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Chapter 1

Introduction

It seems impossible to be neutral about London. Samuel Johnson opined that when one is tired of London, one is tired of life, but William Cobbett described it as a ‘great wen’ and a ‘monster’. These conflicting opinions are still with us, although possibly not so memorably expressed. Both the current mayor of London, Boris Johnson, and his predecessor, Ken Livingstone, have described it as the greatest city on earth, but perhaps they would say that. Their opinions of their city differ much less than their politics.

Other views have not always been so positive. Professor Roy Porter published a social history of London in 1994. It ends on a note of pessimism about London’s prospects, fearing that the city might become a museum piece. It was just as well he also pointed out that historians make poor forecasters, as London was even then on the cusp of its own reinvention.

His last paragraph ends: ‘London is a muddle that works. Will it stay that way?’ The answer would appear to be yes. London and Londoners have rethought their city, its governance and its geography. Only the Rolling Stones appear to be the exception to the rule that change is constant. All great cities need to change. This book looks at how London has been reinvented in the past, and describes the reinvention it is experiencing now. It also asks what is necessary to ensure that this wave of change succeeds and that London continues to prosper.

I grew up in the outer suburbs, in what used to be called the commuter belt, and I went to school in London in the 1960s, travelling by train and spending winter afternoons warming myself on the coal fire in Surbiton station’s art deco waiting room. I gave in to teachers who said I would be foolish to aim to be a geologist, since women were not allowed on oil rigs and oil was the future for geologists. I went as a teenager to London to gawp at Biba and Mary Quant but couldn’t afford any of the clothes. I made most of my wardrobe on the old Singer sewing machine at home, with designer patterns, trying to live up to the new times. Air conditioning was unheard of, and so were daily showers. Central heating was rare.

It is important to remind ourselves from time to time about how enormously lifestyles have changed for the better over these past fifty years – change enabled by economic growth and higher incomes. The reinvention of our capital city and its surrounding hinterland has been a crucial part of that change. In the 1970s it was hard to imagine the London of the new millennium. It seemed as if London, and indeed the United Kingdom, was struggling. Successive oil crises in 1974 and 1979 exacerbated the decline of industries saddled with complacent management and disgruntled workforces. London was losing population and losing jobs. The new towns planned around the edge of the city, such as Basingstoke, Stevenage, Harlow and Milton Keynes, seemed destined to be the sources of growth. The swinging sixties had touched far too small a part of London to make more than a small dent in the general feeling of doom and gloom. Yet change did come. In 2002, when I became the first chief economist to the newly formed Greater London Authority (GLA), my initial task was to prepare long-term projections for the city as the basis for a new London Plan. Those forecasts showed expected employment growth of 435,000 between 2001 and 2011, a scale of job creation sceptics said could not be achieved. In the event, 427,000 additional jobs were created. I am glad I stuck to my guns.

The general thrust of my projections did not change over the following ten years and they continued to be largely accurate. London has even bounced back from the recent post-crisis recession. In the summer of 2013, employment was higher than at the previous peak in 2008, and output was back to 99 per cent of the peak. Short-term indicators are all positive. The doom-mongers of 2008, when Lehman Brothers collapsed, appear to have been mistaken, at least as far as London is concerned. The latest projections from the GLA (not now my responsibility) suggest that, if anything, employment growth has accelerated. Population is now expected to increase by 1.7 million and employment by 850,000 by 2036. The challenge is to provide the conditions in which these projections can be successfully realized, through a further reinvention of London’s economy.

How can this be brought about? Successful urban reinvention depends on changing, in the right way, four interrelated elements of the economy. These are

•the structure of output and employment, enabling new activities and jobs to be created;

•the places people live and the kind of people moving into London, through appropriate planning and building, ensuring there is a suitable workforce;

•transport links and other infrastructure, so that people can get around easily; and

•communications, especially international connections, so that trade can continue to grow, London being quintessentially a trading city.

