Cities and enterprise

London is in a class of its own when it comes to job creation, income levels and economic dynamism. The gap between London and the rest of the country grew substantially under Labour and has continued to grow under the Coalition. Instead of trying to think up new ways to tax London or to discourage it, maybe we should study its success a little more and see how other great cities in the UK could do the same. We should want to narrow the gap by the rest improving, not by seeking to damage London’s success in financial services, banking and property.

A recent study by the Centre for cities shows that London increased private sector jobs by 5.7% between 2010 and 2012. Birmingham at 2.2% and Manchester at 2% were also positive, whilst jobs were declining in Glasgow, Sheffield ands Bristol. Edinburgh, Liverpool and Brighton were also successes with higher rates of job creation.

London excelled at business formation. There were 76 business starts up per 10,000 people in London in 2012 compared to a UK average of 42. Sheffield at 29, Nottingham at 30 and Newcastle at 30 were particularly low. 47% of London’s population have high level qualifications compared to a national average of 34% and just 23% in Liverpool. London has 463 businesses per 10,000 people com-pared to just 175 in Sunderland and 203 in Plymouth.

These differences resulted in London enjoying average workplace earnings of £684 a week compared to a UK average of £502.Sheffield at £444 and Nottingham at £452 were much lower.

The message from the figures is clear. If you want people to earn more and for the community to be more prosperous, then it has to be open to talent, keen on encouraging higher educational attainment, and above all has to be friendly and open to enterprise. London’s success owes something to inviting talent and money from abroad, but it also provides an environment for many talented and well educated UK people to set up businesses and earn good money.

Urban centres like Reading, Oxford and Cambridge are doing something similar. We need to kindle the same enthusiasms in those cities which are struggling. Success comes from a high rate of new business formation, not just from a few major investors from abroad. London has the highest incomes, the highest value added, but relatively low public spending per head. It is the success of the private sector that marks London out from most of the rest.

Cities which do best usually have a central focus to their activities. Oxford and Cambridge do well based on the importance of their universities. They are now spinning off knowledge and technology based companies from their universities. The civic leaders of the great Northern cities have to work with the private sector investors and companies they have on what else they need to do to make their environments more attractive to entrepreneurs and larger inward investors. I am interested in your thoughts of how other cities can develop specialities as London has in finance and business services, to power their growth.

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  1. Lifelogic
    Posted February 23, 2014 at 6:52 am | Permalink

    London’s success is largely due to it being a tax haven for wealthy non doms and wealth coming in from overseas as it is a pleasant relatively safe place to live for the rich. It is also the obvious place to put your head office for any company expanding into to the UK.

    London could do far better still with more & cheaper property, a five runway Heathwick airport, cheaper energy, fewer planning restrictions and much lower taxes for the worker bees who are not wealth non doms. London often attracts the brightest of the youth for their first few jobs. But who might then move out when they later have families due to school limitation/expense also the expense of larger properties and difficulties in commuting.

    The wages you quote of £684 a week compared to a UK average of £502.Sheffield at £444 and Nottingham at £452 are actually not enough (after tax and NI) to give you a higher standard of living in the London £184 per week after tax and NI perhaps just £120 it does not go far after commuting costs, parking costs and far higher property costs. London is in fact over taxed relative to disposable income after housing and costs of getting to work (other than for wealth non doms and careful tax planners).

    Londoners often pay more tax and yet have a lower standard of living and far more cramped housing than those living in the North of lower wages.

    There is also the motorist mugging industry run by the local councils to fund their excessive pensions. On bus lanes, box junctions, parking etc. to contend plus the deliberate congestion thus caused by deliberate road constriction and lack of investment in roads, tunnels, flyovers, airports.

    • Lifelogic
      Posted February 23, 2014 at 6:59 am | Permalink

      The whole of the UK would of course be doing far, far better if Cameron had not thrown the last election with his lefty pro EU stance and had set a high growth, cheap energy, low tax, lower regulation, more airports runways vision. Then we would now not be in a position where the UK have Miliband for the next 5-15+ years.

      Also if we did not have gender neutral insurance, endlessly more regulation, HS2, the EU and the soft PIGIS loans to fund, got fracking and stopped all the daft subsidies for expensive energy. Alas he is Cameron and is in the wrong party.

    • Alan Wheatley
      Posted February 23, 2014 at 9:38 am | Permalink

      The UK needs a “five runway Heathwick” like it needs a hole in the head.

      • Lifelogic
        Posted February 23, 2014 at 2:48 pm | Permalink

        Well if you want growth and jobs it is surely the best option. I understand many do not actually want growth. I assume that is why so many want wind farms, hs2, airport in the Thames, no fracking, big government, high tax, the EU and PV subsidies.

        • Excalibur
          Posted February 24, 2014 at 2:57 am | Permalink

          The best option by far has to be Boris island. Aircraft already fly into Heathrow along the Thames. Cancel HS2 and spend the money on this new far sighted project with its associated infrastructure.

        • Alan Wheatley
          Posted February 24, 2014 at 9:37 am | Permalink

          It is not a question of whether or not growth is wanted but where that growth is to take place. For those of us who believe in the UK, government initiatives need to be spread around. Throwing money at the South-East will make an unbalanced country even less balanced.

          If the UK wants to have an internationally competitive hub airport it does not have to be near the capital. I still think a hub airport at Glasgow (or Edinburgh) would make geographic sense, but I suspect none of the planners have considered this possibility because government focus is too London centric.

          Further, the London sprawl is making moving from one side to the other ever more of a hassle. Development at the M25/M4 junction will make a poor situation a whole lot worse.

          • Lifelogic
            Posted February 24, 2014 at 12:30 pm | Permalink

            I think it need to be where the demand, the population and existing support industries are.

