In 2012, Docklands finally overtook the City district to become the highest-ranked employment zone for financial services in London
After thirty years, the long-term economic verdict on the redevelopment of London Docklands seems to be: a success! In 2012, Docklands finally overtook the City district to become the highest-ranked employment zone for financial services in London.
July 2012 marked the thirtieth anniversary of the establishment of east London’s Isle of Dogs Enterprise Zone, sited in the Docklands area. Coincidentally, Docklands finally overtook the City district in 2012 to become the biggest urban employment zone in London for banking and financial services.
This case study examines the long-term economic success of the Docklands redevelopment plan, which was originally guided by the London Docklands Development Corporation (LDDC). As part of this timely topic update, we take an additional look at the resulting land-use and landscape changes that are taking place in the City district, part of London’s old Central Business District (CBD).
Evaluating the success of the redevelopment of London Docklands
Land use changes in London City district
Thirty years have passed since dockside parts of London’s Isle of Dogs area began a process of regeneration and rebranding as ‘Canary Wharf’. London’s docks, sited east of London’s CBD on the banks of the Thames, had suffered from dereliction, decay and rising unemployment since the 1960s. In the 1980s, an ambitious development plan for the whole Docklands area aimed to achieve long-term regeneration by attracting a new generation of ‘post-industrial’ employers (service sector businesses). Coinciding with the thirtieth anniversary of the establishment of the Isle of Dogs Enterprise Zone, recent newspaper reports tell us that a major economic success was achieved. However, some journalists continue to criticise the long-term social costs of the redevelopment scheme.
"In July 1981, the London Docklands Development Corporation (LDDC) was set up with a daunting mission of regenerating hundreds of acres of industrial wasteland in east London. The LDDC paved the way for the DLR, Canary Wharf, London City Airport, the Jubilee Line extension and the London 2012 Olympic Games. Few people in 1981 would have believed that Docklands would become such an economic powerhouse and cultural hub, with a rapidly growing residential population." (Tower Hamlets press release, 2011)
The "industrial wasteland" described above is part of London’s Isle of Dogs area, land enclosed on three sides by a meander bend of the Thames. The Isle of Dogs lies east of the London ‘s City district (a part of the Central Business District which, back in 1981, was London’s principal financial hub for national and international commerce). The decision to regenerate Isle of Dogs was taken at the start of the 1980s when the London Docklands Development Corporation (LDDC) was tasked by the UK government with bringing new private investment to London’s east end and deserted docks. The central plank of the LDDC’s strategy was to target the Isle of Dogs district for environmental and infrastructure improvement. They hoped that the wider surrounding area would benefit from trickle-down effects.
Why was the Docklands development plan needed?
History shows us that periodic changes in local industrial and employment structures have been driven by global changes over which national or local government has little or no control. Bold political decisions may need be taken to attract and support new rounds of investment during those times when old industries are seen to be failing.
In the case of London, the later decades of the Twentieth Century saw a major structural shift away from industrial employment patterns established in the eighteenth and nineteenth centuries. Large manufacturing employers, such as textile and food processing industries, began to close their doors in London. Reasons for this change included:
Global shift of manufacturing industries After the 1960s, the UK faced competition from start-up manufacturing firms sited in newly industrialised countries (NICs) with much cheaper labour costs. The mass production of electronics and household goods in Asia (initially in South Korea and more recently in China, for instance) led to massive factory closures in the UK. Between 1960 and 1975, the number employed in London’s manufacturing sector (including furniture, clothing and printing) fell from 1.5 to 0.8 million with knock-on job losses for the docks (such as those located in London) and railways.
Containerisation Shipping containers may be "the lifeblood of globalisation" but they also became the nails in the coffin for what remained of London’s dockside industries. After the 1960s, newly-designed transport ships grew in size to carry larger containers in ever-greater numbers. However, larger vessels were unable to travel inland along the Thames as far as the Isle of Dogs. Instead, new docks were built downstream in deeper water, closer to the North Sea, at Tilbury. More inner city dock closures followed for London.
