John Mills: This is why London is such a divided city

The founder of JML on how to rebalance our economy

London used to be a big manufacturing city - the centre of an industrial empire. For many years, its docks were the biggest in the world.

Now, industry has largely disappeared and with it far too many of the high-productivity, good-quality blue collar jobs, which manufacturing has always been good at providing.

Instead London is now dominated by financial services, creating fabulously rich bankers and hedge fund managers, while far too many Londoners, many on zero-hour contracts or not working at all, are forced out of the centre of town. London is undoubtedly a world-class city but mostly to the benefit of the rich rather than the poor.

Why has this happened? Why is London’s economy so unbalanced?

It is because for many decades we have neglected our manufacturing base. We are good at selling services to the rest of the world – legal, education, banking and insurance, for example – despite the fact that the pound has been very strong.

Most manufacturing, however, is much more price-sensitive, and this is why it has gone into steep decline. In 1970, almost a third of our national income came from manufacturing. Now it is barely 10%.

This is why London is such a divided city. The strong pound shifts employment opportunities towards those with the best education, connections and skills at the expense of everyone who lacks these advantages.

London’s top restaurants are full and the City is awash with building projects but other parts of London are among the most deprived in the whole country. Those who are doing well have relatively secure, high paid jobs, while a big swathe of the population lives from day to day, struggling to make ends meet.

What’s the solution?

We have to get our economy rebalanced, so that there are more good jobs, especially for people who do not have exceptional skills.

To do this, we have to get the pound down on the foreign exchanges so that the UK becomes a competitive place again for the types of light industry for which London used to be famous – producing everything from furniture to pianos, toys to apparel.

This doesn’t mean abandoning services. There is obviously an important place for all the high quality jobs which they provide. 

But it does mean getting back to the much more widespread range of employment which London used to have in the 1950s and 1960s, when the number of people out of work was much lower than it is now, the spread of incomes between top managers and the factory floor was much less than it is at the moment, and job opportunities were much better for ordinary working people.

Not everyone can have a skill and we need to ensure that we provide reasonably well-paid jobs for everyone. This is what manufacturing is good at doing. Some of the work is skilled, but a lot of it is not. Of course it needs people who turn up on time, work reasonably diligently and who care about doing a good job, but these qualities are important at every level.

What we need to avoid is pricing all these sorts of jobs out of the market by allowing the pound to become so strong that manufacturing becomes unviable – exactly what has happened to us.

Could we get a reasonable amount of industry back to London? Of course we could, if we were willing to take the necessary steps to get this done.

Part of the solution is to get the planning system to work in its favour, to ensure that the right transport links are in place, and that training programmes are available.

But we also need to ensure that our industries are able to flourish because the pound is not too high.

Readers' comments (3)

  • So basically- reduce the spending power of the UK population to make them richer. What rubbish.
    Reducing the strength of the pound reduces the ability for people to import the materials needed to manufacture; remember, these islands depend on imports hugely. The tools used to reduce the value of the pound rob from every holder of said currency- mostly people in the UK. It hits those without fixed assets such as property far harder than those who do. It does nothing to solve the principal problem with our industrial competitiveness: high land prices and high taxation on economic activity. It does nothing positive (quite the reverse) to stop the increasing divide between the rich and poor.
    Stop landlords taking the lion's share of projected profit either through high selling prices of land, or ongoing rent extraction, while slashing the taxes we place on labour (NI, Income Tax, Employers NI), and transactions (VAT), and watch productive business boom.

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  • Meanwhile the Government is changing the planning system to enable a whole range of commercial uses - offices, shops, light industry, etc - to change use to housing. This is likely to destroy the small firm economies which characterise most London Boroughs, unpack the critical mass and synergies that make our town centres economically successful. A change of use to housing is a one-way trip. The London economy has just become about investment in housing - we have lost sight of where all this is taking us and need to ask - do we really want to go in this direction?

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  • This article is wrong on so many levels. London's financial services are the success story of the century. The services industries flourish in their presence. What we should be doing is looking at other parts of the UK to emulate this success.

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