City of London Economic Research

Banks: in the City and across the UK

 

By Katharina Ehrhart and Fiona Morrill Researchers in the City of London Research Team

 

Last week, Chancellor of the Exchequer Philip Hammond in his Mansion House speech, spoke about his vision for extending “London’s position as the world’s number one international financial services centre” post-Brexit.

The City is the home of global banking

Banking is a critical part of the City’s financial and professional services ecosystem that underpins the UK’s position as a global centre for finance. Across the UK there are over 250 foreign banks, but it is in the City that the world’s banking sector clusters. Banks from 26 countries are represented here and many cluster around the Bank of England. This includes banks from North and South America (US, Canada, Brazil), from Asia (China, India, Japan), from Africa (Ghana, Nigeria) as well as the Middle East, next to banks from several European countries (Germany, France, Spain).

Banks supporting businesses and households across the UK and Europe

In the words of the Governor of the Bank of England, Mark Carney, who also spoke at the Mansion House, “The City is Europe’s investment banker, and it is leading the internationalisation of green, Islamic, renminbi and rupee finance.” Moreover, he noted that the UK banking system channelled £300 billion in finance to UK businesses and helped 700,000 households to purchase homes in 2017.

Banks’ direct contribution to the UK economy

As well as the services that banks provide, they are major direct contributors to the economy. They provide 360,000 jobs across the UK and over 96% of these jobs are in large firms. One in five of those banking jobs are based in the City.

Banks also account for £35.4bn or 5% of all government tax receipts - enough to pay for the total UK transport budget, including central government and local authority spending.

Our Total Tax Contribution research identified that more than 90% of the taxes banks generate for the UK depend on the geographical location of their operations and employees – a higher proportion than any other financial service, highlighting again, the value that banks locating in the UK bring to the country as a whole.

 

Sources: ONS, Business Register & Employment Survey 2016; CoLC & PwC, Total Tax Contribution of UK Financial Services, 2017; BEIS, Business Population Estimates, 2017; ukpublicspending.co.uk, Mint UK data, 2018. Mark Carney, “New Economy, New Finance, New Bank”, 21 June 2018.

London’s trade contribution to the economy

By Saif Ullah, Researcher in the City of London Research Team 

 

Last week (11/05/17), the Office for National Statistics (ONS) published new data estimating the value of service exports by sector across UK regions and countries. This is the second year that the ONS has produced the experimental dataset, with the most recent estimates covering trade statistics from 2015.

The latest data emphasises the significant contribution made by London in terms of service exports. Nearly half (46%) of Great Britain’s service exports came from London in 2015, amounting to £100.4bn. This is more than the rest of England’s service exports put together (£96.3bn), and 11% higher than its level in 2011 (£90.1bn). The data also indicates that London has increased its share of Britain’s service exports from 2014, where it made up 43.1% of the total (£92bn).

 

 

There are several sectors in which London is a particularly dominant service exporter. 56% of Britain’s financial service exports (not including insurance and pension services) derive from London, further emphasising the sector’s importance to the UK’s trade fortunes: as Fiona’s blog highlighted last week, the UK’s financial services account for over one-fifth of global trade in that sector. Elsewhere, the capital’s construction (62%), travel (55%), admin and support services (58%) and information and communication (54%) exports also comprise a large part of each sector’s total service export value.  

 

 

 

 

Breaking down London’s service exports by sector, financial services form the largest part of the capital’s total service exports, at 28% (£28.3bn). Other major service export sectors for London are real estate and professional, scientific and technical services (17% of London’s total, or £16.6bn), travel (16%, or £16.3bn), and information and communication (16%, or £15.6bn). Insurance and pension services make up a smaller proportion of the capital’s service exports at 2% (£2.4bn).

 

 

Which sectors have seen the most growth in terms of their service exports value? Comparing the most recent figures to those from 2011, information and communication has seen the greatest growth in terms of its proportion of London’s total service exports, making up 15.6% of the total value in 2015 compared to 12.3% in 2011. In absolute terms, information and communication service exports grew by £4.5bn over the period. Travel service exports saw the next biggest growth, making up 16.3% of London’s service exports in 2015, compared to 13.1% in 2011. This equates to £4.5bn growth over the period.

Other sectors that saw growth in service exports over the period were transport, which saw its share of London’s total service exports increase by 1.2 percentage points to 10.9% in 2015 (£2.2bn increase), and real estate, professional, scientific and technical services, which saw its share grow by just over two percentage points to 16.5% (£3.6bn increase).

