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The Clustering of Financial Services in London

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  • Gary A. S. Cook
  • Naresh R. Pandit

    ()

  • Jonathan V. Beaverstock
  • Peter J. Taylor
  • Kathy Pain

    ()

Abstract

This paper reports a one-year study which investigated the clustering of financial services activity in London. A questionnaire asking about the advantages and disadvantages of a London location was sent to a stratified sample of 1,500 firms and institutions. In addition, thirty-nine on-site interviews with firms, professional institutions, government bodies and other related agencies were conducted. The study finds that banking, including investment banking, forms the cluster’s hub with most other companies depending on relationships with this sub-sector. Generally, the cluster confers many advantages to its incumbents including enhanced reputation, the ability to tap into large, specialized labor pool and customer proximity. The localized nature of relationships between skilled labor, customers and suppliers is a critical factor which helps firms achieve innovative solutions, develop new markets and attain more efficient ways to deliver services and products. Particularly important are the personal relationships which are enhanced by the on-going face-to-face contact that is possible in a compact geographical space. Many of the cluster’s advantages are dynamic in that they become stronger as agglomeration increases. The study also finds important disadvantages in the cluster which threaten its future growth and prosperity. These include the poor quality and reliability of transport, particularly the state of the London Underground and links to airports, increasing levels of regulation and government policy that is not co-ordinated with the whole of the cluster in mind. Key words: Industrial clustering, agglomeration, financial services.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p49.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p49

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References

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  1. Swann, G. M. Peter & Prevezer, Martha & Stout, David (ed.), 1998. "The Dynamics of Industrial Clustering: International Comparisons in Computing and Biotechnology," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198289593, October.
  2. Cook, Gary A. S. & Pandit, Naresh R. & Swann, G. M. Peter, 2001. "The dynamics of industrial clustering in British broadcasting," Information Economics and Policy, Elsevier, Elsevier, vol. 13(3), pages 351-375, September.
  3. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 630-40, June.
  4. Henderson, J. Vernon, 1986. "Efficiency of resource usage and city size," Journal of Urban Economics, Elsevier, vol. 19(1), pages 47-70, January.
  5. Baptista, Rui & Swann, Peter, 1998. "Do firms in clusters innovate more?," Research Policy, Elsevier, Elsevier, vol. 27(5), pages 525-540, September.
  6. Roberta Capello, 1999. "Spatial Transfer of Knowledge in High Technology Milieux: Learning Versus Collective Learning Processes," Regional Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(4), pages 353-365.
  7. Naresh Pandit & Gary Cook & G. M. P. Swann, 2002. "A Comparison of Clustering Dynamics in the British Broadcasting and Financial Services Industries," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(2), pages 195-224.
  8. Maskell, Peter & Malmberg, Anders, 1999. "Localised Learning and Industrial Competitiveness," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 23(2), pages 167-85, March.
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Cited by:
  1. Mikel Larreina, 2008. "Financial centres in peripheral regions: the effect of the financial services industry on regional economy - the case of the Scottish Financial cluster," CRIEFF Discussion Papers, Centre for Research into Industry, Enterprise, Finance and the Firm 0805, Centre for Research into Industry, Enterprise, Finance and the Firm.
  2. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Geography or skills: What explains Fed watchers’ forecast accuracy of US monetary policy?," Working Paper Series, European Central Bank 0695, European Central Bank.
  3. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Forecasting ECB monetary policy: accuracy is (still) a matter of geography," Discussion Papers, Free University Berlin, School of Business & Economics 2006/11, Free University Berlin, School of Business & Economics.
  4. Michael Ehrmann & Marcel Fratzscher & Helge Berger, 2006. "Forecasting ECB Monetary Policy," IMF Working Papers, International Monetary Fund 06/41, International Monetary Fund.

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