Clusters in the City and the growth of the technology, media and telecommunications sector

 by Maxine Kennedy

Research Officer at the City of London


Last week (10 August 2016) , the City of London's Research team published a set of maps showing firm movements in and out of the City between 2012 and 2014.

Commissioned by the City of London Corporation and undertaken by Trends Business Research using their own unique database, the maps show patterns of firm activity for five sectors: insurance; professional services; finance; technology, media & telecommunications (TMT), and administration & support services.


MAX1Certain spatial patterns are immediately obvious: The City's insurance firms are tightly clustered in the east – a pattern that dates back hundreds of years. The City's professional services firms are more dispersed, but with a notable cluster in the west. The City's finance firms are clustered in the centre-east. The City’s administration and support service firms have no obvious cluster- which is not surprising, as these firms tend to locate near to their client base rather than near each other. The City’s TMT firms have no obvious cluster, but this could be because the sector is still developing. However there is some evidence of clustering in the west and centre-east of the City.


Why cluster?

Clustering continues to be a marked phenomenon  despite modern technology reducing some of the traditional needs for firms to be physically close to one another. Evidence shows that businesses continue to find benefits from, for example, a shared pool of skilled staff and suppliers. In 2013, just over 60% of City firms bought from others based in the City, and almost 70% made sales to other City firms. Research produced by the City of London earlier this year noted that the prestige of already existing firms was a key draw for firms move to the City. Others have found that productivity increases in business clusters. Whilst there is a lot of evidence about how firms cluster on a city scale - for instance, California’s Silicon Valley, the tech clusters around Cambridge University and New York’s financial hub - comparatively less is known about how firms cluster within cities. These maps help to shed light on these patterns.


The rise of the TMT sector


TMT is a relatively new sector in the City, and has a comparatively higher churn rate (i.e. more firms starting and closing). Thus the map for this sector shows a lot of activity with some clustering in the west and central-east areas of the City boundary.

Although the City remains predominately a financial and professional services hub (financial services alone accounted 39% of City employment in 2014), the growth of the TMT sector is undeniable. Its workforce has grown 44% since 2010, and the latest figures show that 34,500 people, or 8% of the City’s workforce, is in TMT.

Recent data from JLL states that at 31%, it was the TMT sector that presented the most active demand for City offices in Q2 of this year (2016). Between 2001 and 2010, financial services firms accounted for 29% of office take-up; TMT firms at 10%. However, by the next decade, TMT firms had taken over: 21% of take-up was in the TMT sector and 19% was in the finance sector.  This echoes a larger trend in Central London, where the TMT sector has been the biggest take up of office space over the past five years.



Source: JLL, Central London Office Market Report, Q2 2016                                                                                                                                                                                 


       Source: Knight Frank, Central London Quarterly Q2 2016


The future of the TMT cluster

With the TMT sector growing rapidly in the City  - and in London more widely - how might this play out spatially? Taking into account the benefits of clustering , and the  already established tech hub around Old Street on the northern border of the City, will we see this developing sector begin to form a tight cluster within the City boundaries, as the long-established City sectors have? This is something myself and colleagues in the Research team will be keeping a close eye on.

We’ll be updating the maps with the latest data available towards the end of the year, so please check this page, or sign up to our mailing list here to see how these trends evolve.




The implications of Brexit for London – a focus on migration

By Dr Laura Davison

Head of Research at the Economic Development Office, City of London Corporation


London’s pre-eminence as a global centre for financial and professional services is underpinned by many long-standing strengths across the physical, political, economic and social infrastructure. Key among these is its global reach – in terms of both access to markets and the ability to attract a skilled workforce from around the world.

Distinctive aspects of London’s economy mean that London will be sensitive to particular implications of Brexit in different ways to other parts of the UK - in particular London’s economic concentration in services and the international nature of its workforce and businesses.

For companies exporting to the EU, and London residents with EU nationalities, the impact will be directly tied to the shape of the Brexit negotiations, for example through restrictions to the free movement of EU nationals and direct access to the rest of the EU’s market of 444 million people. There will also, though, be wider consequences for London’s international residents if visa requirements change as a result, and for those international businesses who locate here because of the EU market access this allows -  for example through financial services passporting.

