Pandemics hit dense and internationally connected metropolitan areas hardest. Plagues, epidemics and other crises have a long history of shaping urban life and, indeed, stimulating innovation to address the challenges that emerge from living and working in densely populated conurbations. London cholera outbreaks in the mid-19th century incentivised public authorities to create and fund institutions which allowed the development of the capital’s modern sewage system, thus radically reducing the risk of disease and death.
London’s history provides a prime example of the changing fortunes of urbanisation over time. Having become “the biggest city the world had ever known” in the early years of the 20th century, London’s population declined during the Second World War because of evacuations, the Blitz and people leaving for safer locations. This fall continued in the years after 1945. Population gradually declined from 8.6 million in 1939 to 6.6 million in 1986. The post-war decline was in part caused by policy efforts to replace poor quality housing, partly by the decline of established industries and also because mass car use encouraged different residential patterns. Decreasing population levels suggested that individuals and businesses considered that the costs of density outweighed the benefits, at least until the 1980s. The wider south east prospered while the city at its heart declined.
London’s fortunes changed again with the economic reforms of the 1980s, deregulation of financial services and the emergence of a sophisticated post-industrial economy based on high value-added activities concentrated at the heart of major cities. Financial and business services, property development, cultural industries, education, healthcare and, latterly, tech were seen to benefit from agglomeration in cities such as London, New York and Paris. Steady urban population growth resumed, a sign that the benefits of being in a major city outweighed the costs.
London’s economy proved surprisingly resilient to the economic aftershock caused by the 2008-09 financial crisis. The city demonstrated an ability to adapt, shifting part of its economic structure away from traditional banking and finance, thus recovering fast and continuing to outpace other UK regions. Indeed, by the end of the 2010s, the capital’s economic success had been such that national politicians began to develop policies to “level up” other parts of the country towards London’s GVA per head.
Then Covid-19 struck. The government imposed a lockdown and by the end March 2020, London’s Tube and commuter rail journeys were down 95%, while bus use fell by 85%. Central London, which was more dependent on public transport than any other part of the country, saw economic activity stop almost entirely. As a result, the pandemic has attacked the most creative and sophisticated attributes of London: the dense mix of people, skills and sectors that together comprised the city centre’s vibrant ecosystem. Something very similar has happened in Manhattan.
In a post-lockdown, pre-vaccine metropolis, the Central London economy’s dependence on density and productivity has become a threat to its ability to function. One of the most important benefits of increasing population and workplace density is agglomeration. Being close to other people and other firms makes everyone more productive as they can share inputs and outputs, find a job that better matches their skills, network with each other and create new ideas. In economists’ jargon, labour markets are wider and deeper.
Amenities are also important: shops, restaurants, theatres, opera houses, bars and sports events need a minimum level of density to be profitable. Their presence together enhances the quality of life cities have to offer and provide jobs for (often higher value-added) service industries. Energy efficiency is also gaining momentum: as climate change is becoming one of the most pressing problems of the century, low energy use per worker had become an important driving force towards densification. Compared with the rest of the country, central London produces high levels of output with low carbon inputs.
Of course, the Covid-19 pandemic may accelerate trends which were already changing the Central London economy. Evidence was emerging prior to the pandemic of a reduction in commuting trips per person (when measured across all modes of transport) and of structural changes in employment because of growth in the “gig” economy, plus more part-time and people home working for some days of the week. Such trends were already leading to change in the traditional Central London commercial real estate market.
Having said this, in aggregate terms, Central London employment was growing apace in recent years; commuting by public transport was gaining market share, even though the overall number of commuting trips per capita was falling. Depending on how long an effective vaccine takes to be used widely (or some other solution is found), these recent developments, together with prolonged social distancing measures during a transition period, may fundamentally change how the Central London economy operates at least in the medium term.
The path to a new normality will not be easy. Government at all levels will need to co-operate on policies and programmes which must be radical and innovative. Some change may occur before policy can stop it. Policies could include the encouragement of clusters of business activity outside of the centre (a connected series of mini “central business districts”) and/or permitting much more office space in the centre, thus to allow more space in workplaces.
Residential development may need to expand in and around the city centre so as to allow more people to walk or cycle to work. There may be a case for a rapid and major expansion of public transport provision to reduce overcrowding, or for rationing its use to achieve an analogous aim. Longer opening hours for retail and entertainment could help shops, leisure businesses, the travel sector and the creative industries survive, although residential areas would need sophisticated protection from disturbance.
Transport for London and the government-run commuter railways face existential financial challenges because of the precipitous collapse in their fare box revenues. The business rate system will have to be modified both now and for the coming three to five years. New taxes and charges may need to be found to avoid the need to mothball public services, particularly transport.
London policymakers need to get employees back to work as fast and as safely as possible, as soon as conditions allow. Rigorous assessment of the impacts each of the measures outlined above would have on central London’s economic recovery over the short, medium and longer term should be used to help to prioritise and coordinate action.
A new report from the Westminster Property Association analyses the estimated economic impact of Covid-19 on Westminster ‘s economy, and thus on a major part of Central London, in 2020. It then explores what recovery to 2024 might be like and considers the impact of a range of policy interventions in helping to return the area’s economy to growth as soon as possible.
Nothing like the Covid-19 pandemic has happened in Britain since 1945, or arguably since the epidemics of earlier centuries. Unless government can deliver policy outcomes which return city centres to economic health there will be permanent, bad, consequences for export-generating tourism, the theatre, music, civil aviation, public transport, higher education, museums and the legal sector.
All of these sectors play a role in the United Kingdom’s capacity to have “soft power” within an increasingly challenging world order. This report makes a rigorous, early, contribution to the understanding of the impact of the Covid-19 pandemic on a large part of the Central London economy and what might be done to restore its unique brilliance.
Tony Travers is Visiting Professor of Government at the London School of Economics and Director of LSE London. This article is a slightly adapted version of his Foreword to the Westminster Property Association report. Read the report here.
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