1. Economics
November 3, 2016updated 02 Aug 2021 9:35am

So just how weird is London's economy by European standards?

By Jonn Elledge

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

Last week in this space we looked at how the economy of London compared to those of similar European cities. (Short version: not bad, but not as well as you’d think from all the boosterism.)

And we noted that, even among similar cities, London’s economy was an outlier: a tiny manufacturing sector (3 per cent, compared to 7 per cent for Paris), and a huge business service sector (40, compared to 35). But how unusual is London’s economy? Are there other cities that look similar?

Here are the 10 cities in the Centre for Cities’ European database which, as of 2011, had the smallest manufacturing sectors:

That, by my count, is four in Spain, three in the UK, two in the Netherlands and one in Germany. (Potsdam, the capital of the state of Brandenberg, fact fans). The smallest manufacturing sector of all is in the Spanish city of Almeria, where just 2.4 per cent of the economy is in manufacturing; the largest shown is another Spanish city, Salamanca, where it’s 3.8. But they’re all basically in the same ballpark as London.

Next up, here are the 10 which had the biggest business services sector:

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That’s three from the UK; four from Germany; and one apiece from the Netherlands, Switzerland and Spain. The share of the city economy dedicated to business services on show here ranges from 36.3 per cent in Potsdam, up to 43.0 per cent in Frankfurt. (For the record, the city with the lowest share on this measure is Ruse, Bulgaria: 7.7 per cent.) Once again, all roughly in the same zone as London.

Three cities make both those lists: London, Edinburgh and Potsdam. In other words, while London is an outlier, it isn’t that big of an outlier: there are other European cities that have big business services sectors but don’t make very much actual stuff.

It’s also worth noting that, for all the talk of rebalancing the economy, at the city level, this kind of imbalance is not a bad thing. This scatter chart shows that there is a pretty clear relationship between GVA per worker (that is, productivity) and the share of the economy dedicated to business services:

So, whatever the cause of London’s surprising under-performance, it probably isn’t this. Business services are good for you.

Jonn Elledge is the editor of CityMetric. He is on Twitter, far too much, as @jonnelledge.

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