While financial services remains the dominant service trade exporter in London, its share of London’s total service exports has declined the most – its share fell from 34.1% in 2011 to 28.2% in 2015, with the absolute value of its service exports declining by over £2bn.

 

In summary, this latest trade data release re-emphasises several key points concerning the London and its place in the overall economy:

• Service exports from London form a huge proportion of Britain’s total service exports, and are more than the rest of England on its own;
• Particular sectors in London, such as financial services, admin and support services, and travel, dominate Britain’s overall service exports for those sectors;
• Tech services (information and communication) and travel services are becoming increasingly important export services for London, having increased their share of the capital’s total service exports the most over the last five years.
• Financial services remains London’s most valuable service export, but its share of London’s total service exports has declined since 2011, perhaps demonstrating the capital’s growing business diversification, as well as indicating an increased level of maturity of such firms that are now looking to grow through exporting.

 

 

The UK’s productivity puzzle: regional and sectoral differences

Maxine Kennedy, Research Officer in the Economic Development Office

This week’s blog looks at the new data on productivity in the UK.

What is productivity and why is it important?

Productivity, measured as output per worker, per job and per hour, tells us how efficient resources are being used and is a key indicator of how well the economy is performing.

Long term global data has shown that productivity accounts for the majority contribution towards Gross Domestic Product (GDP), and as such is a key determinant of economic performance, and an indicator of a country’s living standards.

What is the long-term trend in UK productivity?

Often termed the ‘productivity puzzle’, UK productivity has been relatively stagnant over the past decade or so. Following the economic downturn in 2007/08 productivity fell, and despite a strong labour market, it has not yet returned to the pre-crisis trend.

UK, seasonally adjusted, quarter 1 (Jan to Mar) 1994 to quarter 4 (Oct to Dec) 2016[1]

Source: ONS. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/ukproductivityintroduction/octtodec2016

There are several hypotheses for this: first, that the financial crisis led to decreased lending and investment in potentially productive firms; that a lack of investment in equipment and machinery has meant that employees are not working with the most efficient technology available; that there are slowing rates of innovation, or that employees are not making the most of their skills at work. Others have also proposed that how we calculate productivity doesn’t capture the rising importance of the digital economy.[2]

It is also interesting to note that there are sectoral differences affecting productivity. For instance, it has been noted that increased compliance and regulation in the financial services sector following the crisis may have had a negative effect on productivity in that sector, though this may be only be for the short term while the sector adjusts.[3]

However, economists believe that none of these reasons on their own can explain the trend, hence it being coined a ‘puzzle’.

What does the latest UK productivity data show?

The latest data was released by the ONS earlier this month and shows a positive upswing in productivity. Productivity in Q4 2016 was 0.3% higher than Q3 2016, and 1.1% higher than in Q1 2008, immediately prior to the recent economic downturn.[4]

However, the 0.4% quarterly growth remains below the 1994 to 2007 average, and even the ONS warn that the recent positive trend doesn’t indicate an end to the UK’s productivity puzzle.[5]

Regional and sectoral differences in the UK’s productivity?

Andrew Haldane, Chief Economist at the Bank of England, recently analysed UK productivity by looking at firm level data, showing the differences and similarities between firms through a regional, sectoral and export status lens.

We might suspect that productivity varies considerably across the UK’s regions. Looking at data compiled by the ONS and the Bank of England, we can see that overall, London’s productivity is the highest of any region in the UK; it is 75% higher than the region with the lowest productivity, which is the North East.[6]

However, looking at data on productivity at the firm level, we can see that high productivity firms consistently feature in every region in the UK. The distribution does vary from region to region, but the same pattern is seen throughout: a smaller pool of highly productive firms, compared to a majority number of lesser productive firms.

The graph below shows that London has a tighter distribution of highly productive firms (i.e. there are more highly productive firms and fewer low productive firms in London as opposed to the North East, where the pattern is reversed).

Firm level productivity distribution, by region

 

Source: ONS, ONS Research Database, BvD and Bank of England calculations. See: http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech968.pdf

Looking at the firm level data across different industries, we see a similar trend. There are overall differences between sectors, for instance the information and communication and the professional, scientific and technical activities are the most productive (this might not be so surprising since we would expect to see innovation particularly in these sectors), and manufacturing tends to be more productive than construction. It’s important to remember that each sector also faces unique circumstances that affect productivity.[7]

Yet, again, we see a similar pattern: within each sector there is a similar distribution, will all sectors having a smaller number of highly productive firms, who are innovating and leading the way, and a larger number of less productive firms.

