Inner London’s economy a ward-level analysis of the business and employment base by Dmitry Sivaev, October 2013

Inner London is a key economic hub of the UK. Over 200,000 businesses employing over 2,000,000 people are located within the 14 Inner London local authorities. Earlier this year 12 out of 14 Inner London boroughs were granted exemption from the new planning regulation allowing the conversion of offices to homes, highlighting the strong business focus of the area.

Understanding the business geography of Inner London is the first step to understanding how this business powerhouse of the national economy operates, and how policy can support it for the benefit of the capital and the country as a whole.

This briefing presents statistical evidence1 on the nature of the business and employment base of Inner London. The data shows geographical patterns of business activity in total and by sector and the way these patterns have evolved between 2008 and 2011.

1. This work contains statistical data from ONS which is Crown Copyright. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.

1 Inner London’s economy • October 2013 Centre for Cities

Figure 1: Inner London – boroughs and wards2

Hackney Islington Camden

Kensington & Chelsea Newham Hammersmith & Fulham Tower Hamlets The City Westminster

Southwark

Greenwich

Lambeth

Wandsworth Lewisham

Source: Contains Ordnance Survey data © Crown copyright and database right 2013. Commuting patterns • Every day thousands of people from Outer London and from the Greater South East commute into Inner London’s boroughs to work. • Inner London accounts for 40 per cent of Greater London’s population, but 56 per cent of private sector jobs. • The daytime population of Inner London is 68 per cent higher than its resident population; most of the boroughs import workers daily. (Figure 2) Figure 2: Net inflow/outflow of population during the day

1,000,000 Resident Population (census) Net inflow-outflow of daytime population

800,000

600,000

400,000

200,000

0 Islington Camden Hackney Lambeth Newham & Fulham Southwark

-200,000 & Chelsea Kensington Greenwich Westminster Lewisham Wandsworth City of London City of Hammersmith Tower Hamlets Tower

Sources: NOMIS 2012, 2011 Census, resident base; London Data Store 2012, Daytime population 2011, borough level; NOMIS 2012, Business Register and Employment Survey (BRES), New Private Sector BRES, employment status, 2010-11 data and Annual Business Inquiry (ABI), workplace analysis, 1998-2008 data; NOMIS 2012, Business Register and Employment Survey (BRES), 2011 data.

2. Wards are defined as: “the key building block of UK administrative geography, being the spatial units used to elect local government councillors in metropolitan and non- metropolitan districts, unitary authorities and the London boroughs in England; unitary authorities in Wales; council areas in Scotland; and district council areas in Northern Ireland. Population counts can vary substantially, even within a single local authority, but the national average is about 5,500.” 2 Inner London’s economy • October 2013 Centre for Cities

Figure 2 shows how the population of local authorities in Inner London changes during working hours. A negative value for the outflow (purple bar) indicates that the daytime population is smaller than nighttime population, as more people commute out of the borough than into it. Location of Businesses • Businesses in Inner London are distributed unevenly, with many more being based in the traditional Central Business District (CBD) than elsewhere (Figure 3). • Within the CBD, the largest concentration of businesses is in the West End, which includes the West End ward itself, St. James’ ward (Mayfair and Soho) and Covent Garden and Holborn. The concentration of businesses is also very high in the City of London (this is less visible in Figure 3 because the wards in the City are very small. For more detail see the density analysis in Section 3). • There are also higher than average concentrations of businesses on the fringes of the CBD and on the Isle of Dogs in Tower Hamlets, reflecting the location of Canary Wharf.

Figure 3: Business location in Inner London

Total number of businesses The City of London 11,501 - 20,000

6,501 - 11,500

The West End Canary Wharf 2,001 - 6,500

751 - 2,000

130 - 750

Source: ONS, Contains Ordnance Survey data © Crown copyright and database right 2013. Location of Employment

• Employment concentrations follow a similar pattern to the location of businesses (Figure 4). • The largest concentration of public sector employment is found in the St. James’ ward, which includes Whitehall and Victoria. This one ward accounts for 10 per cent of all public sector employment within Inner London. • Private sector employment, while more dispersed, also has significant concentrations in the CBD and in Canary Wharf. The West End wards - St. James, Covent Garden and Holborn – account for 21 per cent of private sector employment in Inner London. By comparison, the entire City of London only accounts for 16 per cent.

