City of London Economic Research

What keeps bringing firms to London?

 

By Edward Clarke, Research Manager in the Economic Development Office

 

Following the vote to leave the EU a year ago, observers have been concerned as to how this will impact on London’s role as the financial services centre for Europe and, by most measures, the world. So what can the announcements from City based firms regarding moving staff out of the city tell us?

The first observation is that whilst fewer firms have so far confirmed moves out of the city than some initially feared, with current figures suggesting fewer than 200 jobs publically confirmed to move, there remains enormous potential for many more to move. The Financial Times and Reuters both estimate that around 10,000 moves are already planned. Estimates for potential future moves go as high as 35,000 (Source: Oliver Wyman).

Secondly, all of the confirmed movements and most suggested moves are to three cities within Europe: Paris, Dublin and Frankfurt. Using the Centre for Cities data tool, I looked at how these cities compare on issues such as the size of population, skilled people to hire from, density of businesses and productivity – some of the key economic indicators.

 

 

Firstly, London is the largest of the four cities; it has the largest population [1] and the largest number of jobs – about the same as the other three combined.

Secondly, Business services (including FS) make up a high proportion of the total jobs across all four cities, but whilst Frankfurt is the most concentrated (43%), the share of business services in London’s economy is higher than in Paris or Dublin – meaning there are around two million jobs in Business services across the Capital compared with 1.3m in Paris. While Frankfurt has a higher share there are 7 times more of these jobs in London due to its size.

Thirdly, all three cities have a high proportion of highly skilled residents and workers. Businesses choosing London have access to the largest pool of talent from which to hire due to its larger size.  

So what does this mean for London?

It is clear that firms and especially financial or professional service firms choose London - and particularly the City- in large part to be close to competitors and the access to talent that it provides. London does well at attracting people to the Capital in part because of the jobs on offer and the chances for career progression – the so called jobs escalator.

Alongside the draw for businesses, there is the draw for individuals. A range of competitiveness studies[2] highlight the draw of London’s lifestyle, culture and entertainment offer, highlighting the breadth of advantages a place needs in order to attract businesses and individuals from around the world. This was reinforced in a set of interviews with relocation specialists conducted by the New York Times about the factors financial services businesses would be looking for [3] – in essence, English language – seen to be essential for attracting a global work force,  a favorable regulatory environment, especially around employment, excellent transportation and communications infrastructure, availability of prime office space and housing, good schools, restaurants and cultural offerings -  and an energy level and openness.

With Brexit negotiations coming up, London’s openness – and attractiveness - to businesses and talent from around the world will therefore remain a cornerstone of its global competitiveness.

 

[1] These use comparable geographies of the built up areas of cities (rather than administrative boundaries, so London in this case is larger than the GLA boundaries), details can be found at the original source: http://www.centreforcities.org/welcome-european-cities-outlook/

[2] 2015, NESTA http://www.nesta.org.uk/sites/default/files/citie_report_2015.pdf; PWC, 2016 https://www.pwc.co.uk/industries/government-public-sector/insights/cities-of-opportunity-7.html  Mori Foundation 2016, http://mori-m-foundation.or.jp/english/ius2/gpci2/index.shtml

[3] http://www.nytimes.com/2016/07/01/business/after-brexit-finding-a-new-london-for-the-financial-world-to-call-home.html?_r=0 

Shared workspaces in major global cities: what’s next for London?

 

By Hui Chai and Adar Schneider, Urban Economic Development, The Bartlett Development Planning Unit, University College London

 

The previous blog of this two-part piece looked at the value of shared workspaces to businesses; this week’s post will focus on the support provided by other major cities to develop shared workspaces, and the lessons London could learn from these practices. 

Support given to shared workspaces in other cities

> Shared workspaces are being incorporated into economic development strategies. Singapore, Shanghai and Hong Kong all use innovation strategies that include creating and supporting incubators. Paris and New York have affordable shared workspace at the heart of their entrepreneurship development strategies.

> Shared workspaces can fill previously unproductive spaces such as alleys, rooftops and historic buildings. Sometimes this is to lower costs, sometimes it is to bring new footfall to an area and other times it is to add aesthetic or placemaking value.

> Makerspaces are entering the shared workspace arena, especially in cities that are branding locally-made products. New York, San Francisco Hong Kong and Paris are supporting artist studios and other makers, such as woodworking, jewellery, fashion design, and commercial kitchens.

> Coworking spaces have the potential to support community initiatives. By opening up their space to public events, hosting non-profits in their space, and cross-supporting local businesses, coworking spaces have a potential to make a positive impact on their communities.

> City governments are setting up incubators in industries related to “smart cities”. Singapore and Hong Kong are examples of cities which have directly established incubators in high tech, financial tech, and green tech to address urban problems.

> City governments are also supporting public-interest incubators. In Paris and New York, for example, spaces and incubators that are tailored to women entrepreneurs, innovation in public service delivery and community development receive subsidies.

> City governments are organising and sponsoring conferences that are centred around networking. For example, the 2012 Coworking Europe Conference in Paris. The Shanghai government invites representatives from the most influential incubators to give speeches in some global conferences and forums to build their reputation and influence.

The chart below demonstrates that city governments are playing an active role in shaping the competitiveness of shared workspaces. Several policy instruments are frequently used in practice, including space provision, finance and business support.

  

Source: Authors

What’s next for London?

