Recently the Economist wrote a piece exploring the rise of London. It was interesting for its comparison with New York, both in terms of the proportion of the population who reside there, and the proportion of the economic activity that takes place there. The general thesis was that whilst London was undoubtedly huge, when compared with New York, it should quite logically be even bigger to reflect its key role in both the British and European economy.
That’s certainly the view of a recent Deloitte report looking at the 50 so called global cities that are said to play a huge role in the social and economic wellbeing not just of their host country, but of the world as a whole.
Global talent hub
The report was based upon data by BoardEx, which is a repository of some 750,000 executive profiles. This data was trawled to find executives who could be associated with one of London, New York, Paris, Tokyo, Hong Kong, Singapore or Sydney, and collated it with equivalent sources from other countries. It found that London was in pole position amongst these global cities, with executives in the city drawn from 95 different countries, which is five times that of Sydney.
These leaders are then exported to more countries than any other city, with London ‘alumni’ working in an impressive 134 different countries. This level of diversity is crucial to the economic growth of the city, especially in creative and high-tech industries, and this is born out by the data. It shows that London is home to over 1/3 of all European Fortune 500 companies, and has three times more corporate headquarters than any other city in Europe.
Engines of growth
What’s more, the Greater London Authority (GLA) reveal that the creative and high-tech industries have increased their Gross Value-Added (GVA) by 16.4 percent since 2009 and now contribute over £35 billion per year. This sector is also incredibly productive, producing 25 percent more than other London industries, and a whopping 40 percent more than other creative sectors elsewhere in Britain.
Central to this growth is the extremely high concentration of top-ranked universities in the capital. There are 15 top universities or business schools in London, which helps the capital find the highly skilled people needed for growth.
The proportion of the workforce in high-skilled work is increasing significantly. This is happening alongside the growth in automation of lower skilled work, suggesting that whilst automation may impact the lower end, it is also resulting in more high-skilled jobs.
The skills crunch
Despite this growth in high-skilled work, the report does urge London’s universities to keep churning out talented people, as companies throughout the capital report challenges in finding the talent they need to grow.
The authors suggest a number of strategies for tackling this, including:
- adapting the subject matter of degrees to ensure a better fit with the needs of industry
- continual professional development for employees
- improving language skills, especially amongst natives
- bridging the communication gap between generations to allow for more effective knowledge transfer
Only so diverse
The report urges Londoners not to rest on their laurels however, not least when it comes to gender diversity. It suggests that much of the labour market growth in the last 20 years can be attributed to greater female participation in the workforce, with policies such as maternity leave and childcare provision supporting this growth. Nonetheless, this has not yet translated into more equal representation of women in executive roles. The authors advocate a number of challenges that London, and other global cities, will need to tackle if this is to be addressed:
- rising inequality – and particularly the ‘hollowing out’ of jobs in the middle of the labour market
- cost of living – the cost of living in global cities such as London is increasingly making it difficult for newcomers
- lack of flexibility – with few firms actively embracing flexible working
- complexities of immigration – and in particular tightening labour rules
“Although the recent growth in London’s employment and economic output marks the capital as a leading global city, the reality is that unless these challenges are tackled, it will become increasingly difficult to sustain this growth, and London’s influence will decline,” the authors warn.
Knowing London, I suspect it’s a challenge it will take on with relish.
- This post gives the views of its authors, not the position of LSE Business Review or the London School of Economics.
- Featured image Central St. Giles, office building complex, designed by Reno Piano, by Rick Ligthelm CC-BY-2.0
Adi Gaskell is an innovation writer for Forbes and works with the National Centre for Universities & Business in supporting collaboration between industry and academia.