The rest of this book looks at each element in turn, at the past and at the scope for the next reinvention. In each case, I take a particular London location as symbolic of the issues: Docklands, Croydon, King’s Cross and Heathrow.

Making and doing: the changing structure of the London economy

London’s habit of reinvention is not new. Between 1932 and 1937, 532 new factories were set up in London, 83 per cent of the United Kingdom’s total. Many of these were new enterprises, making new kinds of goods. They located along what became the North Circular and out along the new radial trunk roads: the A1 out to Enfield and the North, the A4 to Hounslow and the West, the A3 to Kingston and down to Portsmouth. Places such as Park Royal became home to 250 factories before the outbreak of World War II. These new factories made radios and other electrical goods, as well as cars. Hoovers were manufactured along the A40, light bulbs along the A1 by Osram and Phillips, records by EMI at Hayes in Middlesex. Telephones were produced in Hendon and turbines in Wembley. Cosmetics were produced on the Kingston bypass. Food and drink production also became more mechanized and took place on a larger scale, with Lyons Bakeries, Guinness and Heinz at Park Royal, while Beechams had a factory on the A4 at Brentford, and Ilford Photographics, established before World War I in (you guessed it) Ilford, expanded its business as consumer demand grew.

All these new industries were consumer oriented. Many of them made it easier for women to work, as the use of electric cookers, toasters and kettles spread (made by women and used by women). Dishwashers came later; I remember my mother insisting that she had to have one when she went back to work in the early 1960s. This was revolution indeed. Clothes washing followed a different trajectory, since commercial laundries had existed for some time and could be replaced by the launderette. Domestic washing machines took longer to penetrate the home. We had a top-loading paddle machine but it didn’t spin, and the mangle was a horrid contraption that was hard work and dangerous to the fingers. Even in the 1970s many women continued to use the launderette.

The earnings generated in the new industries in the 1930s made it possible for their workers to buy the new houses springing up along the suburban rail lines out to the north-west of the capital, or those served by burgeoning bus systems. In one decade, between 1921 and 1931, the outer suburbs attracted 810,000 people, and another 900,000 arrived in the following eight years as London attracted people trying to escape the depressed North, Scotland and Wales. New goods created new markets and new jobs and attracted new people. It is said that the building boom of the 1930s helped rescue London from depression. It would be truer to say that new inventions and the arrival of new firms and much foreign direct investment made the building boom possible. People bought the houses.

The war put all this on hold. Its aftermath saw resources being put into rebuilding, and into new town centres and planning. Spatial expansion was limited by Green Belts. Still, the factories continued to operate, if rather less effectively. It was only in the 1970s that they began to close. I remember the cosmetics factory along the A3 still operating in the 1960s. I visited radio factories and lamp factories in north London as late as the 1980s. None remain now. These sites are sometimes empty, but it is more likely that they have been redeveloped for housing or retail. The Hoover factory in Perivale, listed for its glorious art deco façade, is now a mixture of offices and a Tesco supermarket.

In its post-war reinvention, London recentralized. Pre-war, suburban sprawl and London County Council rehousing reduced urban density across the city. This in turn led to the Abercrombie plans, produced after the war but fundamentally based on a pre-Blitz view of London as a growth problem that needed to be stopped. People and jobs had to be moved out and ring roads were needed to move people round. Fortunately for London, Abercrombie’s most draconian visions were never accepted, since they would have involved complete clearing of many areas to provide for more ‘rational’ segregation of people and activities, as well as restrictions on the heights of buildings. He was more successful in cities such as Plymouth, completing the destruction started by bombing and ripping out the medieval street plan still more effectively. That city has not recovered. However, a mix of planning constraints, Green Belts and war weariness did manage to stop London’s growth in its tracks after at least a century of expansion. It took until the mid 1980s for it to get going again.