Firm level productivity distribution, by sector

Another key finding is the difference between firms who export as compared to those who don’t. The graph below shows that those firms which do export, and so are faced with global competition, tend to be highly productive. This suggests that openness to global trade is a key contributor to long term economic growth.

Firm level productivity distribution, by export status

Source: ONS, ONS Research Database, BvD and Bank of England calculations. See: http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech968.pdf

Quite clearly, productivity is crucially important to the future of the economy, and consequently we’re seeing more focus on the topic by the Government and other stakeholders. In 2015, the Government launched its Productivity Plan – the latest update to its implementation is here: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbeis/931/931.pdf

[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/bulletins/labourproductivity/octtodec2016

[2] See: https://www.publications.parliament.uk/pa/cm201617/cmselect/cmbis/87/87.pdf

[3] http://pwc.blogs.com/press_room/2015/06/financial-services-firms-want-government-to-reduce-cost-of-regulatory-compliance-cbipwc.html

[4] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/bulletins/labourproductivity/octtodec2016

[5] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/bulletins/labourproductivity/octtodec2016

[6] Latest data available for the regional level. See: http://www.lse.ac.uk/Events/2017/03/20170320t1830vOT/The-Productivity-Puzzle

[7] http://www.cbi.org.uk/better-off-britain/Productivity.html

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

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.

2. 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.

3. 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.

 

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. 

 

Towards New Ways of Working in the City

By Maxine Carr, Economic research officer at the City of London Corporation

‘Future Proofing the Square Mile’ conference
The research team was recently invited to attend ‘City of London: future proofing the Square Mile’, hosted by New London Architecture, sponsored by Berwin Leighton Paisner and in association with the City of London Corporation and the City Property Association.

The conference brought approximately 150 delegates from various organisations to the Guildhall to attend several presentations all looking at how the City can retain its competitiveness in the short and long term future.

The presentations were broad-ranging and featured ‘how will tall buildings meet future occupier needs?’, ‘future proofing the Square Mile’, and ‘what is in store for Aldgate?’ - all crucial topics of consideration for ensuring sustainable growth for the City. However, what stood out to me was the session on ‘new ways of working’ which looked specifically of the future of the City office.

The rise of co-working
It is increasingly recognised that office environments have a direct impact on the quality of work produced, not the mention the wellbeing of staff. Firms such as Google, Dropbox and Airbnb are famous for their well-designed offices that promote collaboration, creativity and innovation, and indeed act as a tool to attract new talent in their own right. New types of co-working offices – where multiple and different types of companies rent office space, often on rolling contracts – are springing up in all major cities worldwide, at an estimated rate of 4.5 new spaces per day.

Co-working spaces are often seen as the solution for freelancers and small start-ups who are looking for desks at an affordable rate and want to benefit from the networking that occurs when several organisations share one office space.

In one sense, the City of London has its roots in co-working and innovative working practices. As Jack Pringle (Managing Director of Pringle, Brandon Perkins + Will) explained, London’s coffee houses that allowed for networking and creative processes are building blocks of the London we know today. For example, in 1688, Edward Lloyd’s coffee house on Tower Street became the hot-spot for marine insurance, and it developed into today’s international insurance market: Lloyds of London.

Yet, over time, there has been a shift away from this fluid conception of an office space. Today, most modern offices are more likely to comply to a more uniform design, mainly communal workspaces divided into personal cubicles.

New ways of working in the City
But now, a new direction is taking hold. As Mr Pringle commented, “the tin ceiling is so last century!” as he discussed the constant need for the City to adapt its supply of office spaces to the meet the demand of changing work styles (for example, more mobile working) and changing occupiers. Demand is shifting because there are now more freelancers and SMEs in the City than ever before, explained Rohan Silver, Co-founder of co-working space, Second Home. Furthermore, despite the City very much remaining a financial services hub, its proximity to Tech City is leading to an increase in the Media, IT and Communications sector within the Square Mile.

Despina Katsikakis from Transforming Workplace noted that organisational structures are being eroded and are becoming less stiff and more flexible, with a new focus on sharing knowledge. Certification systems such as BREEAM and LEED are now commonly used to demonstrate the sustainability of buildings – yet these are limited to the buildings themselves rather than the people that use them. Therefore, the shift towards improving the design of offices is about promoting wellbeing for staff as it is about providing spaces for making more innovative, and therefore productive, workers.