The rise in unemployment brought about by global shift and containerisation left inner areas of east London with a severe economic challenge to overcome. Further environmental and social challenges also became associated with the deindustrialisation of inner city areas during the 1970s. These included:
Deteriorating terraced housing stock which was first built in the late 1800s (one-third of housing in London’s Docklands was considered unsatisfactory for habitation in 1981)
Traffic congestion along narrow roads whose construction pre-dated the advent of the motor car
Building dereliction and ground pollution left in the wake of deindustrialisation (by 1981, 50% of Docklands was classified as being derelict)
Closure of retail services in areas experiencing middle-class decentralisation (those people who could afford to generally moved out towards London’s suburbs, leaving concentrated levels of poverty behind ; by 1981, unemployment in the Isle of Dogs area had reached 24%, twice the national average)
A general lack of investment in inner city schools and public services
At the time, new opportunities for growth were emerging nationally for the UK. Although traditional manufacturing industries had entered decline, a post-industrial service economy (comprising retailing, financial services and the media) had started to make a far greater contribution towards the UK’s gross domestic product (GDP). However, out-of-town greenfield sites (for instance, along the M4 corridor) were the favoured locations for new service providers in southeast England, rather than abandoned sites like London’s Docklands. This was because the costs of acquiring and redeveloping brownfield land in central London remained prohibitively high. Also, skilled service sector workers were unlikely to be attracted to inner urban areas, such as the Isle of Dogs, due to social, environmental and quality of life issues. What could be done to entice new service sector investment towards such places?
Since the early 1980s, government-led regeneration strategies have had an enormous impact on London’s dockside districts, focused in the first instance on the Isle of Dogs area (part of which is now known as Canary Wharf).
The first sign of a radical urban policy rethink - on a national scale - had come with the 1978 Inner Urban Areas Act (up until then all planning had focused on decentralisation and the accommodation of overspill, rather than on addressing problems in the existing inner city)
Three years later, in 1981, Enterprise Zones were established for the first time in British cities (areas designated as being in need of special assistance, where new firms were exempted from local tax for a decade). These areas were to be administered by Urban Development Corporations (known as UDCs), whose aim it was to regenerate derelict inner city areas
UDCs, such as the London Docklands Development Corporation (LDDC) were given the power and money to acquire and reclaim brownfield sites. They also played an important role in developing local infrastructure to help "pump-prime" these sites for rounds of new investment from the private sector
For almost 20 years, the LDDC was responsible for planning the redevelopment of the Docklands areas (as it became known), working in partnership with other players including the national government (who designated the Isle of Dogs Enterprise Zone in 1982) and the property developers who would ultimately spearhead the large building projects in Canary Wharf.
Thirty years on, the Financial Times (14 May 2012) reports that Canary Wharf has finally "come of age". Describing it as the UK’s "new" financial centre, the paper explains that Canary Wharf just recently overtook the City of London as the biggest employer of bankers in Europe.
A recent transfer of 8,000 jobs by US bank JPMorgan from various sites around the City to the group’s new European headquarters in Canary Wharf has finally "tipped the balance of power three miles eastwards down the Thames"
Since July 2012, the 16 biggest banks in the UK now jointly employ 44,500 bankers in Canary Wharf, compared with 43,300 in the City
HSBC and Barclays are now both headquartered in Canary Wharf. So too is Credit Suisse’s investment banking operation and the US banks Citigroup and Morgan Stanley
It has taken decades for this success to be achieved. "But more than 20 years after Canary Wharf’s first tower blocks sprang up, the district has finally sucked the majority of bankers out of the City of London, the UK’s financial heart." There are, suggest the Financial Times, several keys to Canary Wharf’s success.
