What does the future hold for London’s Economy?

Thursday 24 January 2013

London risks losing some of its vitality because of a dangerous trend of ‘dark’ areas of the city caused by those who own property but do not live in it full-time.

So said economist Will Hutton at the latest ‘Evolving London’ talk organised by GVA in association with NLA and held at the King’s Fund on Monday. 
‘I think it will become a problem and will diminish its vitality’, said Hutton. ‘This whole issue will become very hot indeed over the next 10 years.’ The former Observer editor-in-chief, now principal of Hertford College, Oxford University and chair of the Big Innovation Centre at The Work Foundation was speaking at the event to address the main question: ‘What does the future hold for London’s economy?’ Grappling with issues including, topically, Europe, new emerging sectors, infrastructure investment, aviation expansion and regulation, Hutton said there should be legislation to commit people to live in the homes they own or else we risk that 2/3 of Kensington, Knightsbridge and other wealthy areas will become ‘dark’. We have become far too relaxed about income inequality, he added, and London could begin to resemble Mexico City or Buenos Aires rather than the city that it wants to be.

Hutton said he felt that Britain might be about to go through a similar period of creativity and ferment to that which greeted the period when capitalism became ‘very dysfunctional’ and ‘we got serious’, with the creation of trade unions, universal suffrage and a national network of primary schools. ‘I think we’ll go through a period like that again’, he said. ‘We stand on the verge of a period of quite substantial creativity and tension, because the two things go together.’

Hutton said that the knowledge economy is key to London’s future, but that the city must think more systematically about innovation, and less about financial services being the ‘be all and end all’. The aviation debate is a pressing one for the capital, with it already becoming apparent that feeder airports to London such as Bristol, Norwich and Southampton are flying passengers to Schiphol or Paris for their interconnecting flights. London needs ‘not just a third runway, but a fourth runway, frankly’, with so many industries here depending on it. ‘The possession of a hub airport is pretty essential for the knowledge economy’, said Hutton. This knowledge economy has underpinned London’s success in the last 30 years and will underpin it in the next 30. But Heathrow must be sustained as a hub airport or London must build anew – ‘for my money not in Essex but on the Isle of Grain’, even if this investment was tricky politically to justify to the rest of Britain. And yet London must stay on its ‘virtuous circle’ as a precious part of the national economy.

Other ideas proposed by Hutton included a specialist housing bank to fund homebuilding, with more, taller blocks of residential a possible, partial answer to the city’s shortage, while the area between King’s Cross and Euston is one to watch as a ‘big economic hotspot’, particularly with the arrival of HS2.

David Taylor, Editor, New London Quarterly

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