Here in the Research team at the City of London Corporation, we actively take an interest in these issues and have recently worked with consultants Ramidus and the City Property Association to produce two reports: Future Workstyles and Future Workplaces in the City of London and Serviced Offices and Agile Occupiers in the City of London.

WeWork’s Co-Working Spaces in the City
Even though the concept of co-working has been around for some time, the City is only just beginning to establish itself as a provider of co-working spaces. During the afternoon, the conference took to the outdoors where delegates were divided up into five groups for a walking tour of different themes. I chose the WeWork tour of two of their co-working offices, located in Moorgate and Spitalfields.

WeWork explained that their spaces have been specially designed to promote creativity, with a variety of different types of spaces on offer to suit the needs of the different types of people who work there- including freelancers, SMEs and even teams from larger organisations such as KPMG. Lily Choi gave a presentation on the company and informed the group that a massive 60% of WeWork’s member businesses have done transactions with one another, providing evidence for the claim that the space they provide is successful at fostering collaboration between its members.

Co-working is indeed a trend that the City cannot ignore. Adapting to the ever-changing demands of workers and businesses alike is crucial for the City to remain a competitive location for business.

Bright Lights, Big City

By Gareth Reilly, graduate trainee at City of London Corporation

‘London acts as a continual drain on the rest of the country both for industry and population, and much evidence points to the fact that it is already too large’ - a quote from a report of the Royal Commission on the Distribution of the Industrial Population from 1940, which many people might still see as true today. This quote highlights the age old debate of whether or not London is a help or hindrance to the rest of the UK. As a recent graduate who studied in Leeds and has just moved to London, I was extremely curious to discover whether these old assumptions were based on fact or fiction.

Coming from the demographic which is perceived to be at the forefront of this inward migration provides me with the perfect opportunity to delve into more detail about the issues surrounding this and which other groups are affected. It is widely regarded that London acts as a magnet for young graduates from other regions across the UK and, on the whole, the existing data would support this argument. However this doesn’t tell us the whole picture. A report produced by the Centre for Cities has looked at this in depth, and has been very instrumental in helping to answer these questions. It shows that London actually loses more of its population from outward migration than it gains from inward migration. Figures from the report show that between 2009 -2012, 775,000 people moved in to London, whilst 933,000 moved out of London during the same period. These statistics point to the idea that there is more at play than simply young people moving to the city.

What impact do these trends of inward and outward migration have on London? The first, and the most relevant to me, and many like me is the disproportionate amount of young twenty-something year olds heading to the capital. Between the ages of 21 – 30 the net inflow of people far exceeds the net outflow and the biggest contributors to the net inflow for London were the other major cities. In total, there was a net inflow of 48,400 22-30 year olds from large cities to London, 58% of the total net outflow from large cities. The impact of student migration has had a large bearing on this trend. Many students have migrated from smaller non-city areas to study at universities within large cities. This has generated a large surge of net inflows to these cities, but once graduated the data shows that many are leaving, often for London. This would support the idea that whilst other cities attract young people for their education, London draws them in soon afterwards, but it does not explain why London loses population to UK migration year on year. For that, we have to look at population from aged 30 onwards. From the age of 30 onwards the net outflow of people from London starts to exceed that of the net inflow, suggesting that as people get older and possibly begin to settle down they seek to leave London as a place of residence. This is not to say that they are not still affiliated with London; in fact the majority who leave from this age onwards don’t tend to move very far away. The majority tend to remain in what is deemed the ‘commuter belt’ of surrounding counties that makes for an easy travel into the city for the working day.

So what is the cause of this net migration from large cities to London? Well, it could be argued that the allure of living in one of the world’s metropolises is very appealing, and from personal experience this opportunity was one of the most key factors in my decision to move from Leeds. But it cannot be the only reason - of course London is a megacity but many of the other large cities throughout the UK have some of the same attributes and features just on a smaller scale. In fact the key appeal of London is the wealth of jobs available and the career progression which this entails. Between 2009 and 2012 35% of all the available jobs within London were graduate level jobs; in contrast the other major cities came in at 26%. I would have to agree that searching for graduate level jobs within Leeds and London threw up two very different prospects. Whilst in Leeds I struggled to identify any jobs that would best match my skill set, in London there were numerous opportunities for different roles which fitted. And I am not alone - from my course last year I am aware of at least five others who now live and work in London in comparison to the one who stayed on in Leeds.

It is clear from the data then that London is a magnet to young, career driven graduates flocking to the city in search of jobs. As Centre for Cities flag, then, a challenge for other cities is what other economic opportunities they can offer young people, to retain their skills locally.

