Industrial Concentration and Agglomeration in London

Dr Daniel Graham
Centre for Transport Studies
Imperial College London
London SW7 2AZ
d.j.graham@imperial.ac.uk

23rd July 2003

Executive Summary

This report is concerned with industrial concentration and agglomeration in London. It constructs measures of industrial specialisation, geographical concentration and agglomeration. Its shows the industries that London specialises in and compares the degree of industrial specialisation in London to that of other regions and metropolitan areas in Britain. The report analyses geographical concentration and the tendency to agglomerate for detailed industrial sectors.

The main findings are as follows:

• Some of Britain's industries are highly concentrated in London. London's industrial structure is oriented towards the service industries and particularly towards financial and business services. Other prominent industries in London include television and media, wholesale and retail, hotels and restaurants, transport, telecommunications, public administration, and recreation culture & sporting industries.
• Manufacturing industries are generally under-represented in London. An important exception to this is the printing and publishing sector.
• The London economy is highly specialised relative to other regions and cities of Britain.
• A high degree of industrial specialisation is characteristic of central and inner London, but not outer London.
• The sectors that London specialises in exhibit a high degree of geographical concentration.
• Geographical concentration is particularly marked in financial service sectors and in news, media and television related activities.
• The industries that are prominent in London often score highly in terms of agglomeration as captured by the Ellison and Glaeser index.
• The banking and financial service sectors tend strongly towards spatial agglomeration. London is the principle location in the UK for these types of industries.
• Other prominent sectors in London that have relatively high agglomeration index values include those involved in news, video and motion picture production and distribution, air transport services, and the printing of newspapers.
• London has functional specialisation as well as sectoral specialisation. Employment across a whole range of seemingly diverse sectors may involve broadly homogenous activities and skills within the London economy.
• Over 80% of London's jobs are in industries that exhibit weak tendencies to agglomerate.
• Strong tendencies to agglomerate tend to affect primary and manufacturing sectors

to a greater extent than services. The 4 digit SIC classification defines 207 service sector industries and of these only 14 have high agglomeration index values.

• Many of the really spectacular examples of service sector agglomeration are related to the types of activities that London specialises in.
• The proportion of central and inner London employment that is provided by agglomerated sectors is large relative to other areas of the country.
• Some financial service sectors, motion picture production and distribution, and news agency services have high agglomeration tendencies mainly because of geographic concentration in central and inner London.
• Agglomeration values for legal activities, the publishing of newspapers and journals, and advertising are considerably lower when central and inner London are excluded from the analysis.

The full report in PDF format is available (see 'Downloads' in the right hand column).