How far Must (or Should) Economic Growth in
London be Concentrated in its Central Areas
LSE London Background Paper
For HEIF Development Workshop
29 June 2006
1. Background
Even 20 years ago, concerns about spatial disparities in employment change within
the London region, related to the scale of job losses from inner boroughs, in a context
of general employment decentralisation where outer boroughs were more or less
holding their own, and the Outer Metropolitan Area around London was enjoying
quite strong growth – though it was the areas beyond, in the Outer South East and
parts of East Anglia which displayed the strongest growth. Between 1966 and 1981,
for instance, employment in Inner London fell by 23%; that in Outer London fell by
5%; in the OMA it grew by 10%; while in the Outer South East it grew by 23%. In the
next inter-censal period, to 1991, the pattern was not so very different, though London
Docklands development was starting to produce faster growth in Tower Hamlets.
This pattern was a source of concern, because inner London job losses were
commonly blamed for the concentrations of unemployment (and associated
deprivation) rates of inner areas – though research at the time found little connection
between these (Buck et al., 1986).
This pattern has clearly changed, and though faster growth rates continue to be
experienced in outer parts of the Greater South East, the 1990s saw a major
turnaround in the growth performance of much of inner London, across a substantially
extended Central Business District, leaving Outer London as the ‘ring’ displaying the
most modest job increases (if not the decline evident in the earlier period. The
disparity in growth performance within London is projected to continue in the
employment projections produced by GLA Economics for the London Plan review
(Melville, 2006), as it was in those prepared for the Plan itself (GLA, 2002).
Comparison with forecasts produced for SEERA and EERA indicates that the number
of jobs in the ring outside London IS also expected to continue growing at a much
faster rate than in Outer London.
The immediate stimulus for this seminar was a renewed expression of concern from
non-Central London borough/sub-regional partnerships about the relationship of this
to further faster growth forecast for neighbouring sub-regions of the Eastern/South
Eastern regions. More specifically, we might distinguish three kinds of concern:
 how realistic were the forecasts as a representation of the most likely
outcomes of independent economic trends for areas within London;
 the potentially negative policy implications for Outer boroughs of adopting
these projections as a basis for the revised/altered London Plan; and
 worries about the real (economic, social and environmental) consequences if
employment growth in outer areas was as slow as predicted – particularly
when population and households were projected to grow much faster.
In this seminar we hope to address these questions, together with the logical followons of:
 why is job growth in Outer London so restrained by comparison to that in the
areas on either side; and
 what kinds of initiative or development strategy could accelerate growth in
some or all of the outer areas - if that were seen to be desirable.
2. The 2006 GLA Economics Borough Employment Forecasts
The latest borough employment projections from GLA Economics (the third to be
published, in May this year; Melville, 2006) envisage a growth of 503 thousand jobs
in Inner London and 54 thousand in Outer London between 2003 and 2016, with
further growth of 291 thousand and 118 thousand envisaged for the following decade.
In both periods the projected rate of growth is substantially faster for Inner London,
though less so after 2016. Whereas 56% of the base year employment is estimated to
be in Inner London, 90% of the 2003-2016 growth is projected TO occur there, and
71% of the 2016-26 growth. In the shorter term the imbalance is even more marked,
with Outer London employment projected to regain only 5 thousand of the 26
thousand jobs between 2001 and 2003 by 2011. The pattern is thus one with growth
very heavily skewed toward Inner London (notably the City, Westminster and Tower
Hamlets) up to 2011 and then starting to spread out rather more, until in the last 5
years covered by these projections the growth rates are nearly equal.
In the case of the 2002 Plan employment projections for boroughs (GLA, 2002) there
had been suggestions that the methodology might lead to a downward bias to the
predictions for employment growth in the outer boroughs. The main basis for this was
that the 2002 Plan forecasts had relied very heavily (70%) on assessments of potential
commercial space availability, and that these were:
(a) biased toward recognition of larger existing/known development sites, and those
in areas of intensive regeneration planning (e.g. Gateway, as RTP had suggested
in their report); and
(b) overly deterministic, implicitly reflecting one planning strategy while not
recognising any scope for alternatives to bring more space to the market in
different areas.
On the other hand, the 2002 forecasts took no direct account of the distribution of past
employment trends, giving a weight (30%) only to how differences in industry mix
(between fast growth/slow growth/declining sectors) would be expected to influence
borough level employment growth – taking no account of the fact that in all/most
sectors past trends had actually been less favourable in Outer London.
The latest 2006 forecasts produced by GLA Economics for the Plan review have yet
to be fullydocumented1, but are known to involve a different methodology
(triangulation) involving three components:
(1) potential commercial space availability/physical development potential
(produced by Dave Lawrence of RTP, apparently on much the same basis as
for the 2002 projections);
(2) extrapolation (by Volterra) of actual borough level trends in shares of
London employment in each sector; and
(3) estimates of the impact of changes in accessibility (residents within 45
minutes travel), as a consequence of ongoing transport projects and those in
the Mayor’s Transport Strategy.