‘Evidence-based policy making’ - oxymoron, fable or feasible?

This blog post is co-authored by Sabrina Basran, a former Research Officer at the City of London Corporation, and Gareth Reilly, who has recently joined the City of London Corporation as a graduate trainee.

Gareth Reilly:

The case for using well informed and well-rounded data within the policy process is, arguably, one of common sense, yet at times common sense doesn’t prevail. On many occasions data is used in the wrong way or insufficiently; not enough is taken into consideration for a proper informed policy to be formed.

Using data within policymaking can contribute to its efficacy in several ways: accurate information can help define the issue which the policy is trying to resolve and it allows the scope to be narrowed to focus on specific areas, which in turn allows targeted options to be formed on how best to take the policy forward. Robust and informed data is always likely to help policymakers make accurate predictions about what impact the changes will have once implemented as well as acting as a point of referral for future work, in order to evaluate a policy’s success or failure.

Accurate data can also help increase the longevity of a policy. Whilst numbers and statistics are constantly changing, research can, if well thought-out, be used to shape policy in such a way that it is effectual in the longer term. One prime example of this is the work which was carried out on Growing the Social Investment Market. Not only did the research assess the existing market, but it also carried out an economic impact assessment for the first time providing new, detailed baseline information on the market which has since helped act as guideline for policy considerations as well as contributing to the formation of the Social Investment Research Council.

As a recent graduate trainee joining the Economic Development Office I hope to be able to make a worthwhile contribution to the research process and potentially the policy making process. As such, it is paramount that I practice what I preach and ensure that the data I use is of the best quality and the most relevant to the topic at hand. 

Sabrina Basran:

It’s always exciting to have somebody new in a team, and to hear a fresh perspective on how research can be used, to help ensure that the Corporation’s programme remains relevant. It’s my personal view that it is essential for any practical initiative or public policy to be evidence-based, in order to be effective. Gareth’s comments echo this, though he also raises the important point that there needs to be careful consideration from the research side, to ensure the right data is used. 

The Corporation plays a key role in supporting and promoting London as a leading international financial and business centre and the encompassing aspects of this – from helping local communities to improving the City and London’s attractiveness to businesses and visitors, to enhancing the capital’s position as a cultural hub. It is paramount then for the Corporation to use a well-researched, factual and evidence-based approach to dealing with key policy decisions in order to best serve not only the City, but London more widely and the UK as a whole.

To enable us to do so, our economic research programme spans a variety and range of topics – competitiveness, the UK economy, the EU and regulation, infrastructure, corporate social responsibility (CSR) and London communities to name a few  – with each topic underpinning and helping to inform the Corporation’s policy priorities and strategic areas of focus.

There are a number of examples where we have used research to achieve policy objectives:

• A paper exploring the threats facing London’s trees in the form of new and emerging pests and diseases – this helped to secure £1.5 million in Government funding for a project to fight oak processionary moth.
• Identifying and assessing good practice examples of employee health and well-being programmes amongst large firms based in the Square Mile to act as a benchmark for companies looking to support their employees and be used as a basis for engagement with firms starting on their employee health journey, as reflected at the report’s launch at the ‘Business Healthy’ conference.
• Presenting a rationale and justification for a tax relief for investors in social enterprises – this report, co-commissioned with Big Society Capital, informed Chancellor George Osborne’s announcement of a social investment tax relief in the 2013 Budget.

While by no means perfect, these examples help to demonstrate the value that can be achieved, when we get the right information to the right people in the right way. If there’s one thing I hope to take away from my time at the Corporation, it is this.

Fighting back against the scammers: the challenge of policing economic cybercrimes

By Dr Michael Levi, Professor of Criminology, Cardiff University

Fraud – what’s new?

Through our reliance on the internet and technical devices, ‘cyberspace’ has become a significant new economic crime scene. Whether this is through spam emails, software-generated cold calling, or identify theft experienced by the general public; or thefts of customer accounts, fraud and business disruptions for organisations.

We estimate that well over half of crimes reported to Action Fraud – the national reporting tool for fraud - by individuals and businesses over Q4 last year, had some form of ‘cyber’ involvement. Criminal attacks committed online and using ICT are becoming much more common, and cost hundreds of thousands annually. This includes not only the costs of recovery and paying for protection, but also the money lost by the victims themselves.

As crime changes, so must policing

The draw of cyberspace for criminals is obvious. It allows traditional and new frauds to be carried out on an industrial scale; criminals can operate in multiple jurisdictions and across borders, so they are hard to reach or even identify in the first place.