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Figure 4: Employment in Inner London Inner London total employment Total employment

The City of London 110,001 - 210,000 42,001 - 110,000

Canary Wharf 18,001 - 42,000 The West End 7,501 - 18,000 918 - 7,500

Private sector employment

Tech City Stratford City, Lower Lee Valley Private sector employment

100,001 - 200, 000 50,001 - 100,000 The West End 20,001 - 50,000 5,001 - 20,000 2,501 - 5,000 100 - 2,501 unknown

Hammersmith The Royal Docks London City Airport

Canary Wharf Public sector employment

Public sector employment

20,001 - 60,000 10,001 - 20,000 6,001 - 10,000 4,001 - 6,000 1,001 - 4,000 30 - 1,000 < 30

Whitehall

Source: ONS, Contains Ordnance Survey data © Crown copyright and database right 2013. 4 Inner London’s economy • October 2013 Centre for Cities

Business and employment density

Business and employment density analysis allows us to create a picture of spatial distribution of economic activity that is not distorted by the size of the spatial units at which data is reported.

However it is important to note that density analysis can be deceptive in cases when areas of high and low concentration are combined within one ward. For example, Canada Square in Canary Wharf probably has the highest density of private sector employment in London. But because it is located in the Millwall ward which, beyond Canada Square, has a relatively low density of businesses, on average it has a lower business density than a number of wards in the City of London and the West End. • The highest levels of private sector employment density are found in the City, Holborn, Mayfair and Marylebone (Figure 5). • High levels of employment and business density also spread out into the fringe areas. Hackney, Islington, Camden, Lambeth and Southwark - the wards that border the City and the West End - have much higher densities of business and employment than the rest of the boroughs. • There is a clear East-West divide in business activity across Inner London, with business activity in the West of Inner London being much higher than in the East.

Figure 5: Density of private sector activity in Inner London Private sector employment density

Jobs per hectare The City 1,001 - 1,500 501 - 1,000 South Kensington 201 - 500 101 - 200 41 - 100 0 -40

Hammersmith

Canary Wharf

London Bridge South Bank

Private sector firms density Firms per hectare Tech City 61 - 100 36 - 60 Canary Wharf 16 - 35 Holborn 9 - 15 5 - 8 1 - 4

Mayfair and Soho

Source: ONS, Contains Ordnance Survey data © Crown copyright and database right 2013. 5 Inner London’s economy • October 2013 Centre for Cities

Distribution of business activity by sector

This section provides an overview of the spatial distribution of business activity in selected service sector industries. The findings from the sectoral analysis (Figure 6) highlight that: • The CBD has the largest concentration of businesses across all of the industries considered. • Some industries are much more concentrated than others. Very few financial businesses are located outside the City of London or Canary Wharf, while retail businesses are located across Inner London. • Each industry has a specific pattern of distribution. Arts and Culture businesses are concentrated mostly in the West End; Finance and Business Administration businesses are located in the City and Canary Wharf; Retail is concentrated in Mayfair, Soho and around large shopping malls like Westfield in Shepherd’s Bush.

Figure 6: Concentration of business base by sector

Financial services businesses

Bank, Monument, Liverpool Street Number of business units

451 - 2,000 171 - 450 Canary Wharf West End, Mayfair, Holborn 71 - 170 31 - 70 11 - 3 0 < 11

Hammersmith

South Bank

Professional services business

Number of business units Farringdon Camden Town 1,201 - 5,000 551 - 1,200 Canary Wharf 301 - 550 Holborn 151 - 300 76 - 150 Hammersmith 11 - 75 < 11

West End

Putney

South Bank, Southwark London Bridge, Bermondsey and Borough

6 Inner London’s economy • October 2013 Centre for Cities

Business administration businesses

Holborn Canary Wharf Number of business units 551 - 2,000 251 - 550 121 - 250 Mayfair, Marylebone 41 - 120 11 - 4 0 < 11

West End

South Bank, Southwark

Arts, culture and other services businesses

Camden Town Number of business units Hampstead Shoreditch 501 - 1,600 201 - 500 Marylebone 91 - 200 Soho 41 - 90 11 - 4 0 < 11

West End

Covent Garden South Bank Centre

Wholesale and retail business

Camden Town Number of business units Covent Garden 1,201 - 3,500 701 - 1,200 401 - 700 Oxford Street 251 - 400 151 - 250 Westfield 51 - 150 21 - 50

Mayfair

Source: ONS , Business Structural Database, Contains Ordnance Survey data © Crown copyright and database right 2013. 7 Inner London’s economy • October 2013 Centre for Cities

Distribution of new businesses

Analysis of business start-up geography allows us to look at the more dynamic segments of the business base and identify the areas which, due to high concentration of start-ups, have potential to expand their business base and create jobs. The sectoral dimension of the analysis highlights the emergence of new concentrations of certain types of economic activity in the city.