Of these elements the first two would imply a much larger share of employment
growth in Inner as compared with Outer London, while the third does not really affect
this split, but (for example) seems to allocate substantially more growth to Newham
and less to City/Westminster.
1
A methodological paper is promised for the summer, together with a report on the space availability
study. The basic approach was outlined in Melville (2005)
The first element is arguably still somewhat biased against Outer London growth, and
implicitly dependent on assumptions about policy/spatial strategy – while the third is
explicitly tied to implementation of the Mayor’s transport strategy, both the realism
and priorities of which have come into question, in ways that might significantly
affect the expected spatial distribution of employment growth. At the broad level of
relative growth rates in Inner/Outer London, however, neither the new projections nor
their predecessors are much out of line with trends over the past 15 years or so. And,
in our view, reasonable arguments about the overall London projections would be
more likely to lead to lower than to higher growth figures.
There seems to be no simple technical basis, therefore, for suggesting that
employment growth projections for Outer London as a whole are too low. The more
obvious questions are:
(a) why has growth been generally weaker in the outer areas;
(b) what difference would alternative planning/transport investment assumptions
make to expectations about employment in these areas;
(c) what more specific actions would significantly strengthen performance in the
outer areas; and
(d) why/how does it matter if large areas of outer London show little/no
employment growth – this being the expectation rather than significant net job
losses , and what kinds of policy response would be worth considering.
3. Factors Underlying Weaker Growth Performance in Outer London
Over the past 15 years or so, employment in Outer London seems to have grown on
average by about 0.3% per year – significantly below the UK average, and only about
one third of the average growth rates in two adjoining ‘rings’ of the metropolitan
region - Inner London and the Outer Metropolitan region. This pattern is illustrated in
Table 1 using data from the last two Population Censuses (as one of the more reliable
sources of London employment data). Over this period they indicate that about 20%
only of London employment growth (or 12% of that in the wider metropolitan
region) occurred in the outer boroughs. Long term estimates based on the Labour
Force Survey or the Annual Business Inquiry and coming further up to date suggest a
broadly similar imbalance between growth rates in Outer as against Inner London
(and/or, for the ABI, the Outer Metropolitan Area).
One reason is that the outer boroughs still have rather more employment in goods
producing/handling sectors (declining generally and especially in London) and less in
business (or cultural) services (growth has been fastest). This is a diminishing source
of disadvantage, however, as there are fewer manufacturing jobs left to lose. This
transition occurred earlier in Inner London, where these sectors were very largely
squeezed out in the 1970s and 1980s.
Beyond this, most of Outer London seems to ‘fall between two stools’ economically,
able to match neither the (distinct kinds of) competitive advantage available in central
areas – with their very strong local concentrations of specialist services, excellent
access to rail services, both to access the UK market and the wider region’s skilled
labour pools, and infrastructure support for regenerated ex-transport sites – or in the
Outer Metropolitan Area – with more abundant space, locally resident skill
concentrations, superior motorway/port (and even airport) access, and second-best rail
access both nationally and to central London. This interpretation was strongly
supported by the mid-1990s TeCSEM survey of location factors and judgements
among businesses in London and in the Thames Valley (Cheshire and Gordon, 1994;
Gordon, 1997).
At a simple level the questions are then:
 how relative disadvantages can be mitigated;
 what distinct niche positions the particular combinations of assets/
accessibilities in various Outer London centres can build competitive strength
in;
 what critical inherited constraints on performance need to be overcome; and
 how far is long run reinforcement of the outer economies, to secure the growth
envisaged after 2016, compatible with a period of stagnation before then,
when attention as well as growth is focused on the central areas.
4. Why Might Slow Growth in Outer London be a Cause for Concern ?
Overall the forecasts for sub-regions of Outer London involve stability/slow growth
rather than actual decline (even in the early years), with any potential crises limited to
specific sectors (as in the past). If growth in the wider region proceeds as expected,
the outer areas should not experience net job losses.
Commuting links between sub-labour markets in the metropolitan region are such that
relative employment trends in parts of the region (even in relation to groups of less
skilled/less mobile workers) have rather little significance for local employment rates
– which are, in any case, still significantly better in Outer London than in most inner
areas (very largely as a function of who lives where, and the personal
strengths/limitations they are seen as possessing).