Census data from 2011 highlights just how international London’s population is – with over a third (37%) of residents born outside the UK, and 10% born in other EU 28 nations – 31% of the UK’s total EU population. In contrast, across the rest of the UK (excluding London), 9% were born overseas and 4% elsewhere in the EU. Recent analysis by the Centre for London[1] highlights the key part that EU workers play in some sectors of London’s economy – in particular in the construction industry and accommodation and food services, where they make up substantial proportions of the workforce.

% of jobs held by EEA nationals

Yet the FT[2], working with the Oxford Migration Observatory, has highlighted that many such workers would not meet existing visa requirements - potentially as many as 94% employed in hotels and restaurants, and three quarters of EU construction workers.

Other service sectors - such as financial and professional services - also have a much higher proportion of EU workers in London relative to other parts of the UK. In financial services, these are concentrated in particular subsectors and companies; City recruitment firm eFinance[3] carried out an analysis of the nationality and employment of its database of 156,000 workers, where 17% of London’s financial services jobs were filled by EU workers. Investment banking had the highest proportions, while there were also distinct concentrations of nationalities – such as the Polish workforce in accounting.


Large firms are important employers in London - and particularly so for financial services, with the 90 FS firms with 500+ employees accounting for two thirds of London’s financial services employment.[4] Investment banks are some of the biggest, employing thousands in London, and many thousands more across the country. As the EU is such an important market for FS exports - 41%[5] - the shape of the UK’s future relationship with the EU will have a key impact here.

Finally, London also has a highly international student population. London Higher[6] and HESA figures show that London’s 33k EU students make up 9% of the student population, relative to about 5% for the rest of the UK. Some universities have particularly high concentrations - 18% of LSE’s students and 16% of Imperial’s are from the EU. The UK is also one of the largest recipients of EU research funding, receiving an estimated €8.8bn across 2007 – 2013.[7] Non EU countries such as Norway and Switzerland can contribute to and participate in funding programmes (such as Horizon 2020) and student exchanges (such as the Erasmus programme). Participation is contingent on certain criteria, however - as Switzerland is now discovering, with the suspension of its Erasmus and Horizon participation following its migration referendum in 2014.[8] 

While London’s migration patterns are complex, with different nationalities having moved here at different points in time and for different reasons, it is obvious that EU and international workforce, students, residents and visitors play a significant role in London’s economy. The outcome of Brexit negotiations could change the face of the city profoundly.










Curators, coders, musicians and meat traders

By Robert Clear, Researcher in the City of London Research team

The City’s north west flank, where Smithfield blends into Farringdon and Clerkenwell, is an unusual district of the square mile. It’s not a centre of finance or law, contains few international headquarters, no skyscrapers and none of the great monuments that draw crowds of international tourists. It is, however, one of London’s most historically and architecturally rich areas, and the City of London Corporation aims to turn the 800 metres between the Barbican and Smithfield Market into a globally important cultural quarter.

The first big steps in this venture will be in the realms of music and conservation, and will address one of the capital’s great cultural challenges: though its orchestras are world class, the spaces they play in are not. Its most important concert halls, the Barbican (home to the London Symphony Orchestra) and the Southbank Centre, are widely considered inferior to their counterparts in other global cities such as New York, Paris and Tokyo.

A decision, however, by one of the capital’s leading cultural institutions has created an opportunity to redress this imbalance: the Museum of London is moving home, and a world class concert hall is to be built in its place – a 1,900 seat venue that will be one of the finest anywhere.  

From its current site, a 1970s construction straddling a roundabout at the end of London Wall, the Museum will relocate a few streets away to Smithfield. There it will share the Victorian home of London’s last medieval wholesale market – still the centre of London’s meat trade after almost a thousand years. The move will increase the Museum’s size from 17,000 to over 27,000 square metres and, it’s hoped, be a catalyst of further cultural developments (more information on the project can be found here).