Its large-capacity high-rise blocks have allowed large employers such as JPMorgan to house all their staff in a single site. In the older built environment of the City, banks typically need to acquire an entire suite of Victorian or Georgian buildings, each with far fewer floors than the Canary Wharf skyscrapers. Although some new high-rise buildings, such as "The Gherkin", have recently joined the City skyline, there are not enough modern buildings to meet demand
Canary Wharf’s large modern high-rise buildings also have sufficient space to provide employees with a large canteen and a gym. Overseas investors and transnational corporations, such as American banks, expect to be able to provide their employees with these kinds of amenity
Rents are around one-third cheaper than in the City (annual average rents for so-called prime office space are running at £36 per square feet in Canary Wharf, compared with £55 per square feet in the City)
However, the Guardian (15 May 2012) adopts a far more critical view of the economic and social transformations witnessed in east London since the 1980s. This newspaper report asserts that:
Canary Wharf has been "the most spectacular expression of London's transformation" into a city with levels of inequality that previous generations had sought to eliminate. An enormous wealth divide now exists between the highest-class housing areas and poor areas around the edges where no so-called "trickle-down" effect has actually been experienced, in the Guardian’s view
Very few of the new jobs created since 1981 have gone to those families who lost their jobs when the docks of London closed. Those local people who did gain new jobs often found themselves occupying low-paid roles, such as cleaners or baristas in the local coffee bars
The new housing was built. "Inflated prices, dictated by the means of a captive market of bankers, soon forced up rents and mortgages in the surrounding areas" – although new housing developments did include social housing which had more affordable rents
The mixed opinion we see here in the newspapers, as they discuss local changes in London’s Docklands, mirrors another debate over the impacts of globalisation over the same 30-year time period. Globally, more wealth now exists than in the past, however some people worry about its increasingly uneven distribution . Wealth creation, taken at face value, can always be presented as good news. However, the distribution of that wealth demands critical inquiry and evaluation.
One consequence of the London Docklands development plan has been the loss of employment in financial services in London’s old City district. As one wave of businesses has moved out, others have moved in, resulting in some interesting changes in land use. Increasingly, this old part of the city’s CBD has become home to technology and media companies.
‘The City’, or Square Mile, is the core of London. It is a small area around which all urban growth has historically been focused, since medieval times. Over time, the City district’s residential population has shrunk to just 7,000 people but around 300,000 people commute into work there every day. The City district is the traditional home of the financial services industry, including banks, insurance companies and a range of financial, legal and advisory businesses. These firms have traditionally required a prestigious central London address that is easily accessible for national and international clients travelling to London. A central location also maximises the banks’ access to a hand-picked, highly skilled workforce drawn from the entirety of London’s commuting suburbs and the wider southeast region.
However, in recent years, the land costs in the City have become too high, even for some of the most successful banks. Since the global credit crunch began in 2008 (see our previous feature), the financial services sector has suffered severe economic losses (including a plummeting share price for some of the biggest banks, such as RBS). As a result, some smaller companies have gone bankrupt. Others have relocated to Docklands where land is cheaper.
The Financial Times (15 May 2012) notes that "as recently as 2008, the Square Mile was given over almost exclusively to banks, insurers, and a tightly-knit coterie of financial, legal and advisory businesses. Now, the combination of a shrinking financial services sector, relocations to Canary Wharf, and rapidly rising rents in central London’s other business districts is reconfiguring the tenant base."
Financial services companies accounted for just 20 per of all new office space leased during 2011. Instead, a range of different types of business have arrived, providing the City with a more diverse character. Technology, media and telecommunication companies are at the vanguard of this movement into the Square Mile (as the City district is sometimes called).
Skype, Oracle, Groupon and United Business Media have all arrived in the City district over the past few years
New retail and entertainment spaces have been created in the City district, such as One New Change. This is a shopping mall that has attracted a range of upmarket restaurants, including Jamie Oliver and Gordon Ramsey, since opening in 2010
Older residents and workers are concerned with the loss of the City’s distinctive cultural landscape, however. As the banks leave, "there are those who lament the gradual decline of an institution. There are concerns, for instance, that the bars nestled in the gloom of the City’s winding alleys will be left behind as workers head to the new entertainment complexes" (Financial Times, 15 May 2012).
‘Canary Wharf claims high ground on City’ Financial Times 14 May 2012
‘The myth that Canary Wharf did east London any good’ Guardian 15 May 2012
‘City no longer preserve of financiers’ Financial Times 15 July 2012
Written by Dr Simon Oakes, a senior GCSE, A-level and Diploma examiner who teaches at Bancroft’s School, Essex
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