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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 clusterÂ’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 clusterÂ’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.

Suggested Citation

  • Gary A. S. Cook & Naresh R. Pandit & Jonathan V. Beaverstock & Peter J. Taylor & Kathy Pain, 2004. "The Clustering of Financial Services in London," ERSA conference papers ersa04p49, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa04p49
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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa04/PDF/49.pdf
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    References listed on IDEAS

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    1. Henderson, J. Vernon, 1986. "Efficiency of resource usage and city size," Journal of Urban Economics, Elsevier, vol. 19(1), pages 47-70, January.
    2. Maskell, Peter & Malmberg, Anders, 1999. "Localised Learning and Industrial Competitiveness," Cambridge Journal of Economics, Oxford University Press, vol. 23(2), pages 167-185, March.
    3. 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, vol. 9(2), pages 195-224.
    4. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, pages 630-640.
    5. Baptista, Rui & Swann, Peter, 1998. "Do firms in clusters innovate more?," Research Policy, Elsevier, pages 525-540.
    6. 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, vol. 13(3), pages 351-375, September.
    7. 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, number 9780198289593.
    8. Roberta Capello, 1999. "Spatial Transfer of Knowledge in High Technology Milieux: Learning Versus Collective Learning Processes," Regional Studies, Taylor & Francis Journals, vol. 33(4), pages 353-365.
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    Cited by:

    1. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Forecasting ECB monetary policy: accuracy is (still) a matter of geography," Working Paper Series 578, European Central Bank.
    2. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Geography or skills: What explains Fed watchers’ forecast accuracy of US monetary policy?," Working Paper Series 695, European Central Bank.
    3. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2006. "Forecasting ECB monetary policy: accuracy is (still) a matter of geography," Discussion Papers 2006/11, Free University Berlin, School of Business & Economics.

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