Or rather, it took until then for people to notice what was happening. It had become fashionable in the 1980s to talk about the economy as one of ‘market towns’. Out-of-town centres, retail hubs and office parks were all the rage, and we all travelled by car. Even though there had been two oil price crises – one of which meant that the government went as far as issuing petrol ration books (I still have mine, as well as my childhood one, which I can only just remember, for chocolate) – the car, and the personal freedom it enabled, was key. The first thing I wanted to do on my seventeenth birthday was to get behind a steering wheel. And this perception remained even while the world was actually changing. Business services has been on a pretty constant upward trend for decades, even while other activities were declining (Figure 1.1). This kind of employment is largely office work, where meetings and the need for contact with one another hold sway. It is all much easier in the city centre, and so this has been the latest shift in employment.

Figure 1.1. Employment chart showing the shift from manufacturing.

In 1971, there were more than a million jobs in manufacturing in London. The latest estimates, for 2012, show that there are fewer than 200,000 left (according to this definition). In 1971, there were around 400,000 jobs in business-to-business services. There are now about a million. We have succeeded in replacing all those jobs lost in declining manufacturing industries with many more jobs, but in different kinds of roles involving different kinds of goods and services. On the other hand, it might come as a surprise to see that the number of people working in finance and insurance has not changed much over the same period: it is still roughly 350,000.

The reinvention of work continues, both along the current trajectory and potentially into new possibilities. Chapter 2 examines this further by tracing the redevelopment of Docklands and the rise and fall of financial services. I argue that some aspects of both the rise and the fall are myths, and that they obscure the broader and much more important picture of service industries more generally, in which London is a world leader. The digital age heightens the importance of these strengths and leads to new opportunities in services, entertainment and new products. London should be well placed to exploit these opportunities if we manage to keep our nerve.

Living and localities

After all the destruction during World War II, bomb sites were still colonized by rosebay willowherb decades later; it is not surprising this plant is known as fireweed in the United States. A shortage of offices and the slow return of people to the capital meant that residential buildings in central London had temporary permission for office occupation, much of which has only expired in the last ten years or so. Over the decades, the work has moved from all those suburban factories to office blocks in the centre of the city.

Even so, London remains a low-density, suburban city (Figure 1.2). With roughly the same population and the same land area as Hong Kong, the distribution of people is completely different. Hong Kong has high-rise blocks and unpopulated hills, and dwelling densities as high as 1,250 per hectare. ­London has miles and miles of terraced streets, and even its employment densities are low.

Figure 1.2. City density map. (Hong Kong: © Urban Age, LSE Cities, London School of Economics and Political Science. Other five cities: © LSE Cities, London School of Economics and Political Science.)

The City of London has an employment density of around 300,000 people per square mile, and Westminster has one of around 75,000. New York’s is up to 600,000 in the midtown core; that of Paris’s central business district sits at around 90,000. London can increase this density if it wants to and still remain a city in which it is a pleasure to live.

The most densely populated residential district is Kensington and Chelsea, at 131 people per hectare, though Westminster is at similar levels if the Royal Parks are excluded. Barcelona has up to 400 dwellings per hectare, while the highest dwelling density in London is in Westminster, with 300. This is not about a failure to build high: Barcelona is not a city of ­tower blocks. Many of London’s post-war estates were built at lower population densities than you would find in a series of mansion blocks in Kensington. Various architects have shown that terraced housing at three to four stories can achieve greater density in more comfort than tower blocks. In other words – and perhaps surprisingly – the rows of Victor­ian terraces, which remain so popular, generate more density than the deeply unpopular high-rise buildings that give high density a bad name.

It is not clear whether the suburban sprawl is due to preference or plan. Planners themselves argued for low-density housing when slums were cleared – as low as twelve houses per acre (30 per hectare) – providing semi-detached houses with gardens to promote healthy living away from overcrowded slums. It would have been cheaper to build terraces, and it is not at all clear why this did not happen. Probably they were not considered ‘modern’, even if people would have liked them. Solid mansion blocks of flats are popular and, in the right location, now extremely expensive.

However, the built environment is slow to change. Neither Christopher Wren nor Patrick Abercrombie succeeded completely in their grand plans to change the geography of London after conflagrations. Wren managed Regent Street but no other major boulevards, while Abercrombie’s ring roads were never completed either, although the Archway road proposal dragged on for a generation.