            Anyway I thought this fake green government believed that the sea will drown an airport in the Thames shortly again, circa 1953?

    • Bob
      Posted February 23, 2014 at 12:14 pm | Permalink


      Londoners often pay more tax and yet have a lower standard of living and far more cramped housing than those living in the North of lower wages.

      Well spotted LL.
      London is an okay place to live if money is no object, such as the welfare classes.
      If you own property in London it might pay to let it out and go to live somewhere not so crowded with cleaner air.

    • Anonymous
      Posted February 23, 2014 at 7:59 pm | Permalink

      Equally the failure of other cities was often as a result of decisions made in London.

      To outsource being one example. To sell off being another.

  2. Mike Stallard
    Posted February 23, 2014 at 7:04 am | Permalink

    Freedom to develop. I mean positive freedom. You need to find what you need to hand.

    For example. To start up a painting studio you need a very cheap building because you haven’t got any money and you are not going to make any for a long time. You need a good supply of paint from people who understand paint and you need a ready supply of virtually free models. Then you need people to buy your work. If just one of these ingredients is missing, then the whole project won’t work. You got the lot in France in 1890s. You don’t get a lot of it in modern Wisbech.

    What you do not need is the government sticking its nose in. Tax, ridiculous regulations, checking by numpties who have no idea what they are really looking for and huge plans to improve usually end up in disaster.

    There are going to be casualties and poverty in a start up too. The losers will be on the street begging. There will be severe stress and, yes, madness. Some people are going to be disgustingly rich and they will show it off. We have to realise that expansion isn’t pretty. Cambridge used to be a lovely little provincial town clustered round a mediaeval university. Now it is a sprawling Peterborough.

    • Lifelogic
      Posted February 23, 2014 at 9:48 am | Permalink

      What on earth is “disgustingly rich” surely it is what you do with it and how it was made that actually counts?

      It is disgusting to waste money on things such as green tosh subsidies, pointless wars, propping up the EURO and HS2, and endless parasitic bureaucrats as governments so often do.

      The more Bill Gates, Warren Buffet types the better as I see it. Even if Gates’s software is rather annoying and time wasting. I would far rather have the money with them, and people who use and invest it well, rather than with largely incompetent, parasitic and often corrupt governments anytime.

    • uanime5
      Posted February 24, 2014 at 2:54 am | Permalink

      To start up a painting studio you need a very cheap building because you haven’t got any money and you are not going to make any for a long time. You need a good supply of paint from people who understand paint and you need a ready supply of virtually free models. Then you need people to buy your work. If just one of these ingredients is missing, then the whole project won’t work. You got the lot in France in 1890s.

      In 1890’s France you also needed to be independently wealthy, have a patron, or spend much of your life in poverty if you wanted to be an artist as it was very unprofitable.

      What you do not need is the government sticking its nose in.

      In 1890’s France there was very strict regulations regarding what you could show in salons and social regulations regarding what women could paint. Neither of these hindered the art movements.

  3. Lifelogic
    Posted February 23, 2014 at 7:18 am | Permalink

    They should also sort out the dismal level & state of particularly maths and science education in schools, more like the Chinese in style. They also need to pay more for good science teachers than other teachers to cope with supply and demand in some areas. Also stop paying for students to study hobby and nonsense subjects at university as so very many do, perhaps even 70%+ of them. Fine but let them pay for themselves for these.

    Far more vocational subjects, fewer lawyers and more engineers, builders, plumbers, electricians, maths! medical and science graduates …

    • uanime5
      Posted February 24, 2014 at 2:57 am | Permalink

      They should also sort out the dismal level & state of particularly maths and science education in schools, more like the Chinese in style.

      In China they only get good results by putting huge press on children to do well. Their society also rewards educational achievement far more than the UK.

      They also need to pay more for good science teachers than other teachers to cope with supply and demand in some areas.

      Or better yet stop charging people to become teachers.

  4. arschloch
    Posted February 23, 2014 at 7:28 am | Permalink

    Yes its a great “success” for neo-liberal economics but are you seriously going to be able to replicate that elsewhere? How many of those big paying jobs are in global finance and how many of them are held by British people? I will not comment on the ethics of what is going on there, but every recent international financial scandal always seems to have its origins in the City. London is one of the reasons why we need wide open borders, how can it thrive without them? If the BBC wanted to do a realistic remake of “Are you being served?”, the staff of Grace Bros would all be foreigners with a limited command of English. Enjoy it while it lasts, because as we saw in the Summer riots, once the existing social order receives a little strain the Met have big, big problems keeping the lid on things.

    • Anonymous
      Posted February 23, 2014 at 7:45 pm | Permalink

      Indeed, Arschloch.

      Mr Redwood writes as though things are normal. Around here (I am not in London) the population is growing rapidly and changing beyond recognition. This is not helping the company-to-population ratio and this cannot be managed where there is absolutely no control of population levels.

      One paper reported recently of a newly arrived family (10 plus) given accommodation and benefits. etc ed
      Offer benefits and they will come. Under this ‘system’ there will always be more people than jobs to support them.

  5. Mark B
    Posted February 23, 2014 at 8:07 am | Permalink

    When you look at some of the major cities around the world, they tend to have one thing in common – access to the sea. Whether they be on the coast or further up some river, access to the sea and trade to other nations is key.

    Some cities tend to be created and grow due to their proximity to natural resources or to strategic location.

    As the UK manufacturing sector has diminished, so too has the size of the ports and the jobs, skills and monies that they bring. Where London succeeds is over other cities I think, is that it has evolved into something much more than just a port. Insurance, banking and many other non-manufacturing jobs were created long ago and flourish to this very day.