On the supply-side, putting these new workplace growth forecasts alongside
residence-based estimates from the (Cambridge Econometrics et al, 2005)
London/South East Commuting Study (undertaken for the Assemblies and RDAs)
points to some much increased imbalances with apparently strong implications for
commuting (see Table 2). Employment among residents of Outer London is projected
to grow by very much more than workplace employment in the area (indeed by as
much absolutely as in Inner London, though at a slower percentage rate). As in the
1990s, this implies increased out-commuting from Outer London both to Inner
London (mostly be public transport) and to the Outer Metropolitan Area (much of this
by car). Though a continuation of past trends, this raises questions both about
capacity constraints and about sustainability, in terms of growth of non-local car
traffic.
The other potential reason for concern about continuation of the slow growth trends
relates to the potential for further weakening of the competitive position of outer
London centres as (and where) they fail to develop their own concentrations of
economic strength and appropriate infrastructure to sustain these. Except at the ends
of the extended east-west Central Business District and around Heathrow, the options
for a more polycentric form of development within London (matching that in the
wider region) would seem liable to be foreclosed over the Plan period, unless
positively taken up within the revised SDS.
5. Agenda for the Seminar
The intentions of this seminar are:
 initially to establish a common understanding in relation to the forecasting issues
outlined in the background section above (particularly via discussion of Bridget
Rosewell and Dave Lawrence’s presentations, as key people involved in the
forecasts) – and to understand the basis for the shifting distribution of projected
growth over the extended Plan period;
o This might reasonably lead to questions as to whether GLA/GLA
Economics should be pressed (by the Assembly) to produce variant
projections, incorporating particularly alternative assumptions about
the rate/pattern of transport improvements (given that GLA
Economics’ methodology can simply be adapted to alternative
assumptions).
 and then to focus attention on understanding:
o why recent growth in London has been so centralised;
o whether this is entirely a good thing;
o what could make a difference to the distribution of actual growth
across London; and
o how this relates to actual or potential elements of the Mayor’s various
strategies, including the Plan but also the Transport and Economic
Development Strategies.
References
Buck, N. , Gordon, I. and Young, N. (1986) The London Employment Problem,
Cambridge: Cambridge University Press.
Cambridge Econometrics et al. (2005) Commuter Flows in London and the
Wider South East 2001 to 2016/2021, London: Corporation of London
for GLA/LDA/SEERA/SEEDA/EERA/EEDA
Cheshire, P. and Gordon, I (1995) ‘Change and spatial specialisation in the
South East region’, in Cheshire and Gordon (eds.) Territorial
Competition in an Integrating Europe, Aldershot: Avebury.
Gordon, I.R. (1996) ‘Territorial Competition and Locational Advantage in the
London Region’, American Association of Geographers Annual Meeting,
Charlotte, NC.
Greater London Authority (2002) Demand and Supply of Business Space in London,
SDS Technical Report 21, London: GLA
Melville, D. (2005) ‘Triangulation and Employment Projections’, London: GLA
Economics
[http://www.london.gov.uk/mayor/economic_unit/docs/triangulationemployment-projections.pdf]
Melville, D. (2006) ‘Borough employment projections to 2026’, Current
Issues Note 9, GLA Economics
[ www.london.gov.uk/mayor/economic_unit/ docs/current_issues_note_9.pdf]
Table 1
Employment Change By workplace and Residence 1991-2001
(Census of Population)
Employment by
Employment by
Net
Workplace
Residence
Commuting
1991%
1991%
1991 2001 change 1991 2001 change 1991 2001
change
change
Inner London
1809
359 19.8
957
292 30.5
852
919
Outer London
1540
97
6.3
1869
187 10.0
-329 -419
London Fringe
801
120 15.0
909
81
8.9
-108 -69
Rest of Outer
Metro Area
1544
224 14.5 1728
172 10.0
-184 -132
London
Metropolitan
Region (total)
5694
800 14.0 5463
732 13.4
231
299
Table 2
Projected Employment Change By workplace and Residence 2001-2016
(GLA Economics May2006 for London employment by workplace; other figures
from Cambridge Econometrics, 2005)
Employment by Workplace
2001-16
2001
Change
(Census) (GLAEcon
& CE)
%
change
Employment by Residence
Net
Commuting
2001%
2001
16
change 2001
(Census) change
(CE)
(CE)
Inner
2168
565 0.22122
1249
189
15.1 919
London
Outer
1637
28 0.01406
2056
186
9 -419
London
London
921
119
12.9
990
57
5.8 -69
Fringe
Rest of
Outer Metro
1768
243
13.7
1900
123
6.5 -132
Area
London
Metropolitan
Region
6494
955
14.7
6195
555
6.2 299
(total)
Note: The GLA Economics workplace forecasts are actually 2003-based; changes are
presented here against a 2001 base, for comparability both with the 2002 London Plan
projections and the Cambridge Econometrics projections for employment by
residence (in all zones) and by workplace (in the OMA), which take Census
workplace and residence data as their base.
2016
1295
-577
-7
12
699