Although the built environment changes little, the character of the different parts of London and the identity of their inhabitants have changed substantially. Around the turn of the twentieth century, Charles Booth undertook a mammoth survey of life and labour in London. He rated every part of the city. Thus, the parish of All Saints in Knightsbridge beside Hyde Park is rated yellow – ‘upper middle and upper classes, wealthy’ – in some parts and red – ‘middle class, well to do’ – in others. We would probably rate it similarly today, though perhaps more coyly. Booth’s bottom rating is black – ‘lowest class, vicious, semi-criminal’. This category is given to some locations in the parish of All Hallows in Bow, for example. I doubt that ­Experian or CACI, who provide detailed categorization of locations for consumer companies, would use such terms. But we know that many of these parts of London remain poor and deprived.

Some places have changed dramatically, though. Spitalfields is an area marked firmly black by Booth. It does not feel vicious and semi-criminal now, with its galleries, boutiques and clubs. On the other hand, it is a stone’s throw from Brick Lane, which seems to have been much more industrial when Booth was working, and is now a centre for Bangladeshi food and restaurants, having hosted a whole series of immigrant communities. Spitalfields was a centre of weaving, especially silk, in the seventeenth century when Huguenot refugees settled there. The large windows needed by weavers are still apparent in some of the streets. More recently, Jewish refugees arrived here, and then, post-war, those from the Indian subcontinent.

Waves of immigration are nothing new, and new arrivals tend to start out in poorer places, close to their point of entry. Once they begin to do better, they usually move to better locations with larger, nicer houses. And then the next wave arrives. There has been some speculation about whether this upward movement has halted, but it may rather be that settle­ment takes time. Somali populations, for example, have existed in London for generations, based around seafaring and living near the docks. More recent influxes have resulted from the civil war but have gravitated to the same areas, though there is also a community to the west in Ealing. Some of these clusters are hard to understand or predict. The centre of Korean London life is in New Malden, near Kingston, but how this was seeded no one seems to know.

An alternative example is Notting Hill. In the 1960s and 1970s this was an area where unscrupulous landlords forced out tenants who had protected rights, to replace them with West Indian immigrants who struggled otherwise to find housing and who could be charged more for smaller flats. One such landlord, Peter Rachman, gave his name to this activity, although his notoriety was more to do with his mistresses, Christine Keeler and Mandy Rice-Davies, and their involvement in the Profumo affair than with his business activities.

Thus, Notting Hill went downhill and became crowded, underprovided with services and poor. It also generated a carnival to reflect its new ethnic identity. However, although the carnival still takes place, the ethnic mix is utterly different. Notting Hill has gentrified. Its proximity to White City, for the BBC (at least until 2013 when the BBC moved back into Portland Place in London), and its ease of access to central London, plus the potential for refurbishing large houses back from multiple-occupation, created the potential for gentrification. So Notting Hill, poor but respectable in Charles Booth’s day, has gone both downhill and uphill since then. I think we would now have to characterize it as wealthy.

London is, therefore, not a stable city: people move and groups move, much as the West Indians disappeared from Notting Hill, although to where I don’t know. It is also a city of suburbs; it is a typical conceit that we should welcome Henry James’s description of London as a city of villages. It would be truer, but less romantic, to say it is a city of suburbs. Nowhere better illustrates this history than Croydon. Once a village, it is now well and truly within London, and has suffered the vicissitudes of successive waves of development, of planning and of replanning. In Chapter 3, I look at the future of living in London with reference to this quintessential suburb.