    This means much wealth and potential investment tends to flow and stay south. To correct this is not going to be easy, neither will it take one or two measure, and as for time scale, well, how long are you prepared to wait. But doing nothing is not an option !

    Many of the problems of high unemployment seem to come from Labour run areas. Whilst some here might say, “So what, what do you expect, that who people who want to be looked after vote for ?” Well yes, but, after thirteen years of a Labour Government, I would have thought that their lot would have substantially improved and we would be well on the way to tackling the issues raised here.

    I think what is needed is less Government intervention and allow as much power to those who live and work in the area. Central Governments are not good at local things. It is best left to those who know the lay of the land . Giving the people and their elected representatives more power to control their own lives and monies would indeed be a good start. Yes, less money for Central Government, but more for Local Government and people.

    Currently, I understand that business rate go straight to Central Government. If this is so, would it not be a good example of where Government can help by ceding control and letting Local Government dictate what it needs.

    • uanime5
      Posted February 24, 2014 at 3:02 am | Permalink

      When you look at some of the major cities around the world, they tend to have one thing in common – access to the sea.

      What about major cities in landlocked countries? Also how is access to the sea beneficial in modern times?

  6. Richard1
    Posted February 23, 2014 at 8:22 am | Permalink

    The big difference between London and other cities is how international it is. London has been transformed over the last 30 years and is now a dynamic world city. Mainly due to the financial services and related service industries. In general tax is far too high, though as pointed out by Lifelogic, the UK is a tax haven for foreigners. So for other cities to imitate London’s success, given they can’t rely on an influx of non-doms to the financial service sector, the best policy would be to cut taxes and incentivise investment, business formation, risk taking etc. There needs to be a change of mindset in many of those cities you cite, away from reliance on the public sector. The anti business tone of the Labour and LibDem parties, and of much that comes out of the EU these days doesn’t help.

  7. alan jutson
    Posted February 23, 2014 at 8:33 am | Permalink

    All you have to do is look at who sets up the new companies of which you speak for success.

    Most companies are formed by self employed people, because that is the natural progression.
    When one person gets too busy, they employ another subcontractor (self employed person) to help out, and so as business grows so do the number of sub contractors, until you have enough work on a regular basis to perhaps employ someone on a permanent basis.

    So why do we make it so difficult for the self employed, why have successive governments made such people jump through more and more hoops for these workers with a whole series of tax changes and status requirements.

    Why is it so difficult for those who are unemployed to sign on and sign off , with a huge delay in benefits if they take up some temporary work, because it takes time to become confident that work is available if you look hard enough.

    So the simple solution is to make it far more simple for people to become self employed.

    Will any government do it, unlikely, because they do not like people who think for themselves, and perhaps do not fit into a government designed tick box.

    • uanime5
      Posted February 24, 2014 at 3:12 am | Permalink

      When one person gets too busy, they employ another subcontractor (self employed person) to help out, and so as business grows so do the number of sub contractors, until you have enough work on a regular basis to perhaps employ someone on a permanent basis.

      Technically the self-employed person is hiring a contractor as a subcontractor is some hired by a contractor. For example a contractor might be hired to build an extension, and they’d hire subcontractors to dig the foundations or to do the wiring.

      • alan jutson
        Posted February 24, 2014 at 7:54 am | Permalink


        You are correct.
        But a contractor can also be a sub contractor because he reports to a main contractor, and may also employ specialist trades from time-time for the main contractor.

        This is the beauty of how the system works, but the main contractor is still in charge, only reporting to the client if it is not his own project.

        Thus we have a very flexible system which does not require employment law etc.

        People who work this way choose to work this way, so why do governments want to elbow their way in with more and more controls over these people, which was my original point.

  8. margaret brandreth-j
    Posted February 23, 2014 at 8:43 am | Permalink

    1)Money breeds money , which is why London prospers.
    2)Academic control over institutions /organisations negates new energy.
    3) Old professional labels with fixed ideas gives credit where it is not due and slows progress.
    4) New Universities in the North are the future.
    5) Specialities are not the answer. Diversification will not allow financial disasters as easily.When for example coal mines were closed whole towns suffered.
    6) Investment in technology and buying British would help.
    7) Flair for creative projects should not be stamped on as individualism. ‘Tesco’ and other like businesses started from humble origins.

  9. Denis Cooper
    Posted February 23, 2014 at 8:43 am | Permalink

    “These differences resulted in London enjoying average workplace earnings of £684 a week compared to a UK average of £502. Sheffield at £444 and Nottingham at £452 were much lower.”

    Apart from anything else, for the purposes of comparison you really need to include the differences if the cost of living in those places.

    • Lifelogic
      Posted February 23, 2014 at 2:40 pm | Permalink

      Indeed it is simply not enough of a difference to cover the additional housing costs and tax.

    • Jennifer A
      Posted February 23, 2014 at 6:34 pm | Permalink

      ‘Good’ wages do not always equate to good living.

      500k for a small house ? Congestion ? Overcrowding ?

  10. Mark W
    Posted February 23, 2014 at 9:05 am | Permalink

    A can do attitude and lack of chip on the shoulder is what is required. A lot of energy comes from the positive drive of immigrants that haven’t suffered the leftist world owes you a living nonsense from our schools. Why did it take the Poles to start the hand car wash thing going. And they make quite a tidy sum from it too. Good luck to them.

    • bigneil
      Posted February 23, 2014 at 1:41 pm | Permalink

      do they pay taxes? -everything is cash in hand, and who knows who works there – how many illegals? criminals etc

    • Anonymous
      Posted February 23, 2014 at 7:52 pm | Permalink

      Not all immigrants are contributing, Mark.

