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10 Jun 2015
For a major city to flourish, and to maintain its competitive edge, it needs to sustain diverse economic activity at all scales, from the multi-national corporation to the individual start-up. Whilst London is a powerhouse for business and finance, it is also a city that benefits from a flourishing creative sector with specialisms including, jewellery, fashion, furniture, publishing, digital media and cultural tourism.
Creative industries within London have naturally clustered together overtime, as seen with the Hatton Garden jewellery quarter and Silicon Roundabout at the heart of ‘Tech City’ in the Shoreditch/Hoxton area. Business clustering has a number of advantages, including greater opportunities for sharing resources, knowledge and infrastructure (e.g. internet connectivity, flexible/hybrid workspace), attracting talented and highly skilled professionals and increasing innovation and competitiveness in the marketplace.
The UK Government has been encouraging the growth of creative clusters in London and other major UK cities. It launched the ‘East London Tech City’ initiative in November 2011 to support the emerging Silicon Roundabout digital cluster in East London. The critical mass of cultural, media, marketing and internet businesses has successfully branded the area as the ‘UK’s alternative to the USA’s Silicon Valley’ and culminated in the creation of over 32,000 new businesses in the area between 2012 and 2014 (source: The Flat White Economy (2015), Douglas McWilliams).
However, valuable commercial workspace in London is being converted into empty homes. These conversions are a result of an easement in planning policy, known as Permitted Development Rights, which has made it easier for offices/warehouses to be converted into residential homes (source). London boroughs received 2,005 prior approval applications to convert offices to homes under the new Permitted Development Rights between May 2013 and July 2014 (source).
Whilst Central London’s Central Activities Zone is exempt from the policy, other parts of London and other major centres e.g. Birmingham, Liverpool, Sheffield, Bristol that benefit from economies of agglomeration are under threat. For example, in Croydon a ‘significant amount’ of the office space in line for conversion is occupied by businesses. Mike Kiely, director of planning at Croydon Council, stated “we’ve had some fairly major occupiers that have told us they are being forced out. These are blue chip companies. They don’t want to leave Croydon and we are having to work very hard to keep them in Croydon” (source).
In addition, the new swathes of high-rise luxury flats that are changing the skyline of London are leading to the gentrification of Inner London, as foreign investors snap up properties and the majority of local residents are forced further out. This in turn is leading to a rise in commercial rents, which forces out local businesses, particularly small-medium enterprises (SMEs) and start-ups that are critical for the local economy and character of the area.
However, there is growing resistance to such high-end residential schemes. In early 2015, property developers Hammerson and Ballymore submitted plans for two high rise towers of up to 48 floors – the same height as a Canary Wharf high-rise – at the Bishopsgate Goodsyard site in Shoreditch. Whilst London Mayor Boris Johnson supports the scheme, Hackney Mayor Jules Piper launched a campaign to stop the developers. Mayor Piper raised concern that the “these luxury flats, which are well beyond the reach of ordinary Londoners, will cast a shadow over the whole of Tech City, and threaten to damage the local, creative economy (source). There is concern that such major developments could ultimately lead to the dissipation of growing business clusters as small-medium enterprises and start-ups become priced out of the area.”
The fragmentation of business clusters in London, particularly in the creative sector, could have devastating effects for London’s economy and competitive edge. There is a need for a step-change in national policy that ensures greater protection for business cluster areas. The UK Government’s current approach to Permitted Development Rights is eroding valuable workspace and the rapid rise of luxury flats in London is impacting on functioning local economies that ultimately ensure London’s continued success.
You may also be interested to see some of our Future Proofing Cities work on London in our London 2100 report to which I contributed.
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