 London is already participating in the shared workspace market in several important ways. As a global city that has always been a centre for finance, culture, history and business, it is unsurprising that small businesses want to start here. We believe London has the ability to achieve many of its development goals by using shared workspaces. We recommend considering the following policy tools.

> Attract new business and increase employment by investing in incubators directly with startup grants to support early stage SMEs and increasing the London Co-Investment Fund to gain equity in accelerators.

> Support international exposure by hosting global conferences and sending speakers to conferences related to flexible work.

> Make it easy for business to operate flexibly by increasing freely available internet connectivity through city-wide wifi.

> Support disadvantaged entrepreneurs by investing in incubators that target underrepresented groups such as women or POC entrepreneurs.

> Support community development by encouraging coworking spaces to host community events or donate space for volunteer opportunities.

> Improve public service provision by supporting technology incubators which innovate to meet “smart city” goals.

> Attract creative entrepreneurs and maintain affordable workspace by continuing friendly planning regulations to allow coworking spaces in “meanwhile” spaces and in historic buildings to lower the cost.

> Support light manufacturing and demand for London-made products by encouraging affordable shared makerspaces and increasing the branding of “Made in London” and cultural identity.

> Allow micro businesses, the self-employed and artists to benefit from shared workspace by keeping rents stable in specified zones.

Cities that are active in promoting incubators and other shared workspaces are benefitting from creative ideas that have transformative effects on the economy and the city as a whole.  Shared workspaces have the potential to increase value capture for the city, spur innovation, and protect the vibrant culture and creativity that makes the city such an important place. Our full report is accessible online, and we welcome any questions about our research.

Contact: Hui Chai [email protected] or Adar Schneider [email protected]

 

Special thanks to:

Dr Margarethe Theseira UCL                                    

Dr Laura Davison, Mr Saif Ullah and their team at the City of London Corporation.

 

 

 

What value do shared workspaces bring to businesses?

 

By Hui Chai and Adar Schneider, Urban Economic Development, The Bartlett Development Planning Unit, University College London

 

With the rise of agile working and increased mobility in the modern economy, the spaces people work in are quickly changing. Our research looked into shared workspaces in Singapore, Hong Kong, Shanghai, New York City, San Francisco and Paris, examining how businesses benefit from them, ways city governments are supporting their development and what lessons London may learn. The first part of this two-part blog looks at the growth in shared workspaces and the ways that businesses are benefitting from them. 

The Rise in Sharing Workspaces

The shared workspace market is rapidly growing. Businesses that run coworking spaces, a particular type of membership-based workspaces, are increasing in number and in membership.

 

Source: Deskmag Global Coworking Survey

There are several kinds of shared workspaces, which differ in leasing arrangement, membership requirements, services and primary users. Coworking spaces, incubators, accelerators and serviced offices all meet major needs for businesses, such as convenient access to resources, peer-to-peer interactions and business support services.

 

Source: Authors

 

Users of shared workspaces

Although there is a prominence of tech and digital media sectors currently using shared workspaces, businesses of all types are using them. From food entrepreneurship to music producers, fintech companies to hand creme makers, shared workspaces are catering to a diverse array of businesses. While many incubators and accelerators are curated to particular industries, most coworking spaces foster diversity. Shared workspaces are used by businesses at all stages. Coworking spaces are primarily used by stable micro-businesses, freelancers and those in the seedling stage. Incubators and accelerators are commonly used by startups and entrepreneurs. Large or mature companies use coworking space and serviced offices as spillover space or even to get “eyes on the ground” and observe what is happening in the industry outside their campus. Mature businesses are also opening their own accelerator programs to acquire new talent.

Ways businesses benefit from shared workspace

Shared workspaces offer features that help businesses grow and prosper. We identified seven business needs that are considered by users when selecting a workspace:

> Knowledge spillover is the most significant benefit from sharing workspace. Whether it is by sitting near someone who can answer a question, getting mentorship, learning more about the market from a networking event, connecting with the right people through an accelerator program, or learning from an industry showcase organised by an incubator -- businesses are looking to gain knowledge through their workspaces.

> Sharing workspace lowers the learning curve for new businesses. By bringing experienced professionals into the same space as startups, early-stage entrepreneurs can learn from their experienced peers. This can happen naturally, if a workspace has a diverse membership base, or can be constructed with mentorship programs and workshops.

> Rent and other costs are lower. Many larger coworking spaces offer business tools, partnerships and perks for their members at a discount, such as mailing services, accounting and HR, storage, etc. These discounts would not be available to most micro businesses, but by joining a larger network they have bargaining power with service providers.

> Location matters. Even for freelancers, working in a location that is transit-accessible and within a thriving neighbourhood is attractive. Not surprisingly, many shared workspaces are located in business districts and close to public transit.

> Businesses are attracted to incubators and accelerators because they offer business growth potential. Those who look for incubators are less interested in social amenities or facilities and more interested in networking, funding, skills, and mentorship.

> Members of shared workspaces benefit from diversity. Members are able to test out ideas and products on their fellow members, or request help and collaboration for skillsets in other industries. For example, a website designer can get support from peers who may have expertise in law, accounting, marketing, etc.

> When prestige is important, businesses often choose serviced offices. While more and more coworking spaces are hosting corporate spillover teams, companies which require prestigious addresses and private, high-end meeting spaces will use serviced offices to meet clients.

 

Source: WeWork

The benefits listed above highlight the importance of shared workspaces to businesses. The next blog post will look further into the development of shared workspaces in other major global cities, and the lessons that London could learn from them.