The analysis suggests that: • The number of start-ups in the CBD is much larger than anywhere else in Inner London. This suggests that the attractiveness of central location for new businesses is not restricted (at least not significantly) by ‘diseconomy’ factors (e.g. high rents, congestion, etc.). • High concentrations of start-ups can be found on the CBD fringes, particularly to the north of the CBD. This reflects the expansion of the CBD into these areas for push and pull reasons (e.g. overall expansion of the business base and increased competition within the CBD causing displacement). • The East-West divide in start-up location, while still evident, is less stark when compared to the overall business geography analysis. • Start-up activity in the finance, and culture and arts sectors is very concentrated, while in the professional services and ICT sectors it is much more dispersed.

Figure 7: The Geography of start-ups in Inner London

Total number of start-ups Number of start-ups Holborn Tech City 1,001 - 1,800 201 - 1,000 Canary Wharf 101 - 200 Mayfair and Soho 64 - 100 51 - 63 15 - 50

Holborn Number of start-ups

Tech City ICT start-ups 81 - 300 51 - 80

Canary Wharf Soho and Mayfair 31 - 50 16 - 30 11 - 15 < 11

Putney

South Bank London Bridge, Bermondsey 8 Inner London’s economy • October 2013 Centre for Cities

Professional services start-ups

Hoborn Number of start-ups

121 - 400 61 - 120 36 - 60 Mayfair, Soho Canary Wharf 21 - 35 11 - 2 0 < 11

West End

Bermondsey, Grange

Financial services start-ups Number of start-ups Bank 121 - 200 76 - 120

Mayfair, Soho Canary Wharf 41 - 75 21 - 40 11 - 2 0 < 11

Business administration start-ups Number of start-ups Canary Wharf 61 - 150 41 - 60 Royal Docks, 26 - 40 Mayfair, Soho London City Airport 16 - 25 11 - 15 < 11

Hammersmith

9 Inner London’s economy • October 2013 Centre for Cities

Arts and cultural services start-ups

Number of start-ups Shoreditch Marylebone 31 - 120 21 - 30

Soho 17 - 20 14 - 16 11 - 13 < 11

West End

Source: ONS , Business Structural Database, Contains Ordnance Survey data © Crown copyright and database right 2013. Changes in the geography of the business base and employment

Analysis of changes in the geography of the business base and employment over the period 2008 to 2011 allows us to identify recent trends and to tentatively suggest what the possible patterns may be in the future.

However the analysis needs to be read with caution and changes at the ward level may be misleading in some cases. At this small geographical scale, a one off event such as a large business moving out, would not represent the wider trend, yet may show a significant decline in a ward. This would say little about the attractiveness of an area.

The analysis suggests the following patterns and changes: • The City of London has been the main driver of growth within Inner London. Both employment and the business base of the City grew by 13.5 per cent despite weak national performance over the same period. • The Fringe boroughs of Hackney and Southwark enjoyed business base growth of over 5 per cent and most of it occurred in the wards neighbouring the City of London. • Tower Hamlets and Newham also performed strongly. The highest growth was in Canary Wharf but a number of wards in both boroughs saw good business base and employment growth. • The total number of start-ups in Inner London barely changed over the three year period. But this overall static picture hides significant variation between places within Inner London. While some areas saw a sharp decline in start-up activity (mostly in the West End), other areas experienced rapid increases in the number of start-ups (for example, London Bridge, Shoreditch, and Greenwich riverside).

