors and investees alike to understand. n The financial cost of advice and of compliance with the
The research finds that there is scope for reconsideration and
Financial Promotion Regime is disproportionately high for the
adjustment of the Financial Promotion Regime to take account
majority of social enterprises relative to the investment amount
of social investment, whilst still providing appropriate regulatory protection for retail investors.
that they seek. n The Financial Promotion Regime does not explicitly recognise the distinctive features of many social investment
Access to finance is a major challenge for social enterprises.
contexts, where investments are often small-scale, localised,
One way that they can raise funds is to issue a ‘financial
involve personal associations and financial return is often a
promotion’ – a communication that is an ‘invitation’ to investors to engage in investment activities. In so doing, the investee
secondary consideration. n The recent introduction of the FCA Crowdfunding Regulations
(the social enterprise) is required to comply with the legislative
has further complicated the regulatory landscape for investees.
and regulatory regime applying to financial promotions – the
First, by further restricting the already small pool of retail investors
‘Financial Promotion Regime’.
to which investment communications can be made, therefore limiting opportunities for market growth. Second, there are likely
The Financial Promotion Regime is the primary set of domestic
to be additional costs of complying with the Crowdfunding
rules which regulate the marketing of smaller-scale investments
Regulations, on top of the Financial Promotion Regime.
to investors based in the UK. Though 90% of lending to the UK social investment market was in the form of secured loans in
The report concludes by finding there is scope for reconsideration
2011/12, social enterprises are increasingly in need of unsecured
and adjustment of the Financial Promotion Regime to take
debt capital. This research highlights how the Regime presents
account of social investment. At present, the regime creates
challenges for investors and investees alike, which prevent the
barriers both for investors and investees which risk stifling the growth
capital needs of this particular market from being met.
of the marketplace, instead of providing an appropriate level of regulatory protection. It is possible, the report states, to see how
Summary findings
some modest tailored adjustments to the Financial Promotion
The nature of the Financial Promotion Regime as it currently stands
Regime could enable more retail social investment, whilst ensuring
presents a number of barriers to the growth of the social investment
that retail investors are adequately protected.
market. This is both in relation to ordinary retail investors interested in making social investments, and for social enterprise investees seeking to raise capital through the marketing of social investments to ordinary retail investors. Taken together, these challenges are likely to impede the growth of this burgeoning market.
The Regime presents complex challenges for investors and investees which risk stifling growth in the social investment market
21 Economic Development Research Programme Review of 2014 Corporate Responsibility and Community
Cultural Innovation and Entrepreneurship in London May 2014 Special Interest Paper Published in electronic and hard-copy format Commissioned by the City of London Corporation and authored
Fostering cultural innovation and entrepreneurship
by CultureLabel Agency, this paper considers an emerging
Based on a review of existing models and examples of cultural
movement of ‘cultural entrepreneurship’ within London’s
entrepreneurship in London, the paper identifies some ‘best
technology, creative and cultural industries – being driven through
practice’ features of cultural innovation in an organisation, namely:
a mix of economic necessity, and an increasing awareness of the opportunities for innovation and entrepreneurialism. By examining the current landscape of cultural entrepreneurship, both in the UK
n E mbrace and enable ‘intrapreneurship’ among employees – get them thinking like an entrepreneur in your organisation.
and internationally, the study finds that London-based institutions
n Encourage experimentation instead of over-analysis.
and individuals are already leading the way in cultural innovation.
n M ake use of co-working spaces – they offer the best of
It concludes that London has an opportunity to establish itself as one of the world’s leading cities for cultural entrepreneurship.
both worlds. n Borrow new models for innovation and experimentation. n Adopt new approaches to partnerships.
What is cultural entrepreneurship?
n Bring in the right people to help develop the right culture.
Cultural entrepreneurship represents the meeting point of culture,
n Explore multiple channels to reach audiences.
technology and entrepreneurship. It is fuelled by collaboration
n Seek out new forms of funding and resources.
between different industries including the arts, cultural and creative
n Consider economic impact and gentrification.
industries, technology, and financial services. A crucible of bold new ideas One of the recent catalysts, says the research, for the rise of
London has the potential to be the crucible of bold new ideas,
the cultural entrepreneur has been an economic need due
says the study, to help grow new audiences and the associated
to reductions in public funding to arts and culture institutions.
revenues for culture - whether through institutions, technology
Subsequently cultural institutions are looking to open up new
companies or a new breed of ‘cultural start-ups’. The challenge
revenue streams to get their projects off the ground. However,
in achieving this potential lies in effectively bringing these different
cultural entrepreneurship is just as much about leveraging new
communities together.
technologies and existing assets to create new forms of artistic value and reach new audiences, as it is about fulfilling an
One way of doing so includes launching a cultural accelerator.
economic need.