Getting about

The West Indians who moved out of Notting Hill are almost certainly travelling further across the city now than they did then, though they probably do not spend any longer travelling than before. Transport is the glue that holds any city together, along with drains and fuel. No city can survive if its citizens keep dying of bad water, nor if they cannot keep their homes warm and lit. And a city is about moving about. It is salutary to remember that Shanks’s pony – walking – remained a primary method of transport in the city until very recently. Read Samuel Pepys’s diary and you will find him often walking out to Greenwich to investigate the ships being built before walking home again. Read Trollope’s nineteenth-century novels about London and you will find that people walk everywhere, down to the Houses of Parliament, back to Mayfair, and then off again to the City. And of course there was very little option. Roads were narrow and crowded, coaches would be slow. The horse was the only alternative to one’s feet.

The horse created its own problems. Like many girls in my time, I cried over the death of Ginger in Black Beauty, worked to death in the shafts of a hansom cab. Horses had to be stabled, manure carted, feed and water provided; they are powerful but not simple animals. The horse limited the size of the city. So too did disease. In the medieval period the lure of the city was strong, because the rewards were high. But so were the risks, and the city needed continuous replenishment from the country because death rates were so high. By the twentieth century better drains reduced these risks, though in fact the source of cholera was not understood until late in the nineteenth century. Fortunately, dealing with the stink of bad water dealt with the water quality, even though it was the stink that was thought to be the problem. It is extraordinary that between Roman times and our own so little thought was given to the very basic issue of effluent and drains.

The city was transformed not only by drains but also by the combination of rail, buses and electricity. Horse-drawn bus services made commuting possible even before the dawn of the train. Omnibuses – for all – first brought workers from Paddington to the City from 1829. George Shillibeer’s buses gave clerks and smaller merchants the opportunity to live further away from the city, improve their quality of life and enlarge the space they could afford. No change there then.

By 1900, Shillibeer’s successor, the London General Omnibus Company, owned nearly half the capital’s 3,000 horse-drawn buses and trams, carrying some 5 million passengers a year. Buses could get into the centre of London and carried higher earners, while trams ended at the city fringes and were for working men, who started work earlier than those in the buses.

However, it is the train that we have to thank for the geography of most of London today. It is not too much of a stretch to contend that the train was the key invention that made the industrial revolution a worldwide phenomenon. It made it possible to connect cities and countries in an utterly different way, and to transport goods more widely and more easily than ever before. People were latecomers to train use – most lines were originally built for freight – but from the 1830s on, the commuter railway made possible the outer suburbs, and subsequently the Underground connected all the railway termini and the inner suburbs in new ways too.

The year 2013 marked 150 years of the Underground in London. Compared with now, in 1863 the Underground was not a very pleasant experience. The trains were pulled by steam engines and the coaches had no lighting systems. Electric lighting systems were only introduced in the 1880s and the first Act of Parliament to control this was passed in 1882, with the first power station built in Deptford in 1891. Electrification of the transport system came later, with electric trams appearing in Hammersmith in 1901, running from Shepherd’s Bush to Acton. The Lots Road power station became operational in 1905 to power the Piccadilly line – following a construction period that only started in 1901. It is hard to imagine how quickly things were both planned and built in this period.

The London Underground had a second power station at Greenwich but that has since closed, with the system now supplied through the National Grid. Electric trams and electric trains changed the face of the city, paving the way for the retirement of the horse, and making possible the Clean Air Act in due course after the war. However, power stations initially meant coal and smoke. At least eighteen power stations have been constructed in London over the years. The earliest, in Deptford, Woolwich, Shoreditch, Croydon and Kingston, were developed to provide lighting, while the next tranche – in Barking, Brimsdown, Neasden and West Ham – powered trams and the new Underground. The biggest expansion was in the Edwardian period, with stations at Greenwich, Hackney, Kingston, Stepney and Taylor’s Lane, Willesden. These were all coal fired and are all now closed, though newer gas-fired stations operate at Taylors Lane and Brimsdown (Enfield). Newer stations appeared during the 1930s and 1940s at Bankside, Battersea and Brunswick Wharf, while Bulls Bridge in Hayes appeared as a gas-fired site in the 1970s. All have since closed. Bankside is now the Tate Modern art gallery, while Battersea is a listed structure still seeking love and attention (and investment). The others have been swept away completely. Power generation in London still happens in Barking (at a gas-fired site), Enfield, Croydon (also at a gas-fired site some half a mile from the original station, where one remaining chimney now marks the IKEA store), and at the Combined Heat and Power incinerator in Bermondsey. Greenwich remains as back-up capacity.