      How many car cleaners does it take to cover the costs of one imprisoned criminal allowed access here through the same open borders ?

  11. Alan Wheatley
    Posted February 23, 2014 at 9:33 am | Permalink

    I agree, the way forward is to improve the less good rather than penalise the best.

    As to how to achieve a better balance, it is necessary to recognise that London has an inherent advantage because it is the capital. It means that some institutions and organisation have to be in London, and others need at least a London presence though the majority of their activities are elsewhere. So there is an inherent base load of activity, and that means there is a base level of buying and spending, which it turns leads to a base load of wealth creation.

    Add to this the prestige of being in London, a capital city of World renown. As an aside, when watching the Antiques Road Show, an excellent programme on the BBC, experts tend to give items extra approval for it having been made in London. And, of course, if you are a top craftsman, or financial analyst, then you are likely to head to where you can get the highest rewards for your skills.

    Which leaves the question of how to improve the less good.

    Certainly other cities and urban areas, and also rural areas, need good governance.

    They probably should try to improve in ways that does not put them in direct competition with London, rather in the same way there is no point in the High Street shop trying to compete with the supermarkets simply on price; they have to offer something different that is appealing.

    Finally, there is one thing central government MUST do if it wishes to see improvement elsewhere, and that is to recognise that the whole country is NOT like London. Central government has to govern with a flexibility that allows other areas to improve their prosperity in ways that suit themselves, and should not be constrained by policy, rules and regulations that work well for London but handicap enterprise elsewhere: energy policy being a prime example.

    • Jon
      Posted February 24, 2014 at 10:12 pm | Permalink

      Your competition is not london, it’s the Netherlands, it;s Germany, it’s China, it’s Korea, it’s Hong Kong or New York etc etc etc! What it is not is London. Governments cannot control the global market, when they try, they cr@p on their own countries prospects.

      Rather than wanting something given to you, think that no one else in the world will give you anything and you need to get that business to earn. If you don’t want to compete with that, then you won’t get the work. Don’t blame those that do!

  12. Denis Cooper
    Posted February 23, 2014 at 9:36 am | Permalink

    Off-topic, watching the news about Ukraine last night it scrolled along the bottom that Yulia Tymoshenko had told that crowd that everything would change when Ukraine joined the EU.

    So we have some foreign politician confidently anticipating that in due course the British government and Parliament will agree to give every one of the ca 50 million Ukrainian citizens the automatic right to come and live and work in Britain; and maybe her confidence about that is increased by the knowledge that the current British Foreign Secretary has already got a so-called “referendum lock” law passed to make sure that the British people would have no direct say on that, they would not be asked in a referendum whether they agreed to share their country with the Ukrainian people.

    I am referring of course to Section 4(4)(c) of Hague’s European Union Act 2011, which he invoked in February 2012 to block a referendum on whether we wanted Croatia to be allowed to join the EU:

    and which would no doubt be invoked in all future cases, whether it was Serbia, for which the final negotiations on accession have just commenced, or Ukraine, or Turkey.

    This has been done by a minister who is alleged to be a fierce “eurosceptic”, one of the fiercest in the senior ranks of the Tory party; and yet there are those who still delude themselves that there is a real possibility of some kind of pact between the Tory party and UKIP …

    • alan jutson
      Posted February 23, 2014 at 11:42 am | Permalink


      I share your concern.

      We now have political unrest in three countries, Egypt, Syria and now Ukraine all close to or near to the EU boundaries, which is worrying in itself

      But how many more nations want to join the EU.

      We have Turkey wanting/waiting to join, we now have part of Ukraine wanting to join.

      One is forced to ask, how big does the EU want to be, has it no limits !

      Will Russia be next ?

      One thing in common with all of the latest Nations to join, or wanting to join.
      They all seem to want to benefit financially in the shorter term through grants or hand outs.
      Have none of them learnt anything from Greece !

      Time for us to get out of this club before it breaks itself and us at the same time.

      • Bob
        Posted February 23, 2014 at 7:52 pm | Permalink


        But how many more nations want to join the EU.


        Scotland could be next?
        Then the Brits will have free access Alex Salmond’s new socialist utopia.
        Or vice versa.

    • Bob
      Posted February 23, 2014 at 12:38 pm | Permalink

      I believe that David Cameron favours pro EU candidates with Tory safe seats and cabinet positions.

    • Brian Tomkinson
      Posted February 23, 2014 at 1:35 pm | Permalink

      Well said, Denis. Hague admitted on Marr this morning that his aim, just like Cameron, is to keep the UK locked in the EU. Other than blind party loyalty, I can think of no reason why an intelligent person like our host can keep telling us that his party and its leaders are Eurosceptic.

    • Timactoin
      Posted February 23, 2014 at 1:37 pm | Permalink

      Treacherous behaviour by the usual LibLabCons. Disloyal to the indigenous population every time. Who else would sign up to free movement and by implication free public services? The NHS is starting to creak at the seams. its cost me £500 this week alone for treatment for my wife for potentially serious condition/problems or wait 17 weeks! Why? Mass migration continues unabated and the cake keeps getting smaller on this very overcrowded island. God help those who can’t afford private interventions on our International Health Service. I can’t help notice how we now have a big stream of Chinese citizens being allowed here at our expense. Why?

    • Leslie Singleton
      Posted February 23, 2014 at 3:36 pm | Permalink

      Be of better cheer Denis. There is a “real possibility” that you-know-who are going to do so well in three months’ time (and the LibDems annihilated) that there will indeed be “some kind of pact”. We are talking about hope and judgement about the future and to Hell with the history and indeed the current position. Besides, if a pact between the Conservatives and left wing and nonsensical Clegg can materialize out of thin air, how could it possibly make sense that something similar is impossible with right wing and sensible Farage? Also, there has still to be hope that the Conservatives will simply throw Cameron out which would help a pact along no end. Perhaps not a big hope I agree. If hopes were dupes fears may be liars in ye words of the poet. And/or “Tough up” in the words of Blair.