This ambitious programme would help creative and cultural entrepreneurs grow scalable, investable businesses through a
Cultural entrepreneurship in London
programme of intensive development and access to finance,
Favourable conditions such as a huge demand for UK culture
connecting them to global leading cultural brands, business
at home and overseas, Government-backed finance support
mentors and technology experts.
initiatives, and London being home to one of Europe’s biggest community of start-ups and entrepreneurs, have conspired to
Many organisations currently also offer mentorship programmes for
create an enabling environment for cultural entrepreneurship
individuals and projects, whether provided by organisations within
in London. Individuals and independent teams are creating
the industry, funding bodies, or from corporate supporters such as
new commercial businesses in the cultural industry, and cultural
AMEX, Bloomberg or Google Campus. A valuable addition would
organisations and policymakers are more open than ever to
be a central resource across the creative and cultural industries to
the industry becoming more entrepreneurial and experimenting
match mentors to projects, as well as providing expertise on a short
with new ways of working. Talent, ideas, reputation and finance
term basis.
have come together to create new opportunities for cultural entrepreneurs seeking to develop innovative business models.
22 Economic Development Research Programme Review of 2014 Corporate Responsibility and Community
New Specialist Sources of Capital for the Social Investment Market April 2014 Research Report Published in electronic and hard-copy format As the social investment market continues to grow, there
likely to come from a pioneering group of local authority pension
is a corresponding need for finance among social sector
funds who require large investment sizes and have created
organisations, and particularly, demand for early‐stage ‘risk
dedicated allocations to support social investments.
capital’. This has raised concerns that a lack of appropriate finance may pose a significant barrier to market growth.
Investors also identify challenges to engaging with social
Institutional investors represent potentially deep pools of capital
investment, including:
for the market, which – if mobilised effectively – could make a
n L ack of clarity around definitions of social investment and
transformative difference to the amount of risk capital available.
investment products. n P erceptions of the market as risky, and unfamiliarity due to an
Potentially untapped pools of capital
emerging track record.
The study looks at eight previously under researched investor
n E xpected low return rates comparative to other investments.
groups who have scope to be engaged in the market:
n S ize requirements for large ‘investable’ opportunities.
n Charitable organisations;
n A lignment between core social mission and the social
n Corporations; n Faith-based organisations;
investment opportunity. n A disassociation between ethical/socially responsible
n Family offices;
investment (SRI) activities and social investment (no natural
n Housing associations;
‘stepping stone’ from SRI across to social investment in
n Insurers;
the portfolio).
n Pension funds; n University endowments.
n A ccess to/availability of credible advice, and a lack of awareness of credible sources. n C onfusion among asset owners as to who is responsible for
These eight institutional investor groups active in the UK, which
identifying social investments as an option – advisers or clients.
together control total combined assets of over £687 billion, are examined as potentially untapped pools of capital, given their social investment to date is estimated at around £500 million at the upper end. Key findings Across all the investor groups there is a strong belief in the potential to increase their social investment over the next five years. However, tapping into this interest will require an understanding of investors’ motivations and investment priorities. Charities, corporations, housing associations and family offices – who are primarily motivated to create impact as an objective of their investment activities – are most likely to be the prime providers of risk capital, estimated at £500 million in value. Investment into less-risky, more established social industries – estimated at around £5 billion in capital – for market growth, is
Family offices
Insurers
Pension funds
Housing associations
Charitable organisations
Faith-based organisations
Corporations
Institutional investors offer a deep potential pool of capital for the market
University endowments
23 Economic Development Research Programme Review of 2014 Corporate Responsibility and Community
Best Practice in Promoting Employee Health and Wellbeing in the City of London March 2014 Research Report Published in electronic and hard-copy format Improving programmes – key recommendations This research, authored by Cavill Associates in collaboration with
The research also provides a number of practical suggestions as
the University of Salford, and published by the City of London
to how large firms can continue to support the health needs of
Corporation, looks at best practice in programmes supporting
their workforce. These include:
employee health and wellbeing.
n A ssessing organisational and individual determinants of health within the organisation.
