East London is the centre of the UK's hopes for a return to economic growth. Local authorities can learn by its example
Last week's worse than expected GDP data – a 0.7% contraction in the last quarter – throws a spotlight on George Osborne's search for economic growth. Apparently the diamond jubilee holiday contributed to the decline, but the Olympics will provide a boost that bodes well for the third quarter of the financial year. These statements reinforce the pivotal role of London in our national economic fortunes.
All local authorities and local enterprise partnerships (LEPs) need growth strategies that make the most of economic relationships with London. However, another London announcement is arguably just as significant to our long-term economic prospects – the opening of the new High Speed Sustainable Manufacturing Institute (HSSMI) close to Ford's Dagenham factory in east London.
It seems counterintuitive to mention it during the Olympics, but London remains the UK capital of manufacturing. The latest Nomis figures show that, although London has the lowest proportion of employment in manufacturing of any LEP area, it actually still has by far the largest absolute number of manufacturing employees at 178,200.
Yet London's importance in manufacturing is not principally a function of its employment footprint. The capital's continuing pre-eminence as Europe's leading world city depends on its industrial capabilities. Running and maintaining transport systems, the logistics of supplying the city, minimising and managing waste, delivering the infrastructure and support for knowledge-based, consumer and residential sectors are huge undertakings of industrial scale. London's financial and business services also provide significant sources of private sector resourcing and capability for UK manufacturing's expansion into new national and international markets.
In short, for councils and LEP areas that consider manufacturing an important sector, London provides both the major national market for industrial goods and services, and also the most likely supply of finance for manufacturing growth across the UK. How authorities and LEPs understand and help their businesses connect to these markets will be a major determinant of how and when local growth resumes.
If HSSMI is an understated reminder of London's manufacturing prowess, it is potentially a major milestone in the long-term economic future of east London, where the economic and social challenges are as acute as anywhere in the UK. The latest GVA per capita figures for the sub-region for outer east and north-east London is £13,429. This is a mere 12% of the figure for inner west London, which stands at £109,278; the degree of economic inequality in our world city is four times greater than elsewhere in Scotland and the rest of England put together.
Of the flagship investments made to redress the balance, the Olympic legacy, Crossrail, and the emergence of a new tech city at "Silicon Roundabout" are the most striking. But as a recent report on Tech City by the thinktank Demos suggests, most of the impact of these initiatives will be realised in inner east London – with diminishing ripples into Barking and Dagenham, Havering, Redbridge and Thurrock across the border in south Essex. This begs the question of what the economic foundations for growth in outer east London might be in the medium and longer term.
HSSMI points to a potentially powerful scenario: building on Ford, the new London gateway port at Thurrock and the low carbon environmental goods and services in the London Sustainable Industries Park, east London can provide a hub for the industrial capabilities needed to keep London functioning as a strong, growing and internationally competitive world city.
London in 2012 points to a return to growth for the whole UK economy, and steers the strategies of all local authorities and LEPs in this process. Amid the noise and glamour of London 2012, local leaders need to recognise and build on London's role as a driver of manufacturing growth throughout the UK. They need to replicate the implicit process outer east London is going through (of which HSSMI is a signifier) to determine their own future credible and deliverable roles and functions in the global and local economy.
David Marlow is director of Third Life Economics and a former local government chief executive
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