- Agglomeration effects mean that big cities tend to be more productive
- But it hasn’t solved London’s growth headache…
Buried deep in the Spring Budget was a very interesting detail: if the UK’s secondary cities were as productive as those in the rest of the G7, the GDP would be almost 5 per cent higher.
In theory, big cities can pack a huge economic punch thanks to agglomeration effects. This is the idea that certain businesses benefit from being in close proximity to one another, thanks to access to a specialised workforce and extensive infrastructure. Dense city centre environments also facilitate face-to-face interactions, which are helpful for information sharing and the generation of new ideas. We see these kinds of successful clusters in places as varied as Silicon Valley (IT and tech), Hollywood (film and production) and Canary Wharf (financial and professional services).