How important is London to the future prosperity of the UK?

As a Londoner, I’m bound to say that London always has been, and always will be, central to Britain’s prosperity. But as Andy Burnham begins his first day as Prime Minister in the northern city of Manchester, should I be worried?

The Romans founded our capital 2,000 years ago and, despite later abandoning it Boudica’s revolt, the Plague, the Great Fire and two world wars—it has remained by far the country’s most important city.

During the expansion of the British Empire, ports such as Liverpool and Bristol flourished, while the Industrial Revolution allowed northern and Midland cities to grow and prosper. Yet as the Empire declined and manufacturing contracted, many of these challengers faltered. Birmingham might have become a true second city, but Green Belt restrictions curtailed its expansion. By the 1960s, it was only around one-eighth the size of London. Margaret Thatcher infamously left Liverpool to decline as she shifted the country from a manufacturing to a service-based economy, accelerating this trend. London became the epicentre of Britain’s services industry, with finance centred in the City.

Look across Europe and a different pattern emerges. Germany, for example, has a capital of just under four million people, but it also boasts several major cities with populations exceeding one million, including Hamburg, Munich and Cologne. By comparison, Britain’s second-tier cities remain relatively small at around half a million people.

I believe London’s dominance has served Britain well over the past 50 years. As a relatively small country, we have punched above our weight against economic giants such as the United States, China and India, by concentrating talent, capital and influence in one globally competitive city. Despite Brexit, London continues to rival New York as the world’s leading financial centre.

That strategy has come at a cost. Much of the rest of the country has been left behind. Although EU investment and urban regeneration revitalised many regional cities, the imbalance has fuelled political discontent, contributing to demands for greater devolution in Scotland and Wales and to growing support for both the political right and left among people who feel excluded from London’s success.

Meanwhile, London has its own serious challenges. High housing costs and overstretched public services have made it increasingly difficult for ordinary people to remain in the capital. I was fortunate enough to buy my home 30 years ago, when property was still affordable. I worry that my children may never be able to raise a family here because home ownership will be beyond their reach.

Our new Prime Minister wants to rebalance the economy, and I agree it is the right time to do this. But weakening London’s role risks weakening the country just when we need stronger economic growth. Research shows that larger cities generate higher productivity. They benefit from economies of scale, lower infrastructure costs per person, and greater rates of innovation. The bigger and better connected a city becomes, the more productive and, interestingly, the more inventions they produce. If London, with its population of nine million, must compete against China’s megacities of more than 20 million people, how can Manchester, with little more than half a million residents, hope to do so?

Perhaps, however, scale is not the only factor that matters.

London prospered not simply because it was large, but because it was diverse, open and, by the standards of pre-twentieth-century Europe, relatively egalitarian. Inventors, financiers and entrepreneurs could meet in coffee houses, exchange ideas and build businesses together – fuelling both the Enlightenment and the Industrial Revolution. Lloyd’s of London and the Bank of England trace their origins to coffee houses where like-minded people could meet. Cities are hubs, where people crammed together create their own energy. The question, then, is how we deliberately supercharge this synergy so we can compete against the big guys.

For many years, the assumption was that innovation flourished in spacious research parks set in peaceful countryside. Increasingly, the opposite is shown to be true. London’s King’s Cross Basin redevelopment demonstrates the power of clustering. Google, the Francis Crick Institute, Central Saint Martins and numerous other organisations all huddle together in one space, sparking off one another.

Britain is too small to compete with larger economies in mass manufacturing. Our advantage has always been creativity, innovation and entrepreneurship. We should foster that. Super-concentrating our effectiveness to compensate for our lack of scale. We should encourage vibrant innovation hubs across our cities, built around our world-class universities and colleges. Cambridge already provides an excellent model, showing how research, creativity, investment and enterprise can reinforce one another to create sustained economic growth.

So, Andy, as you devolve more power to England’s city mayors, don’t simply provide funding. Give them a blueprint for creating the kinds of innovation hubs that attract talent, investment and ambition. These hubs will develop their own centres of gravity, critically creating opportunities for young people to build successful and affordable lives in cities across Britain.

But as you rebalance our economy, don’t neglect London. It remains our greatest asset—and the engine that will continue to power much of the nation’s prosperity if it is allowed to evolve and develop as it has always done.

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