To an extent, the flow of institutions across spaces is the product of chance – the Museum’s move happens to free a central London plot suitable for a concert hall, and its takeover of the western end of Smithfield Market is possible because the latter currently lies empty. On the other hand, each of these players and spaces is connected with the City of London Corporation. In 2021, when the Museum vacates its current spot on London’s Roman boundary, the Corporation plans to gift the land for the construction of the new concert hall. It’s also one of the Museum of London’s principal funders and is the owner of Smithfield Market.

These connections reflect the Corporation’s unique position as a cultural custodian. Less obviously, perhaps, its promotion of a cultural quarter is tied to its role as a supporter of business. For the City’s north western edge is emerging as a start-up cluster, notably in the tech sector. The Corporation’s challenge in the coming years, then, will be to take advantage of the area’s historical spaces to foster arts and business together. If successful, a district shared by curators, coders, musicians and meat traders will be a legacy for the future.

Fintech in the UK and Hungary

 by Eva Rez 

 As a City of London Programme Fellow, I have the opportunity to  participate in the Annual Alumni Event, where we discuss the latest in the financial sector. Being a principal in a venture capital company dealing with startups and interested in fintech I was asked to write about the Hungarian fintech landscape in comparison with the UK which is hopefully useful to identify directions of travel for the Hungarian fintech industry.

Key Drivers

I start this brief comparison with some of the main factors influencing the emergent – disruptive, innovative – fintech in general because this will give the framework of what comes next: market readiness, the startup ecosystem, regulation and public support.

One of the key drivers of the spread of fintech and other disruptive technologies is internet and mobile penetration. It is hard to compete with the UK, with an internet penetration of 93% (2016) and mobile penetration (2014) of 124%. Yet even though the figures are not that advanced in Hungary – 80%; 118% respectively – I would not say that the outlook is bleak. On the contrary, there is hope for the future of fintech in Hungary!

E-commerce is also a generator of more fine-tuned financial solutions. In the UK 64% of the population purchases online, spending EUR 3,073 per annum on average. In Hungary less than 30% of the population buy online, and of those 30% the average amount spent per annum  is EUR 346. (Source: Ecommerce Europe, 2014) It is also interesting to note the difference in the access to bank accounts: almost everyone (96%) in the UK has a debit card and they actually use it. Only 60% of the Hungarian population hold debit cards and are much less likely to actually use them to make payments. This is a huge gap between the two markets. It is not only about the standard of living, but probably also about the openness to new solutions.

But before getting tied up with these facts and figures, here are two charts about the Mobile Payments Readiness Index (MPRI) of the two countries from an international financial service provider. Not only do these snapshots speak for themselves, but they tell us how hot these markets are. While it is not surprising that the UK is more attractive than Hungary, it is worth highlighting the reasons why: environment, consumer readiness and regulation.


Mobile Payments Readiness Index  (Source: Mobile Payments Readiness Index)

  Ukfin“The United Kingdom, with a sizable economy, large household spend, and a developed infrastructure, presents a very attractive picture for mobile payments readiness, as shown in its total score of 37.5 on the MasterCard Mobile Payments Readiness Index. Among its most attractive features is the intuitive distribution of familiarity, willingness, and usage of mobile payments by type across demographic segments…”


Hungary combines a vibrant partnership scene—reflected in a very high Mobile Commerce Cluster score—a still-developing legal and regulatory system and Financial Services sector. These factors, coupled with Consumer Readiness scores that consistently trail the Index average, give Hungary a final score of 27.0, which ranks the country at number 31 on the overall MPRI.”


Market & Infrastructure

It is not really fair to compare the market size of the two countries as the UK is the financial centre of Europe, with a mature credit market. In Hungary, insurance and financial services give less than 4% of the country’s GDP and this proportion has shown a decreasing trend over the last couple of years. While every financial institution which would like to get on the map makes sure to be present in London, in Hungary around 50% of the banks are state-owned. Taxes imposed on this sector frightened away many global players from the relatively small market. However, this rather old-fashioned structure does not mean that local players are not open to innovation at all but it indicates that there is still a lot to be done. Here is an example of the approach of the biggest bank in Hungary:

“Hungarian OTP Bank could acquire startups or IT companies to expand its own digital services platform. OTP is introducing mobile applications and digital services to its retail customers, developed by OTP Mobil, the bank's own mobile application developing subsidiary. It would consider acquisitions in this space as well. The bank is not looking for payment systems or other fintech solutions, but could consider targets that can provide a large number of retail users or valuable products for OTP's digital services.” (Source: Mergermarket)

Regarding the capital market there are still many issues to be solved: education of debtors and investors, financing of SMEs, lack of liquidity, etc. However, the basic infrastructure is in place and it is in good shape. It is more about breathing life into the system: providing financing alternatives for companies at different stages; creating a firm investor base which remains active on the market; reducing uncertainty; and enhancing credibility and trust.

