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Economy / Jobs

It’s a KIBS thing: Are some British cities going backwards?

The latest instalment of our series, in which we use the Centre for Cities’ data tools to crunch some of the numbers on Britain’s cities. 

We haven’t talked about KIBS in a while, have we? Let’s talk about KIBS.

“Knowledge Intensive Business Services” are, basically, the high-skill, high-value bit of the modern economy. In short, you can break an economy up into extraction, manufacturing, agriculture, and services. It’s the latter that generates most of the wealth in advanced economies, but not all services are equal: there is much more money to be made in accountancy, say, than there is in retail. At any rate: if you want your city to be rich, you generally want more of those delicious KIBS.

So this, on the whole, is a bit worrying:

In the first half of the decade, KIBS fell as a share of the economy in no fewer than 23 of the 63 cities in our database. And not all of these cities are places you’d associate with economic problems, either: they struggling cities like Dundee, Swansea and Burnley, but also richer ones like Edinburgh, Aberdeen and Milton Keynes.

The decade started rather bumpily, so I checked if this as just a recession thing by checking if the pattern held if you started counting in later years. Starting the clock in 2013, things were different. Now there were 27 cities where the KIBS had shrunk. Right.

So what’s going on? Couple of theories. One is that they’ve lost some good jobs: in the smaller of these economies (Slough, Worthing), the loss of one significant company is probably enough to make a noticeable dent in the figures. Another possibility is that they haven’t lost KIBS jobs – might even have gained them – but that other, generally less productive sectors have grown faster.

What is clear is that there is, perhaps surprisingly, no obvious link with incomes. Check out this scatter graph which plots the change in KIBS with the change in weekly wages. There is, and I’m being charitable here, no correlation whatsoever. It’s a correlation coefficient of 0.04, which is basically invisible.

Click to expand.


Which suggests that maybe seeing the share of your economy devoted to KIBS shrink by 2 per cent really just doesn’t matter that much. Perhaps there are other well-paying jobs replacing them, which aren’t classed as KIBS because there’s a quirk of the data. More likely, I suspect, there’s a mismatch between the two datasets: the KIBS one shows what happens inside a city’s economy, whereas the wages one includes people who live there but work elsewhere. What happens in Worthing is probably less important to its residents than what happens in London.

And yet, and yet… Here’s another scatter graph showing weekly wages against KIBS. Unlike the last one, though, this isn’t change over time: it’s the figures for a single year, 2015.

Click to expand.

That very definitely is a correlation: a coefficient of 0.66, which is pretty bloody strong.

So: KIBS-heavy cities do still do a lot, lot better: perhaps the changes in that earlier dataset are simply too small to have much of an impact.

The lesson here seems to be that a city can see the share of its economy devoted to high-value business services shrink a little without consequence. But if it starts dropping like a stone, people are going to get a lot, lot poorer.

Anyway, to sum up, I’m sure Brexit will be completely and utterly fine.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and also has a Facebook page now for some reason. 

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