  13. Bert Young
    Posted February 23, 2014 at 9:42 am | Permalink

    I lived and worked in Central London for over 20 years ; through good times and bad there was always an atmosphere of challenge influenced mainly by the number of headquarters of companies , the city banks and central government . It is true that this enviroment created opportunity and promoted growth ; if you rose to the challenge the rewards were there to be had . I now live near Oxford and , since retiring , have made full use of the opportunities presented by the University . The friendships I now have from this connection are reward enough , however , at the top of my list is the enjoyment of meeting and discussing with very bright young people . Oxford is a vibrant mixture of town and gown and it is no surprise that it is surrounded by a vast array of intellectual / commercial enterprises .

  14. acorn
    Posted February 23, 2014 at 9:46 am | Permalink

    England has become the dormitory area for London, you only have to look at the map. All the major rail tracks lead to London. The majority of the major roads lead to London. Airplanes with the most business seats in them, land at London airports. 95.4% of all taxation is collected and dispensed (in penny packets) from London to field operating sub-units, that can most loosely be described as “local government”.

    Like it or not, a laissez-faire neo-liberal government would see no reason to intervene in what has evolved. It would assume the private sector and its markets, would have exploited any available opportunities, had profits been envisaged. If the latter has not occurred, then such a government will have failed its prime directive to dismantle the public sector for private profit. It will have failed to sufficiently (a) De-regulate, then (b) Corporatise, then (c) Privatise.

  15. jeffery
    Posted February 23, 2014 at 10:00 am | Permalink

    Much of London’s prosperity comes from being the centre of government for a country where government is very concentrated. All the well paid lawyers, tax experts, accountants, lobbyists etc etc may count as private sector, but actually live off government. This is a worldwide phenomenon, eg Washington DC. Not to mention government-sponsored media and culture.

  16. oldtimer
    Posted February 23, 2014 at 10:10 am | Permalink

    Promotion of technology led innovation would be one place to start. For this to happen there needs to be a nucleus of one or more businesses with the necessary knowhow and locally based university and/or technical institutions to provide a mixture of relevant research and qualified young peoplke. The University of Warwick, for example, appears to have good links with the motor industry. No doubt there are other examples around the country.

  17. zorro
    Posted February 23, 2014 at 10:13 am | Permalink

    Yes, good points. I am not sure John if you saw a survey the other day which put Reading in the top 10 of European cities expected to flourish in coming years.


    • John E
      Posted February 23, 2014 at 3:58 pm | Permalink

      The article is linked below.
      As a longtime Reading resident, I attribute it’s success mainly to wanting to grow and welcoming new business – I’m not sure the rest of the UK does. This is despite Reading being constantly held back and resented by it’s neighbours – e.g
      1. South Oxfordshire has successfully resisted a third bridge across the Thames for 50+ years.
      2. Reading’s boundaries were artificially constrained by a boundary review during the Heath government as it returned Labour MP’s at the time. This means my home is in Mr. Redwood’s Wokingham constituency when by any other logical measure I live in Reading. It also contributes to Reading being repeatedly denied City status.

      This is a bit like London’s story in miniature – I’m not sure that the rest of England actually wants to grow and succeed.
      Reading came in third in the top 10 small European cities behind Eindhoven and Cambridge and with Grenoble, in France and Utrecht, in the Netherlands, just behind. The town ranked second in the league of top small European cities for business friendliness which looked at factors such as the number of companies in high tech industries, jobs, fDi, ease of doing business and credit rating.

  18. Colin
    Posted February 23, 2014 at 10:52 am | Permalink

    “The civic leaders of the great Northern cities have to work with the private sector investors and companies they have on what else they need to do to make their environments more attractive to entrepreneurs and larger inward investors.”

    No, they don’t. They just have to get out of their way.

    • Lifelogic
      Posted February 23, 2014 at 2:56 pm | Permalink

      Indeed out of their way and stop mugging them.

    • Leslie Singleton
      Posted February 23, 2014 at 3:56 pm | Permalink

      Colin–I don’t like the quote you have put in inverted commas either. Civic Leaders my foot–they have less than no control or ideas worth a damn by definition to me, except maybe negative. And I find our host’s use of the words “great Northern cities” to be condescending–a word he has been known to use (wrongly I thought) in relation to some of my comments in the past . The long and short of it is that London is the Capital of the World and furthermore has been for a very long time (and of course was the Capital of Roman Britannia) so I for one cannot work up much surprise that smaller and newer cities just about anywhere (by no means just up North) are plain not in the same league. Everybody knows this, so goes there. The rest of the country should be thankful for London.

  19. StevenL
    Posted February 23, 2014 at 11:15 am | Permalink

    But the law, tax and regulation are the same in London, Liverpool and Newcastle. London just has the best ‘stuff’. It houses the UK Parliament and top ranks of the civil service, the financial and commodities markets, the Royal Courts of Justice, hub airports and great public transport etc.

    London’s biggest industry – financial services – is exempt from the 20% gross profits tax – VAT – that everyone else has to pay too. I wonder if they hit bank balance sheets with a 20% gross profits tax, and distributed the proceeds as a ‘northern cities tax credit’ you might see more start ups in Liverpool and Newcastle?