The Fintech Startup Scene

The UK fintech market generates GBP 20 billion (EUR 26 billion) revenue annually. This figure is hard to digest. Because the UK is the heart and soul of the emergent fintech industry in Europe, many different innovations have been developed, particularly in recent years following the financial crisis. Emergent fintech is about working around incumbent financial service providers and disrupting business models. This is why peer-to-peer networks and crypto currencies are already very popular. There is a huge database available in the UK on financial transactions, which can be worth a fortune, but it also reveals security and privacy issues.


In Hungary, the starting line is far behind the UK. The whole startup ecosystem is just evolving and all market players have a lot to learn. But it is looking increasingly promising and the fintech space is emerging. In 2015 there were 50 startups and SMEs working on some kind of fintech innovation. Out of these, 35 early-stage companies have appeared on the scene over the past three years focusing on various micro-sectors including payment solutions, personal finance management systems, roboadvisor solutions for wealth management, crowdfunding, bitcoin and insuretech. There is one area which has not been covered yet by any local fintech startup: lending. It is both surprising and understandable in the aftermath of the last couple of years’ drama - high level of indebtedness due to FX based loans. There are also SMEs trying to gain a foothold in this space. Thanks to mainly public money via the Joint European Resources for Micro to Medium Enterprises (Jeremie Funds) companies raised EUR 13mil to develop mobile payment solutions, credit scoring and risk assessment systems. (Source: Portfolio)

There has already been a notable transaction between the UK and the Hungarian fintech sector when Misys, the UK based financial services vendor, acquired the Budapest-based digital channel solutions vendor IND Group in 2014. The value of the deal was not disclosed but based on rumours it could have been as high as EUR 30 million. A partnership had existed prior to the takeover, from 2013. The IND Group provided online and mobile banking services, personal finance management and payment solutions to its 30 clients around the globe, while Misys wanted to add these retail banking solutions to its portfolio. The transaction had some positive outcomes for the Hungarian fintech scene:

  • the founders of IND left Misys and became business angels, not only funding fintech startups but also helping teams improve their industry knowledge and make valuable contacts. They have joined startup events and accelerator programmes in order to share their experience and shepherd young talent;
  • former IND employees would like to make their own ‘disruptive baby’ - the boost in the number of fintech startups is partly due to their efforts.

It is also worth mentioning that there are young enthusiasts with a good understanding of the space, IT developer skills and innovative ideas, who are building their profile in Hungary’s fintech scene. They are also keen on building a fintech community by organising various events and meetups (e.g. Fintech Meetup; Bitcoin Budapest). From a venture capital point of view it is always exciting to meet people who know their target market and potential customers.


In my opinion, supporting innovation requires education, a friendly regulatory environment and public acceptance. Let’s look at the fintech comparison from this angle. While not being an expert of the UK education system, it is clear that for finance, London is the place to be. Yet financial literacy must be improved in all countries.  People need to be informed about financial innovations. In this regard, Hungary has a long to-do list and our universities have a crucial role in this (I’ve written about this previously on my own blog site). But as I mentioned above, successful ex-fintech company builders can also have important added value here.

Regulation is always a tricky point. In my view, UK regulators are very open minded and supportive with innovation. At the last City of London Alumni event we heard that there are regular discussions between the fintech industry and the regulator. Not only did the Financial Conduct Authority recognise the benefits of these new solutions, but the term ‘regtech’ was also born referring to “nimble, configurable, easy to integrate, reliable, secure and cost-effective” regulatory systems that helps innovators better understand and manage their risks.