Current health and wellbeing practice in the City Interviews with 20 large City employers, representing tens of thousands employees, found that City firms uphold good practice across different workplace health issues, and hold a sophisticated understanding of the key aspects which link health and wellbeing to the bottom line; for example the link between
n P lanning programmes with the help of a steering group, comprising employees at all levels of the organisation. n D esigning programmes with the active involvement of staff based on known evidence of effectiveness and identified staff needs. n I mplementing changes to the work environment and
staff engagement and productivity. However there is also room for
work practices to reduce negative influences on health and
improvement.
wellbeing at their source. n E stablishing organisational-level programmes to raise
The interviews found:
awareness about mental health issues.
n There is variation in how City firms approach health and wellbeing in their organisation. Engagement with staff; management training and buy-in; and partnership working with external organisations are all increasingly common. n Most of the firms have well developed occupational health and employee assistance programmes. Fewer companies appear to have programmes that are developed in conjunction with staff, and not all are supported by senior management. There
n D eveloping individual-level interventions in all areas including mental health, musculoskeletal health, physical activity, diet and smoking. n E nsuring that processes are in place to deal compassionately and effectively with employees who have diagnosed mental health problems. n E ncouraging the development of social support networks in the workplace.
is growing awareness of the need to be open and talk about
n E valuating all approaches to workplace health promotion so
mental health, and mental wellbeing is an area of workplace
that the evidence base and business case can be improved.
health that most companies want to develop. However mental health issues are not currently integrated and managed within the workplace system by most organisations – provision is very much at an individual level. n When it comes to back pain and musculoskeletal health, firms largely take a preventative approach to help manage musculoskeletal disorders in their workforce. Current provision includes ergonomic work station assessment; access to physiotherapy (fast-track in some instances) and exercise provision.
City firms recognise the link between employee wellbeing and the bottom line
24 Economic Development Research Programme Review of 2014
Research Periodicals The Economic Outlook for Central London March 2014 Research Periodical Published in electronic and hard-copy format The Central London economy has acted as a key driver for
The outlook for Central London – key conclusions
the Greater London and UK economy over the past decade
n Employment growth is forecast to ease to 1.8% in 2014 from the
according to this research prepared by Oxford Economics for the City of London Corporation. Calling Central London the ‘engine of the UK economy’, the study predicts that from 2013 to 2023, the region will create 319,000 extra jobs, which equates to more than one in every eight jobs created across the country. As growth in the UK becomes increasingly driven by the private services sector,
15-year high of 4.6% witnessed across Central London in 2013, though this is still expected to surpass the national average. n The claimant count measure of the unemployment rate is forecast to continue decreasing over the next few years, falling to 2.4% in 2017. n In the decade from 2014 to 2023, employment is forecast to
Central London will benefit from continued specialisation in high
experience robust growth of 1.2% per annum, equivalent to an
productivity financial and business related services particularly
additional 319,000 jobs by 2023.
accounting, auditing, tax, and advertising.
n By 2023, GVA is forecast to be over 40% larger in real terms than its current level. This equates to average growth of 3.5%
Central London overview
per annum over the next decade, in line with the average
Central London’s population stands at almost 1.8 million, and the
recorded over the historic period from 1991 to 2013.
area supports total employment in 2013 of 2.4 million, equivalent to 45% of Greater London’s workforce, demonstrating its role as a global business centre. On average, Central London’s workers are
n W age rises over the coming decade will see wages break through the £1,000 per week mark in 2021. n The technology, media and telecommunications sector has
more productive than those in Greater London and the rest of the
become increasingly important, accounting for more than
UK. Gross value added (GVA) per job averaged £71,500 in 2013,
220,000 jobs, and projected to rise by more than 49,000 jobs
70% higher than the national average.
over the next decade, particularly in computer programming and consultancy, publishing, and motion picture and sound
Employment structure
recording. By 2019, it is expected that the sector will employ
Central London has a very high concentration of private sector
more people than financial services in Central London.
services employment, with the sector accounting for 71% of Central London jobs in 2013, in comparison to contributions in
In the short to medium term, the sectoral mix of job creation
Greater London and the UK of 63% and 51% respectively. This is
in Central London will remain consistent with current years.
largely due to the concentration of financial and business services
Professional services are expected to account for 30,000 of the
in the area, accounting for 42% of all jobs in Central London. This
76,000 new jobs forecast in Central London over the next two
sector includes professional services, the area’s largest employer,
years. A further 27,000 are expected in administration and real
with almost 450,000 jobs. The trade and hospitality sector
estate and 12,000 from information and communications.
accounts for 17% of employment and is highly concentrated in Westminster due to its numerous tourist and retail attractions.