Power, transport and public health are the core infrastructure for any city, as the Romans perhaps knew better than we do. They founded London where it is because Southwark is the easiest place to cross the Thames when arriving from the south. However, London was abandoned when the Romans left. Its stone buildings would have fallen into disrepair and the city would have been a frightening place. Certainly the Saxons did not want it: they formed a settlement just up river and called it Lundenwic. It was used as a trading post and possibly not even regularly settled. Aldwych is the old market and part of the Saxon town. The Fleet River marked the boundary between the two cities and, over succeeding centuries, it remained the demarcation between the trading city, run by its aldermen in the City of London, and the administrative city in Westminster. The Fleet River became the drain for both and a huge risk to public health.

The ability for people to move around safely is essential to the well-being of a city, as is the creation of a healthy environment. In Chapter 4, I use the redevelopment of King’s Cross and St Pancras as an example of how transport improvements and public realm investment can change a location and generate economic growth as well. Transport may not be sufficient to generate growth, but it is certainly necessary.

The international dimension

There is a comic song (by Michael Flanders) that explains the laws of thermodynamics, the refrain of which goes:

‘You can’t pass heat from a cooler to a hotter,You can try it if you like but you’d far better notter Cos the cold from the cooler will get hotter as a ruler, and that’s a physical law!’

I have always found this useful in remembering the second law of thermodynamics, but I wish that there was anything half so clear in economics. I have spent a considerable proportion of my career trying to develop models and results that do not depend on incorrect assumptions or on a belief that using the word ‘perfect’ in a description means that such a world would be either desirable or achievable. In the process of considering how economic analysis actually works, however, one thing stands out as a rule: trade creates growth. Trade makes it possible to divide labour, exploit scale, use raw materials and transfer knowledge. The benefits of trade may not always be distributed as we would wish, but they are always there.

Trade can, of course, happen at many levels – between individuals, between communities and regions, and between countries. International trade has been a feature of all wealthy civilizations. The ancient Greeks decorated their temples with colour from Asia, the Mediterranean and the Caucasus. Rome traded across its known world. The discovery of the Americas opened up new trade opportunities and created what is currently the world’s richest country. China, on the other hand, closed its borders for several centuries and lost its technological advantage. It is now catching up. The inter-war period saw a diminution of trade, reflecting growing protectionism of home industry and jobs. This reduced employment and prosperity rather than increasing it, however. Trade shifts activ­ity and employment, but this can be part of what Schumpeter called the waves of creative destruction. London’s jobs are centred where trade happens: central London, Heathrow, Docklands and around subsidiary centres such as Croydon (Figure 1.3).

Figure 1.3. London employment density map, 2003. Darker colours are areas of higher employment density. (© Greater London Authority.)

Technology can drive such waves of restructuring. This could be the technology that harnessed steam power, that which produced electric motors, or cars, or it could be the technology now giving us cloud computing, and which enables me to research this book almost entirely while sitting at my laptop.

London has always been a fulcrum in Britain’s trade with the world. Though the west coast ports of Bristol and Liverpool grew rich on trade with the Americas, London was still participating. Bristol had the slave trade, but more slaves were traded in London, just less obviously. Whether with ships or aeroplanes or via the airwaves, London trades. The meridian line at Greenwich does not of itself put London at the centre of the world’s time zones, but merely reflects London’s importance in trading relationships when those zones were established in 1851. But the time zones still reflect reality. New York is five hours behind, Delhi five hours ahead. London is the location where working hours in all these zones overlap. This is a huge advantage, as is the global use of English as a business language.

However, to be a centre of world trade, communication of all kinds must function effectively. I will examine this in relation to our love–hate relationship with Heathrow, to aviation and to our policymaking mechanisms in Chapter 5.