  20. forthurst
    Posted February 23, 2014 at 12:19 pm | Permalink

    How much of London’s success is contingent on syphoning off the wealth of the rest of the country? In the US, the ‘financial services industry’ generates 40% of all corporate profits. Are we really expected to believe that banksterism creates real net added value nearly equivalent to that produced by the whole of the rest of the country, and that after paying themselves at many levels more money than many successful businesses could sustain at any level? No doubt London is not as ‘successful’ as that but the same principle applies. We could do with less ‘success’ in banksterism and consequently more stable banks, cheaper vanilla loans and lower costs for raw materials, currently stored by banksters in gigantic warehouses, for us all etc. Most of the activities of banksters is not to fulfill consumer needs at all but to market toxic products and interfere in markets used by genuine buyers and sellers.

    Here, banksters are entirely above the law; however, in the US, they pay massive corporate fines for the type of blatant criminality which would land anyone else in prison; having paid their fines, hardly denting their massive profits, they then seek other newer ways of rigging markets. It is time to remove corporate responsibility and take the view that the criminality is that of individuals, since otherwise we have to believe every shareholder is a crook as well. That it is not to deny that there are genuine business activities in the City which satisfy customer needs; these are the businesses that do not flail around the market looking for another bunch of suckers or loophole to exploit.

  21. The PrangWizard of E
    Posted February 23, 2014 at 12:24 pm | Permalink

    I understand that the proponent of the Minimum Wage, ie. State control of wages, has acknowledged that it doesn’t work. But is it likely to be abolished? Of course not, the Socialist answer is to have more of it, not less. I gather it is to be made more complex by having differing rates around England. Does this mean having lower rates than now in some places, or will it merely be increased for some and others be left behind? Sounds like a nightmare in the making.

    In areas where businesses are just getting by, and few new being created it costs the very jobs people call for, stifles initiative and enterprise, and creates lazyness in both employer and employee. (I do wonder if the MW is however a means of keeping the Unions ‘on side’.)

    Such change will need a vast policing bureaucracy and criminal sanctions than now for those who don’t pay or who ‘get round’ it, a good State job creation scheme, of course.

    The answer is to return to freedom of contract, a concept mostly forgotten in this new world social order we are moving to. We drifting back to the old days – I recall something about ‘Prices and Incomes’ controls way back. What we need is for government and the British State to get off our backs.

    But maybe one day we may regain the spirit to rebel in such a way that we will be heard.

    (And by way of technical question – I have a longer title than I post but I can only input 20 characters and spaces – I have shown all I can input above, is there any particular reason, can it be changed? The incomplete word is England.)

  22. Mike Wilson
    Posted February 23, 2014 at 2:31 pm | Permalink

    London’s success is not shared by many of its inhabitants. I think it is fair to say that the vast majority of the next generation are priced out of its housing market.

    Many people come to London from the provinces, after university, to work – and return home some years later as they have no hope of ever owning a home.

    So, how to bring Bristol etc. up? Simple, find some way of getting rich foreigners to buy houses there. Of course they will suffer a housing market that few can afford but who cares eh? Who actually CARES about the changes in our society that are turning the next generation into renting forever serfs?

  23. libertarian
    Posted February 23, 2014 at 4:04 pm | Permalink

    If you want places outside of London to grow and prosper then you MUST stop taking business rates and taxes from them and using them for central government. There is absolutely no point in local authorities trying to develop business friendly plans if they don’t get any of the rewards back.

    London thrives for many different reasons to the rest of the country.

  24. Antisthenes
    Posted February 23, 2014 at 4:27 pm | Permalink

    Eventually the success of London will like a ripple on a pond radiate out to the rest of the UK. Unfortunately it is a slow process and can be read and is being by many that the opposite is happening. The danger therefore is that patience and left wing envy politics will prevail and the wrong policies followed. Attempts will be made to divert business away from London to other places using draconian methods. The result will be the powerhouse that is London will start to falter and businesses will not necessarily look to relocate elsewhere within the UK but outside it. The best way to encourage the expansion outwards from London to the other parts of the UK is to make them as attractive to businesses as London is.

  25. Baza
    Posted February 23, 2014 at 4:28 pm | Permalink

    One of the best success stories in the NW is what is happening in Warrington. In the recent Centre for Cities report it finished in the top ten…..with growth rate of 4.5% and average salary of £507. NEETs reduced by a third in just 18 months. Just shows what can be done.

  26. Tim Almond
    Posted February 23, 2014 at 6:25 pm | Permalink

    “These differences resulted in London enjoying average workplace earnings of £684 a week compared to a UK average of £502.Sheffield at £444 and Nottingham at £452 were much lower.”

    And London also gets 138% higher tax spending than the average, so all we can say is that it’s a more expensive city, not a more productive one.

  27. lojolondon
    Posted February 23, 2014 at 7:23 pm | Permalink

    If you want the other cities to do better, stop treating them as dormitory towns. If you build a High Speed train line to Birmingham, then more people will be rushing into London every morning before dawn, and getting home late.
    If you want Birmingham to be a better centre of business, the local council needs to decide to cut taxes an red tape on small businesses, and the government / BT needs to get that long-promised high speed fibre broadband up and available, and then Birmingham can be a business centre in it’s own right.

  28. Bill
    Posted February 23, 2014 at 9:25 pm | Permalink

    To answer the original question in your posting, I think there has to be something that the city can offer to the economy of its day. In the era when Britain led the industrial revolution, the northern cities provided skilled and disciplined labour.

    We may still be able to do that but my guess is that the best way in the future to grow a city’s prosperity is through a partnership between the city and its university. Already the contracts of university researchers carry clauses about intellectual property rights. We need synergy between venture capitalists and multi-disciplinary scientists.

    • Stephen O
      Posted February 24, 2014 at 6:33 am | Permalink

      I would agree that the development of the local universities would be a key component. The most recent UK example of a City development plan is surely that of east London with the Olympic and related legacy projects.