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Figure 8: Changes in business base and employment geography 2008-2011

Business base growth, 2008-2011

Mayfair, Soho and Marylebone City of London Number of firms 410 - 1,000 110 - 400 Canary Wharf 0.01 - 100 The West End -49 - 0 -190 - -50 -810 - -200

Private sector employment growth, 2008-2011

Tech City Change in start-up Stratford City, counts The Olympic Park 51 - 100 Shepherds Bush (Westfield) 11 - 5 0 Mayfair, Soho 1 - 10 -9 - 0 -49 - -10 -199 - -50

The West End

Royal Docks

Greenwich

Waterloo London Bridge Public sector employment growth, 2008-2011 Battersea

West End City of London Change in job counts The Olympic Park 7,501 - 15,000 1,001 - 7,500

Canary Wharf 1 - 1,000 White City -999 - 0 -7,499 - -1,000

Shepherds -27,919 - -7,500 Bush (Westfield)

Hammersmith Royal Docks

Change in start-up activity, 2008-2011 Southwark London Bridge Waterloo The Olympic Park Change in job counts 7,501 - 15,000 1,001 - 7,500 Whitehall 1 - 1,000 -999 - 0 -7,499 - -1,000 -28,577 - -7,500

Source: ONS, Business Structural Database, Contains Ordnance Survey data © Crown copyright and database right 2013. 11

Inner London’s economy • October 2013 Centre for Cities

Transport accessibility and business concentrations

A recent Centre for Cities report highlighted that the concentrated pattern of growth in London puts high pressure on London’s transport network.3 Figure 9 compares accessibility to public transport across Inner London with the geography of jobs density and shows that quality of public transport connections is one of the factors that has a strong effect on business location choices in central London.

The transport accessibility map uses the Pedestrian Transport Accessibility Levels (PTAL) scores calculated by Transport for London. PTAL scores depict the ease of access to public transport from different points in space. They account for walking times to nearest stations and the frequency of services provided by the relevant modes of public transportation. Figure 9: Transport Accessibility and employment density of Inner London Public transport accessibility in inner London

PTAL Scores 0 1a 1b 2 3 4 5 6a Greater 6b accessibility

Private sector jobs density

Jobs per hectare 1,001 - 1,500 601 - 1,000 251 - 600 151 - 250 101 - 150 71 - 100 41 - 70 26 - 40 11 - 25 2 - 10

Source: ONS, Business Structural Database, TFL, Contains Ordnance Survey data © Crown copyright and database right 2013.

3. Bolton T (2013) London 2030: a series of events exploring the future growth of the Capital London: Centre for Cities

12 Inner London’s economy • October 2013 Centre for Cities

The map suggests that the way the public transport network is developed may have direct implications for geographic patterns of economic growth within the city. However, it also shows that certain locations outside the CBD do not have high job densities, even though their accessibility score is very high. The link between public transport accessibility and job density in locations further away from the CBD seems to be rather weak.

This reflects the evidence that, whilst transport accessibility is an important factor, it is only one of many factors that influence business location decisions. Property values, agglomeration benefits and even where business owners live are among other factors that drive location decisions of businesses, which differ significantly across industries and business size. Broadband speeds as a possible restriction to growth

Speed and reliability of internet connection is one of the factors that many businesses take very seriously when choosing where to locate.

Figure 10 shows broadband speed data at postcode level. The data presented is collected by OfCom via a survey of household and small business providers.

Low connection speeds in areas where large corporate offices are concentrated (City of London, West End, Canary Wharf) should be treated with caution, as data for such areas tends not to be representative. Despite its limitations, the data can be used to compare connection speeds in different areas on the fringes of central London or outer parts of Inner London. The zoom-in maps highlight slow internet connections in Bermondsey-Canada Water and Shepherd’s-Bush-Hammersmith areas. The third zoom-in map shows connection speeds in Tech City. Figure 10: Maximum broadband speeds

Max broadband speed (MB per second) 30 27 - 29 24 - 26 21 - 23 18 - 20 15 - 17 11 - 14 2 - 10

13 Inner London’s economy • October 2013 Centre for Cities

Even though the data potentially under accounts for broadband speeds in commercial premises, it still shows that, even when mostly residential areas are compared, connection appears to be faster outside the CBD and its immediate surroundings than within them. This suggests that this issue needs to be studied in more detail in order to make sure that poor broadband infrastructure doesn’t restrict London’s growth prospects. Concluding comments This briefing presents an overview of the economic geography of Inner London. The main findings are: • London’s CBD dominates the economy of the capital and is growing stronger over time. • Employment in Inner London is dominated by Knowledge Intensive Business Services (KIBS) industries that benefit the most from agglomeration. • Even within Inner London there are strong sector based patterns of business location and growth. • The most significant pattern of the last five years is the expansion of the CBD into new fringe locations. • The evidence and analysis provided in this briefing should be used to inform policy decisions taken by the GreaterLondon Authority (GLA) and individual London local authorities with regard to planning, infrastructure investment, business support and procurement amongst other policy areas.

© Centre for Cities 2013

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