319,000 more jobs in Central London by 2023
25 Economic Development Research Programme Review of 2014
The Economic Outlook for the City of London April 2014 Research Periodical Published in electronic and hard-copy format The City of London is set to create 41,000 extra jobs by 2023,
The outlook for the City – key conclusions
according to this periodical prepared by Oxford Economics and
n L ooking ahead, the City’s economy is projected to grow at
published by the City of London Corporation. Highlighting the
an average of 3.4% per year to 2018, compared to 3% growth
City’s role as a key economic driver of the national economy, the
projected for the UK, reinforcing the City’s position as a key
study finds that employment within the City increased by 24.3% between 2009 and 2013 (compared to 2.3% across the UK); a
driver for the London and UK economies. n S tronger, balanced growth is expected across the UK, driven
figure that translates into 85,000 jobs created in the City over that
by business investment, helping to support demand for
period. Future employment growth is forecasted to be driven by
financial and professional services. However, recovery in
the professional services sector, expected to generate more than
global conditions will be as important for the City given the
half (25,000) of the new jobs by 2023.
international nature of much of its business. n I n the nearer term, over the next two years 15,000 new
City of London overview
jobs will be created in the City. Professional services are
Employment in the City of London was estimated to reach
expected to create 8,400 jobs with a further 4,900 in
435,000 in 2013, equivalent to 18% of all jobs in Central London. In
administrative support sectors.
total, the City is responsible for 28% of Central London’s output
n E mployment growth is forecast to average around 1.5%
and 15% of the Greater London economy. The City’s high
per year in the medium term; this will be equivalent to an
economic contribution reflects the talented labour force it
additional 35,000 jobs in the City by 2018. Neighbouring
attracts, with average productivity levels per job at over twice
London boroughs with strong financial services sectors such as
the average UK rate.
such as Tower Hamlets (Canary Wharf), will also enjoy strong growth as development of the area continues.
Employment structure
n L ooking further ahead, with 41,000 new jobs expected
The report finds the service sector accounted for 98% of all jobs in
over the next decade, the technology, media and
the City in 2013. Financial services employs over 165,000 workers
telecommunications sector is expected to enjoy expansion
(equivalent to 38% of total employment in the City), while the
with an additional 5,000 jobs driven largely by computer
second largest sector, professional services, employs 120,000 (27%
programming, consultancy and related activities. Financial
of City employment). The third largest employer is administrative
services employment is expected to remain relatively flat over
business services and real estate, both of which are interlinked
this period; however rising output is projected to be achieved
with financial and professional services. Reflecting its status as the
through higher productivity.
biggest employer and high productivity, the financial services sector also has a significant impact on gross value added (GVA) in the City, generating 64% of total GVA.
3.4% annual growth in the City’s economy until 2018
26 Economic Development Research Programme Review of 2014
City of London Key Facts London’s contribution to UK growth
The City’s role
As the UK continues to recover from the economic downturn,
Despite the City’s relatively small geographical area, it
London’s growth has continued to make an important economic
generated £48.7 billion of economic output in 2013, representing
and fiscal contribution through its role as an international
15.2% of London’s economy as a whole and 3.6% of the UK’s
financial and business centre, providing jobs, driving economic
total output, indicative of its high productivity levels at £112,000
growth, and consistently providing a significant proportion of UK
per job compared to a UK average of £42,000. Over the past four
tax revenues.
years, the number of businesses choosing to locate in the City, and the number of people employed in the Square Mile, has
London is projected to achieve economic growth of 4.2%
grown by 14% and 10% respectively.
in 2014, compared to a UK average of 3.2%. Strong growth enabled London to provide a fiscal surplus of £34 billion in
The City is home to 15,105 firms and provides jobs for 392,400
2013/14, with its total public expenditure of £93 billion offset
workers. Four main business clusters, defined as areas with above
against tax revenue generation of £127 billion, equivalent to
UK average concentration of firms and/or employment, exist
21% of the UK’s total tax take.
within the City: financial services; insurance services; professional services; and technology, media and telecommunications (TMT). Tables 1 and 2 show the prevalence of these industries and other key sectors within the City, in terms the number of firms and total employment, and the percentage change over recent years1.