Recent events, even if in a different market segment, showed that Hungarian society is not that ready for new ideas. Or at least a big part of it, including the regulators, is not. I am referring to the UBER case here in Hungary, which after several taxi demonstrations resulted in a law making it possible to ban the platform for a year. We all recognise that startups will not become the next big success story if they focus on the tiny Hungarian market alone. They have to prepare for the conquest of international markets, and this definitely brightens the picture.

Change will happen regardless of current Hungarian regulation. The PSD2 (Payment Services Directive 2 - EU Directive) will enable third parties – thus startups as well – to get access to clients’ bank account data with their consent. The directive will be implemented in Hungary as of 2018. If people start to discover that many of these fintech solutions help them manage their finances, provide them with cost-effective, tailored financial services and flexible cross-border solutions, there is a chance that fintech will become a common term in Hungary as well.

Final Remarks

Having a background in finance and working for an open-minded venture capital firm – Day One Capital - makes me hope that we will not only keep plodding on behind the great fintech innovations of the UK, but that we will provide the rest of the world with some valuable solutions from Hungary. The evolution of the Hungarian fintech community is certainly happening, and it makes me optimistic about the future. I hope that in the years to come I will be able to report on a much more advanced Hungarian fintech scene.


Eva blogs regularly at



Dispelling the myths about apprenticeships

By Ododo Ediagbonya, Employability and Enterprise Project Officer in the Economic Development Office 


Apprenticeships are a key talking point for government, with apprenticeships seen as a method of addressing skills shortages and stimulating economic growth As part of this refocus on apprenticeships, last year the Government announced plans to increase the number of apprenticeship starts to 3 million. Alongside this, from April 2017, employers with an annual pay bill of over £3 million will have to pay an Apprenticeship Levy of 0.5% to HMRC, to fund their apprenticeships. Discussions are on-going about how unspent levy money will be used. However, it is thought that it may be used to fund apprenticeships in small businesses.  It is hoped that this new scheme may incentivise more industries to explore the apprenticeship route for employment, particularly given the additional subsidies received from Government.

 Yet as the Government begins to implement the changes to the apprenticeship industry, many still have questions about apprenticeships. Here are a few common apprenticeship misconceptions debunked:

  • Apprenticeships are for young people

Although there is more government funding available for young people aged 16-18, apprenticeships are accessible to all age groups. In fact in the year 2014/15, 39.9% of apprenticeships were taken up by people aged 25 and over.

  • Apprentices don’t have 'real' jobs

An apprenticeship is a work-based training programme. This means that apprentices work in real job roles for a minimum of 30 hours a week.

In addition to this, an apprentice will undergo a training programme, which will result in them gaining an NVQ, BTEC HND/HNC or Degree qualification. In some cases apprentices obtain a specialist qualification such as an Accountancy ACCA qualification.

  • Apprenticeships are a less academic route

The types of apprenticeships available are extremely varied. They range from skills such as butchery to a degree apprenticeships in laboratory science.

Employers in all industries are leading the way by creating a wide variety of apprenticeship standards through the current Trailblazers programme. The apprenticeship offer will continue to grow and hold a range of both practical and academic options.

  • Apprenticeships are for new employees only

Apprenticeships can be accessed by both current and new employees. Apprenticeships can provide current employees with a flexible method of gaining new skills.

I hope this gives readers a quick update and overview of the apprenticeship landscape today and encourages serious consideration of apprenticeships. In London only 8% of firms employed apprenticeships in 2014, compared to the national average of 11%. It will be interesting to see how this figure grows over the next few years.

If you're based in the City and want to know how the City of London Corporation can support you in taking on apprentices, - or if you would like to know more about becoming an apprentice in the City, have a look at our dedicated webpage

You can also contact for more information.


For further reading on non-graduate routes to employment, read Saif Ullah's blog piece

Improving International Access to Credit Markets

By report author Iain Clacher, Associate Professor in Accounting and Finance, Deputy Director of the Centre for Advanced Studies in Finance (CASIF) at Leeds University Business School and Associate at Research Republic.