This raises questions around how best can we tackle these issues? And, what is the role of the police, when so many elements of crime are now outside of police control?

Key law enforcement stakeholders we interviewed for this research recognised that current approaches to pursuing economic cybercrimes are being challenged – both in terms of prevention and in identifying and pursuing suspects across borders. But, even if police budgets were expanded and a large proportion of it spent on pursuing cyber-criminals [as opposed to other types of criminal], this might not reduce frauds significantly.

How can we help those impacted by cyber-fraud?

Though the cost of fraud to individuals and small businesses is often seen as relatively minor, it is a high cost in terms of the amount of harm caused to these victims. We need to ensure that these groups are protected, through awareness-raising and media campaigns, such as those used for other issues like stopping smoking, or persuaded us to use seat belts.

Cyber-protection for individuals and SMEs would ideally be built-in with minimal effort for the user or administered in a ‘bottom-up’ way through peer groups, community bodies and charities, to help these groups adopt simple security processes. Larger businesses can promote good security practice through their already established organisational frameworks, paying attention to insider as well as outsider threats. As part of this, firms should think about what core assets need to be protected, and consider separating these from ICT access.

We also need to identify those at risk of repeat victimisation - a quarter of mass marketing fraud victims have been found to be victims previously. This requires focusing prevention efforts on the most vulnerable, preferably with the participation of community bodies as well as technology firms and Community Officers. Data from Action Fraud can also be used to identify those individuals and businesses that are at risk of repeat victimisation, to focus prevention efforts on the most vulnerable.

The future of policing

Clearly, the issues are complex. There is no quick fix for tackling cyber-fraud.

It is important that economic cybercrimes are established on the policing agenda and in ways that allow a meaningful and realistic response, where the role of the police is less about being the sole player in the law enforcement landscape, and more about partnership working. This will require a careful analysis of resources, police priorities and engagement with other agencies to complement police roles.

However, partnership policing in itself is not the solution to combating economic cybercrime. We also need to think critically about the resources available and how best to use these; and individuals and businesses need to take responsibility for protecting themselves against cyber-threats, as much as is possible.

Download ‘The implications of economic cybercrime for policing’ from the City of London’s website.

 

The changing nature of financial and professional services in the City of London

By Kerri Bridges, Student at BPP University, Masters Legal Practice Course with Business 

The City of London is constantly evolving. The way financial and professional services organisations have driven changes in how workspaces are designed, the adoption of new technology, and implementing regulation, across small and large businesses in the City, is a particularly interesting trend. The changing nature of financial and professional services in the City aims to outline some current trends and potential explanations for the changes taking place in the City today. By interviewing industry experts and collecting perspectives from academic literature, it has been possible to begin to forecast the main themes of change within the City. With relevance to a broad array of industries within the City, as well as read-across to the rest of London and the UK, this report is likely to be of interest to any person employed in roles both within financial or professional services firms, those who work for or with such firms as well as those with an interest in how these organisations are changing. 

There are four main themes discussed within the report: workspaces, technology, regulation and financial technology.

Office spaces are becoming ever more modern, and part of their modernisation involves a change to open-plan layouts, and in some cases, hot-desking. There is some debate as to whether this is the best option for all businesses in the City. The main change in this arena is the way workplaces are changing to accommodate and encourage employees to work collaboratively.

Technology is playing an increasingly important role in business strategy; the ability of the firms in the City to harness technology that is able to support the nature and of volumes of transactions they handle accounts for a significant proportion of their continuing success. With thousands of employees and customers, this requires significant investments and careful management of overhead costs. Technology must also be considered in relation to the increasingly strategic and central role played by IT staff within organisations.

Regulation has changed the landscape of the City to an enormous extent in recent years. Organisations have excelled at adapting, and continue to do so. The role of compliance professionals is changing; fundamentally it is becoming far more attractive as a City role, with individuals who specialise in compliance becoming far more important as a strategic driving force in large organisations.

Financial technology (‘FinTech’) is a rapidly developing new industry on the physical fringe of the square mile, but has a significant impact within. The London talent pool is increasingly engaging with this industry, as are top investment funds and venture capital firms. There are potential challenges posed to top City financial firms by the FinTech sector, but far more opportunities.

The aim of this research is to highlight the developments for individuals and organisations within the City of London, and the way it is advancing in line with an increasingly employee-focused culture.

Download 'The changing nature of financial and professional services in the City'.