      This included new campus for existing London colleges/universities, concentrated Infrastructure investment, a big shopping center and lots of new offices and residential areas. I think there may also be some medical research institutions.

      If government has the objective of developing a northern hub of development, it would have to focus spending on that hub (doubtless at the expense of other areas), with a similar focus on infrastructure (including high speed internet), and universities. Perhaps they could then attract private developers to add retail, residential and office space.

      East London had the advantage of being next to existing high growth areas, so should be a lower investment risk than a northern city as it can count on diverting some of that growth. With a northern hub it might be necessary to have more government involvement/risk bearing.

      Hub activities might be developing local universities research facilities coupled with science park facilities perhaps focused on medical sciences (genetics?), or engineering research. Also develop creative industry hubs, for game developers (supported by training courses), film and music (studio facilities, training facilities). Needless to say where possible you get a private industry leader to commit, so as to have a foundation of activity for new companies to build on.

      This last suggestion is admittedly reminiscent of the failed nationalised industries and industrial strategies of years gone by. The only mitigant to that is that you do not focus too heavily on try to boost a particular activity, but rather a wide range of them and then only when there is seen to be genuine businesses interest attracted, do you follow that up with further investment. Also only focus on building up one hub at a time, and ensure you have someone in charge of the project who really knows how to sell it to investors.

  29. Antisthenes
    Posted February 23, 2014 at 10:56 pm | Permalink

    London has a massive appetite for goods and services from outside of the capital much of it supplied from overseas. The rest of the UK could do no better than find ways to rest some of that away from Johnny foreigner for themselves. After all it was Johnny foreigner undercutting them that destroyed their traditional industries and businesses that have left them in the position that they find themselves today.

  30. uanime5
    Posted February 24, 2014 at 3:22 am | Permalink

    Instead of trying to think up new ways to tax London or to discourage it, maybe we should study its success a little more and see how other great cities in the UK could do the same.

    London benefits from having Parliament and the City located within it, something that can’t easily be replicated elsewhere. Though London has good transport links with other parts of the country, so if all the other major cities had better links with cities other than London it may help them.

    A recent study by the Centre for cities shows that London increased private sector jobs by 5.7% between 2010 and 2012. Birmingham at 2.2% and Manchester at 2% were also positive, whilst jobs were declining in Glasgow, Sheffield ands Bristol.

    If most of the recovery is in the south of the UK while the north sees few signs of a recovery; then people in the north will be unlikely to vote for the Conservatives at the next election.

    The message from the figures is clear. If you want people to earn more and for the community to be more prosperous, then it has to be open to talent, keen on encouraging higher educational attainment, and above all has to be friendly and open to enterprise.

    That’s can’t be inferred from the figures as you didn’t provide any evidence to show that a higher rate of business formation was the reason why London was doing better than the rest of the UK. Also you haven’t factored in things such as the number of jobs created per business start-up or the starting salaries, both of which aren’t reflected in the total number of businesses created but will affect the average income in each region.

    Since correlation doesn’t imply causation you also haven’t proven that the higher percentage of people in London with high level qualifications is responsible for more business start-ups. You’d need figures showing what percentage of entrepreneurs had high level qualifications to prove that these qualifications are important.

    We need to kindle the same enthusiasms in those cities which are struggling.

    How exactly are you going to encourage new businesses in area where there’s high unemployment, resulting in most people have low levels of disposable income. Especially when the Coalition has cut benefits so much that doctors are having to prescribe food to people with AIDS (their medicine is less effective if it isn’t taken with food).

    The civic leaders of the great Northern cities have to work with the private sector investors and companies they have on what else they need to do to make their environments more attractive to entrepreneurs and larger inward investors.

    Well as long as major cities such as Oxford, Cambridge, and London are sucking all the talented graduates from these regions they won’t be able to compete using knowledge or technology. Increased factory automation means that there’s fewer jobs available in manufacture. They can’t alter the law in any major way so they can’t offer any economic advantages without the approved of parliament. So there’s no much they these civic leaders can do.

    Reply I do not see having Parliament/government is necessarily helpful to the growth of a city. Cardiff has its own Welsh government and substantial public sector employment at its heart, but it does not reach London levels of income. The City is part of the reason for London’s higher income and higher employment levels, but the issue is why can’t financial services and banking also do well elsewhere?

  31. Ralph Musgrave
    Posted February 24, 2014 at 6:32 am | Permalink

    I do like JR’s reference to “London’s success in financial services, banking and property.” That “success” consists amongst other things of helping to bring world economy to its knees, causing unemployment on a scale not seen since the 1930s, and persuading politicians to prop up banking with billions stolen from the rest of the country.

    Some success.

    • APL
      Posted February 25, 2014 at 8:40 am | Permalink

      Ralph Musgrave: “That “success” consists amongst other things of helping to bring world economy to its knees, causing unemployment on a scale not seen since the 1930s, ”

      You frame the situation in a biased manner.

      The City works within the economic and political framework set by the political elites. If reckless behaviour has been encouraged in the City, it was encouraged by the politicians who have over the last thirty years; debased every western currency – encouraging short termism – that the politicians then grandstand and claim they deplore.

      Used the banks to finance their own corrupt ponzi schemes by which they finance their election campaigns.

      Before our host steps in and wields his black pen. By that I mean trying to ‘goose’ the economy in order to swing a few votes shortly before the an election.

      The sort of thing we are seeing now, with the announcement that the UK economy is expected to grow by 3%.

      Reply The banks do not make donations to political parties. The forecast of higher growth coems from independent forecasters as well as from the OBR.

      • APL
        Posted February 25, 2014 at 2:21 pm | Permalink

        JR: “The banks do not make donations to political parties.”