Our latest study, published by the City of London Corporation, ‘Improving International Access to Credit Markets, shows the increasingly important role that credit markets and innovations in credit markets have played since the financial crisis of 2008. This has been driven by two key factors. The first is the squeeze of bank lending resulting from the demands of recapitalisation and new regulations. The second, as the figure below shows, is an increasing demand for credit in emerging economies.

Emerging Market Corporate Bond Composition

Corporate bond composition

Source: IMF FSR 2015

As part of our analysis, we developed the Credit Market Assessment Framework, which allowed us to undertake a detailed examination of credit markets in 59 countries. These countries account for 91% of global corporate bond issuance and 87% of global GDP. The results show clear trends in the growth and development of well-functioning credit markets and highlight key areas that need to be addressed for each country. Countries with credit markets at the earliest stage of development need more robust legal systems, better bankruptcy and insolvency processes, and a broader investor base. In addition, for some of the most developed markets there are clear agglomeration effects, and this scale is a significant source of competitive advantage.  

Moreover, the analysis shows those countries that have the highest capacity to grow their credit markets and increase the use of debt finance to support economic growth.

In addition to the development of the Credit Market Assessment Framework, we also conducted in-depth case studies across 11 countries: China, Germany, India, Japan, Mexico, Nigeria, Norway, Singapore, the UK, the US, and Vietnam. These cases look at specific credit instruments in each country and highlight the key challenges and opportunities for each market. 

While many of the developed countries in our sample are in a process of deleveraging, it is in these markets that we are also seeing significant amounts of innovation. From our analysis, there are at least three significant areas of innovation:

  1. The first is the implementation of the Capital Markets Union. The potential of a pan-European private placement debt market could result in a much more efficient allocation of capital across Europe. This development would allow much of the long term capital that is desperately seeking yield at a time of ultra-low interest rates to find investments that meet this need. At the same, it would allow firms in search of finance access to pools of capital at a time when bank finance is harder to obtain.
  1. The second is the development of peer-to-peer lending. As a result of the financial crisis, many firms have struggled to find the finance that they need, while at the same time, investors have struggled to find yield. Consequently, in the UK for example, peer to peer lending tripled between 2013 and 2015 and consumer and business lending was approximately £3bn in 2015. While this is nowhere close to the value of lending that occurs in mainstream credit markets, this is nevertheless a growing area of importance and is likely to see significant growth in the coming years.
  1. The third is green bonds. As the global shift towards a low-carbon economy continues, investors are increasingly looking for sustainable forms of investment. Green bond issuance is an important and growing feature of this new landscape. In 2014, it stood at $37bn - up from around $1bn in 2007. Moreover, this demand is not just occurring in developed markets. The developing Asian markets are a major source of demand for green finance. 

As the City looks towards the future, it should seek to develop and grow these areas in order to maintain the UK’s competitive standing as a global, diverse, and innovative credit market.



To download a free copy of the report, click here.


How influential is the UK in shaping EU legislation?

Conor Foley - Norton Rose Fulbright

In two weeks’ time the UK will vote on whether to leave or remain a member of the EU. Throughout the referendum campaign both sides have raised concerns over the possible impact of an in or out vote on the British economy. Many of those calling for the UK to leave the EU have suggested that too many UK businesses have to comply with legislation that is ‘handed down’ from Brussels, without the UK government having the opportunity to help shape it. This new research report, however, shows that the UK Government has played a significant role at the EU level in formulating legislation relating to the financial services sector.

The research analyses five case studies of financial services legislation proposed and adopted in the last ten years, in order to better understand the extent to which the UK has engaged with and influenced legislation successfully. Ultimately, we find that the UK plays a key role in EU negotiations and has been able to shape emerging policies through its membership of the European Union.

The analysis draws on a range of resources, including  interviews with current and former EU institution and member state government officials, legislators, lobbyists and other stakeholders. They point to significant successes of UK negotiators, from protecting the choice of investment funds available to UK investors in the ‘Alternative Investment Fund Managers Directive’; to ensuring a workable ‘passporting’ regime in ‘MiFID 2’. Crucially, across all five case studies, it is clear that the UK gains far more often than not through its legislative negotiations. 

