Richard Brown: London has its own productivity puzzle

Richard Brown: London has its own productivity puzzle

London is an economic powerhouse, accounting for 23 per cent of the UK economy with only 13 per cent of the UK population. Productivity figures released last week show that four of the ten most productive UK districts (in terms of economic output per hour worked) are in the capital: Hounslow, Tower Hamlets, City of London and Westminster.

But this is not the whole story. Other London boroughs, such as Haringey and Lewisham, appear much further down the list, among “left behind” places such as Blackburn, Stafford and Rhondda Cynon Taf. And while UK productivity grew by about 21 per cent between 2008 and 2018 (not accounting for inflation), it fell in Newham, Barking & Dagenham and Merton, and barely moved in Lewisham.

A slowdown in productivity growth in high performing places would not be a huge surprise: growth is harder to achieve when you are already operating at high productivity; the gains you can squeeze from marginal increases in efficiency are much less impressive than those that can come from new enterprises in regenerating areas.

This – alongside the bigger issues of the financial crisis – probably explains why the City of London’s productivity shrunk more than any other UK local authority’s over the decade. But it doesn’t explain some of the other changes. Productivity surged by more than average in some Inner London boroughs that were already doing well: Camden, Kensington & Chelsea, and Hammersmith & Fulham. The boroughs where productivity fell, on the other hand – Newham, Barking & Dagenham, and Merton – were struggling to start with. London’s economy is becoming more and more concentrated in the city centre.

Struggling Outer London boroughs are not uniformly poor any more than northern towns are, but these productivity figures reflect the very different economic lives lived by rich and poor Londoners. Each borough will have wealthy residents, whose economic activity shows up where they work, not where they live. Their economic fortunes are in sharp contrast to people working in precarious and low-paid employment locally, whose labour is reflected in these local figures. These may not be “left behind places”, but some of the people living in them have every right to feel marginalised.

This dichotomy – between a globally competitive city centre and a struggling periphery –raises questions for local, regional and national policymakers. London’s suburban centres and high streets are being hollowed out by the same forces of retail restructuring as town centres across the country.

But the light of London’s central business district can leave its hinterland in shadow when it comes to government policy. Nowhere in London was among the 100 places invited to bid for £3.6 billion ‘Towns Fund’ last year. How can Outer London’s centres adapt and revive, supporting enterprises and services that will bring commercial and community life – and better productivity and wages – back to London’s suburbs and London’s suburban communities? Centre for London’s forthcoming project on Outer London centres will be focusing on this issue.

There is a broader point too. London is a rich city with a lot of poor people in it, having higher poverty rates than any other UK nation or region after housing costs. Being poor in a rich area does perhaps offer opportunity (though this is debated), but it can also add to stress when local services don’t meet your needs, as explored in a recent report by the Southern Policy Centre.

So the government should be cautious about rushing to refocus spending on “left-behind places” at the expense of thinking about the people and communities who are struggling – even if they are doing so within eyesight of central London’s temples of global trade.

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