        But the do finance the operations of the government. Which means the electoral goals of which ever administration happens to be in government.

  32. Atlas
    Posted February 24, 2014 at 9:19 am | Permalink

    The problem that the “great northern cities” have is that the rationale for their original growth and continued existence evaporated some years ago. Unlike Oxbridge, say, which still has its original, viable, university business.

    • Lifelogic
      Posted February 24, 2014 at 12:38 pm | Permalink

      The University businesses could be far better run than they are and far more profitable too with some better management and a real sense of direction.

  33. Jon
    Posted February 24, 2014 at 9:13 pm | Permalink

    What a refreshing question for a politician to ask!

    The large American company I work for is moving it’s head office to London. That’s like say RBS, Tesco, Standard Life, Barclays, McLaren or BP moving their head office to another country.!

    Why did my company do it?

    Or what would mean the likes of the above move to another country?

    The reason the company I work for is moving is because of the access to perhaps the best world expertise that the City has cornered in their chosen market areas. Also their shareholders, the fund managers of our money purchase pensions, want returns on their pension savers behalf, there is no sentiment these days in internationals that were set up in a particular country.

    Nurture the environment and the globalised companies will seek the expertise if the tax regime suits. There needs to be the expertise to attract these wealthy companies so that is specialise. The successful cities of the industrial revolution did the same, just didn’t adapt when things changed.

    For the company I work for, to be yards away from a leading global syndicate underwriting operation is a major plus.

    As London became expensive Bristol and Birmingham have seen growth in Financial Services and are developing an expertise base. For smaller cities and towns I’d say it’s what they can take on that’s cheaper but within commuting distance (access to skilled workforce). For those further afield it’s a bit of the same, but competing on cheaper overheads. That’s what I don’t see the North East is active in especially on business that goes to the Netherlands etc.

    Needless to say a 50p tax just sends these firms to other parts of the globe.

    These wealthy skilled companies may well set up in london. But they have other sides to their operation best set up outside of costly london. Who want’s that? Who are the town’s and cities that are best placed to get the contracts? If a town is within commuting distance and the resulting workforce experienced then I’d say it would need to compete on price as well so would need to be in a cheap area but offer the available expertise for the out sourced activities of the central operation.

    There is a scattering of towns that look to have the secondary financial services activities. It’s up for grabs. That said there may be a new specialisation that could be developed?

  34. Neil Craig
    Posted February 25, 2014 at 12:59 pm | Permalink

    The only actual proposal the document makes is that London benefits from having a mayor withy greater powers than other cities. Fair enough lets try that elsewhere too.

    However I also note that a far higher number of companies have HQs in London and branches in other cities than vice versa and this is what we should expect if a major factor in London’s success is that the centre of government is there and large businesses like to be able to schmooze with government. This is not a feature that can be widely replicated (though it is in Edinburgh which is also doing well).

  35. billybob
    Posted February 25, 2014 at 4:56 pm | Permalink

    As a long term London resident I think one of the things that stops London based professionals from moving to other regions is a lack of choice of jobs in your chosen sector. I would not move to another city if there was effectively only one likely employer. That is far too risky in this day and age. Other cities need to cultivate clusters of employers in the same field so they can offer a range of jobs to potential relocators who can move with confidence. One other advantage that London has is it is the focus of most if not all thinktanks, professional associations, networking events in most fields. These are valuable to finding out about latest thinking, new jobs, making good contacts, establishing a professional reputation etc. If you live elsewhere it is hard to keep your oar in and maximising your opportunities to get on.

  36. Lindsay McDougall
    Posted February 25, 2014 at 8:38 pm | Permalink

    Since this is political blog, we should ask ourselves what actions Government can take in the cities left behind. Take Glasgow, for example. Glasgow has vast tracts of public sector housing – subsided housing, or ‘low cost housing’ as it is known in polite society. There are the tower blocks; anyone who has seen the bairns playing outside Ibrox Towers, just a stone’s throw from Glasgow Rangers football club, feels sad about the blighted and dependent future they are likely to face. Then there is the vast Easterhouse Estate, full of council houses and more or less separate from other housing estates. Dependency is rife throughout these estates.

    The benefits cap at its current level (average pre-tax earnings) will work well in London and the South East. But in Glasgow, wages are lower, accommodation is cheaper, and the cap won’t be such a deterrent.

    What would work is to get rid of public sector housing all together. Sell the lot off to sitting tenants or, where the tenant can’t afford a mortgage, to a private landlord. Let markets, nothing else, determine rents. Pay housing subsidy to particular people as long as they need it, and don’t attach the subsidy to particular properties.

    Concentrating vast numbers of the poor and dependent and feckless in particular isolated areas is really dumb. One of London’s great strengths has been the rich and the poor living reasonably close to each other, so that artisans can always go out and get work close to home.

    Glasgow still retains a measure of ship building ability, even though it has declined. It still gets military orders but it really should do better in the commercial sector. For example, eight out of the top 10 luxury cruisers for private clients worldwide have been built in Germany. Shouldn’t Glasgow have got some of that business? And is the fact that it hasn’t an indicator of a failure in enterprise? The Clyde is still there, and so is the Clyde estuary.

  37. Alan Wheatley
    Posted March 3, 2014 at 8:18 am | Permalink

    “Mind the Gap: London v the Rest” is a programme on BBC2 at 21:00 this evening; part 2 is next Monday at the same time. It is presented by Evan Davis.

    It was previewed on Radio 4’s Today programme this morning (3rd March) and if the program lives up to the preview I would say well worth a watch.

    It is exactly on the theme of “Cities and Enterprise”. How about encouraging bloggers to watch both programmes and then we could return to the debate on this site?

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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