And how does this compare to the experiences of European countries outside of the EU with access to the Single Market? Iceland, Liechtenstein and Norway in the EEA and, in a different framework, Switzerland, are also assessed on their ability to negotiate and shape policy. The report finds that none of these alternative arrangements provide the same level of potential ability to influence as being an EU member state. These countries do, however, feel the impact of EU legislation on their domestic markets. In order to access the EU’s market of 500 million consumers, they must have domestic laws in place that replicate those of the EU. For Switzerland and other ‘third countries’ this means they must be assessed as ‘equivalent’. For Norway this means EU legislation is added to the EEA agreement and must be adopted nationally. If the UK were to adopt similar arrangements, this would mean that the UK would inevitably need to implement EU legislation without being able to shape it.

There are areas where the UK could do better, but despite this, the results of the research clearly show that outside of the EU, the UK would have almost no ability to influence financial services legislation that directly impacts the City of London.

The long term financial sector development of India -  why we no longer need to be cautiously optimistic


Angela Lynch,  the City of London’s  lead on India and China policy work.


With India’s National Democratic Alliance (NDA) Government under Prime Minister Modi having completed its second year in power at the end of last month (May 2016), there has been widespread commentary, both in India and globally, on its performance. Although some questions remain as to whether progress is moving as quickly as the financial sector would like, the majority of views expressed have been incredibly positive.

The transport sector in India has received a much needed boost, with accelerated road-building and significant investments in the ageing rail network. At the same time, labour laws, have been amended resulting in changes such as increased earning potential for women and encouragement for firms to take on more apprentices. The problem of low financial inclusion levels is also beginning to be addressed. 200 million bank accounts were opened for citizens who had previously never held an account. Several affordable insurance schemes have been opened. Although the agricultural sector has been adversely affected by persistent poor weather conditions, there have been active steps taken to counter this: from the launch of a crop insurance scheme through to diversion of capital into improving irrigation. There is even good news for the legal system, where changes to the Arbitration Act are starting to bring Indian’s arbitration regime far closer to global standards than some international commentators would previously have expected.

Domestic improvements inevitably have an effect on the confidence levels of foreign investors and the above reforms have been accompanied by an active push from the NDA Government to attract foreign institutional investment into key financial sectors in India – including infrastructure and renewables. The recent passing of the bankruptcy law, in addition to bringing expectations for further strengthening of India’s debt markets, also sends a message to foreign investors of the Government’s firm commitment to improve the ease of doing business in India.

The above are only a few examples of the reform that we’ve seen in India and do not even mention reforms and changes that are in the pipeline. They illustrate that change has and is happening across India’s financial and business sectors.

Many within the global financial community have long-since considered India as a market full of potential. As was apparent from conversations at this week’s (2 June 2016) annual meeting of the City of London Advisory Council for India, this potential is now on track to be realised. Clearly there remain challenges to achieving the goals set out by the Government, and much discussion to be had over the implementation of important reforms. However, for now, there is a refreshing change of mood in discussing prospects for India’s financial markets – and no need to be cautious in our optimism.



The City of London also produces research about Indian markets, including reports on Attracting private capital for Indian infrastructure and Policy and regulatory reforms roadmap for the Indian non-life insurance industry. You can access them all here.

Looking back - the work of the Economic Development Research Team over the past year

Dr Laura Davison, Head of Research

Compiling our annual Research Review gives us the opportunity to look back over the previous year’s commissioned research, and reflect on our priorities for the year ahead. Our programme has a very wide remit, spanning local, national, and international economies. This was reflected in 2015’s topics, which ranged from poverty and healthcare in London, through to the ways in which EU financial services support the wider economy, and global currency usage.

A key on-going theme for us is how to ensure that London continues to function effectively as a world-leading business and financial centre over the long term. This includes looking at the physical and social infrastructure that enables the City to operate as the densest concentration of business and employees in London, with a workday population of 415,000 within one square mile - equivalent to bringing in all of the residents of Brighton and Oxford every workday. Nearly a third of our workforce travels from outside of London, meaning that developments that bring new connections and capacity are critical, for example Crossrail, bringing in 1.5million more people within a 45 minute commute of central London.