1 Both tables cite official statistics on enterprises and employment by sector for the last four available years; employment data covering the year 2014 is not yet available.
Table 1: The number of enterprises in the City of London by sector, 2011-2014 Industry
2011 2012 2013 2014 % change
2011 to 2014
Primary and secondary industries
465
485
610
750
61
Wholesale and retail trade
635
660
690
710
12
Transportation and storage
140
150
160
170
21
Accommodation and food service activities
325
345
350
350
8
Information and communication
850
910
1,020
1,170
38
2,390
2,480
2,505
2,430
2
705
715
745
770
9
Professional, scientific and technical activities
5,835
5,975
6,080
6,335
9
Administrative and support service activities
1,175
1,245
1,345
1,495
27
5
5
5
0
-100
Financial and insurance activities Real estate activities
Public administration and defence; compulsory social security Education
95 110 110 120
26
Human health and social work activities
140
170
170
180
29
Arts, entertainment and recreation
165
165
230
250
52
350
360
355
375
Other service activities Total firms Source: ONS UK Business: Activity, Size and Location statistics (2014).
13,280 13,770 14,385 15,105
7 14
27 Economic Development Research Programme Review of 2014
Sectoral employment in the City
Looking ahead, the City’s output is projected to continue to grow at a rate of 3.4% per year to 2018. Over the next two years
The City has the highest level of financial services employment of
it is forecast that 15,000 new jobs will be created in the City, with
any local authority in the UK, with the next highest being Tower
professional services expected to account for more than half of
Hamlets (72,400) and Westminster (41,400). Outside of London,
the new jobs. The TMT sector is also forecast to enjoy continued
Edinburgh has the highest level of financial services employment
expansion (an additional 5,000 jobs by 2023).
at 35,000 in 2013, followed by Birmingham (24,700), Manchester (23,100) Glasgow (21,600) and Leeds (20,900).
The contribution of UK financial services
While the financial services industry remains a key part of the City, accounting for 38% of employment in 2013, 64% of economic
Although financial services employment in the City looks set
output and 16% of businesses, firm growth has remained relatively
to remain stable over time, the sector will continue to make
slight at 2% over the past four years, while the number of jobs has
an important contribution to both London and the wider UK
reduced by 2% from 2010 to 2013. Meanwhile, other clusters such
economy, with stable economic growth to 2023, reflecting rising
as professional services, business services and the TMT sector (as
productivity levels in the sector. The sector provided £65.6 billion
shown by the ‘information and communications’ sector in the
in taxes to the UK Exchequer in 2013/14, equivalent to 11.5% of
tables) have shown strong growth, indicating the City’s sectoral
tax receipts, and employs 1.1 million people, or 3.6% of the UK’s
mix is changing. The number of information and communications
workforce. In addition to making an important contribution to
firms has risen by 38% since 2011 with TMT accounting for
tax revenues and employment, the industry contributes towards
nearly a quarter (23%) of City office take-up in 2013; the arts,
the UK’s long-run competitiveness through significant capital
entertainment and recreation sector has also shown strong
expenditure, its role as major exporter, and the provision of
growth, with 52% more enterprises since 2011.
infrastructure finance to a range of projects central to the UK’s continued economic recovery.
Table 2: Employment in the City of London by sector, 2010-2013 Industry
2010 2011 2012 2013 % change
Primary and secondary industries
2010 to 2013
4,700
5,200
6,400
7,400
57
Wholesale and retail trade
14,700
10,700
11,000
10,600
-28
Transportation and storage
3,000
3,200
3,600
3,700
23
Accommodation and food service activities
14,900
16,100
17,100
18,800
26
Information and communication
23,900
25,300
25,300
30,200
26
Financial and insurance activities
151,000
155,000
159,300
147,600
-2
6,200
6,800
6,400
7,600
23
Professional, scientific and technical activities
87,700
106,500
110,500
110,700
26
Administrative and support service activities
31,700
40,300
41,800
34,800
10
Public administration and defence; compulsory social security
4,300
4,100
4,000
4,000
-7
Education
4,000 4,000 4,300 3,800
-5
Human health and social work activities
3,100
3,200
3,300
4,500
45
Arts, entertainment and recreation
2,400
2,600
2,700
2,800
17
5,000
5,800
5,100
5,900
Real estate activities
Other service activities Total employment Source: ONS Business Register and Employment Survey (2014).
356,600 388,600 400,800 392,400
18 10
28 Economic Development Research Programme Review of 2014
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