It is also crucial to understand how the world of work in the City is changing. In 2015, we worked with the largest companies in the City – who while small in number (225 firms), account for around half of the City’s workforce. The research emphasised the rise in mobile working and a more flexible workforce – with consequent demands on the City’s communications connectivity, for adaptable and well-designed workspace, and a public realm that supports the use of third spaces – such as cafes – to work in. This programme of work continues into this year, looking at the changing needs of the SME firms (employing <250 people) – who make up 98.6% of the business population in the Square Mile.

Financial services continues to be a key industry for London – and the UK more widely, and our annual Total Tax research showed that the tax generated by financial services has continued to rise – now standing at around £66.5bn, equivalent to well over half the annual NHS budget. Across Europe, our research showed financial services accounting for nearly 6% of the EU’s total economic output, with the potential for stable growth of 1.9% per annum to generate an additional 11 million new jobs by 2030 spread across sectors including construction, manufacturing and services.

Looking at global finance, we had the particularly exciting opportunity in 2015 to work with SWIFT to make public new data on the changing use of currencies globally, drawing on their global payments infrastructure linking more than 200 countries and territories worldwide. This emphasised the key role that the UK plays as an intermediary in financial flows, as well as the rapid growth of currencies such as the Chinese renminbi.

For a fuller overview of these and other pieces from 2015, please do download our Research Review – and look out for forthcoming work, as we continue to develop these themes. 


Exploring non-graduate routes into employment

Saif Ullah


How easy is it nowadays for early school leavers to gain employment? With graduates now taking up an increasing proportion of the UK workforce, it has seemingly become more difficult for people that leave education after their GCSEs and A-Levels to get on the job ladder, despite this non-graduate group making up a large majority (40%) of the workforce.[1]     

The pathways to employment for this relatively unexplored group are looked at in more detail in the Resolution Foundation’s most recent report, Finding your routes: non-graduate pathways in the UK’s labour market.

The research provides some useful insights. Utilising data from the Labour Force Survey and British Household Panel Survey, the analysis adds further weight to the evidence that higher qualifications bring greater earnings for non-graduates. However, while academic qualifications for non-graduates are generally valued more highly by employers than vocational ones, in traditionally vocational sectors such as construction and manufacturing, vocational qualifications typically yield a higher return.

The report also illustrates the ongoing impact of the recession on young ‘mid-skilled’ non-graduates, whose careers have stalled as a result of more graduates taking typical non-graduate work opportunities.

Given these growing difficulties experienced by non-graduates in trying to find their way into employment, the research poses important questions about the potential value of apprenticeships. With the Government targeting the creation of three million new apprenticeships by 2020, could this pathway present a more viable route into employment outside of university education?

Apprenticeships are becoming more commonplace within “white collar” sectors than previously. A wider range of employers are increasing the breadth of apprenticeships that they offer, which in turn has led to increased take up of advanced (Level 3 – equivalent to 2 A-levels) and higher/degree (Level 4, 5, 6 & 7 – equivalent to HNC through to Master’s Degree) apprenticeships. Across all ages, the number of advanced level apprenticeship starts rose by over 25% to 181,800 between 2013/14 to 2014/15, while during the same period the number of higher level apprenticeships more than doubled to 19,800.[2]  

However, apprenticeships still remain relatively uncommon within sectors such as finance, professional services and insurance. In London only 8% of firms employed apprenticeships in 2014, compared to the national average of 11%.

From April 2017, employers with an annual pay bill of over £3 million will have to pay an Apprenticeship Levy of 0.5% to HMRC, which will be used to fund apprenticeships for all companies across England. This new scheme may incentivise more industries to explore the apprenticeship route for employment, particularly given the additional subsidies received from Government.

The success of such reforms to the apprenticeship system, however, will depend on making sure that the quality of training and education provided is sufficient to meet the needs of a wider range of companies. A coordinated approach to developing sector wide standards, involving government, industry, training providers and universities, may help raise the level of apprenticeships and provide more rewarding long-term opportunities for non-graduates, as well as creating a viable alternative to employment away from university education.     



[1] Resolution Foundation (2016), Finding your routes: non-graduate pathways in the UK’s labour market

[2] See FE data library: apprenticeships