Londonmaxxing
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Last week I stumbled upon one of the first warm sunny days of the year in London walking North from Kings Cross station. After a long and wet Winter, the sun does fantastic things to Britons. It was no coincidence that later that day social media erupted into a wave of Londonmaxxing — a positivity about a city still among the finest in the world despite negativity from many online.
I’ve got a longer blog post, but I can’t seem to finish it. So here’s a short version.
Why now?
The sun helped, but London is Londonmaxxing now for more enduring reasons.
Due to big improvements in how we measure R&D by the ONS, we only have good data on business R&D since 2018 and only for the wider geography of the Greater South East of England (London, South East, East). But that’s enough to show what’s happening.
Business spending on R&D in the Greater South East of England has risen, adjusted for inflation, by a third since 2018. The sense at this megaregion’s core that it is part of building the future flows from this.
The public sector is the foundation of this success. Nowhere is that more evident than at Kings Cross and St. Pancras. Much of the over £120bn that has been invested in transport infrastructure in London runs through the site or within a mile. Thameslink upgrades, The Elizabeth Line, huge tube renewals and improvements, high speed rail to the continent, and soon HS2. These are just some examples of many.
The public sector hasn’t just been building world-class infrastructure, it has been building world-leading institutions of research and knowledge. The British Library, The Francis Crick Institute, The Digital Catapult, and The Alan Turing Institute are just a few examples. The latest addition is ARIA, the UK’s newest R&D funding body. Announced in 2020 they opened in Kings Cross in 2023.
I was disappointed that ARIA chose London as its location. It meant I didn’t apply to be a Program Director and I know other talented people who similarly opted out. Putting so many of our national institutions in one place leaves a lot of talent on the table. It also shapes the problems we work on as a country. I shared my application on what I would have done and it’s notably completely different to any of the programs that are being worked on.
My fear was that ARIA, in London, would do what institutions in London tend to do. Spend their money in and around London. And looking through ARIA’s recent accounts, and working with Gemini to make reasonable assumptions and extrapolations, that is what they have done in their first three years.
ARIA are just a small part of the increase in R&D in the Greater South East, especially in London. Spending on R&D by the public sector in London has been rising slowly but steadily for decades.
At this point we need to switch to less reliable statistics. The ONS massively improved their methods for measuring business R&D in 2018 with good regional data appearing in 2021. The previous series can only be patched together with reasonable adjustments. You’ll have to trust me that I’ve done those adjustments reasonably, or calculate your own. Having wrestled with AI on this issue for a few days, I would recommend against that.
Business spending on research and development in London, literally building the future, has exploded in the past decade. London has transitioned from a global laggard on business R&D spending to being a competitor within Europe and the world. Londonmaxxing is the natural expression of this growth.
Britmaxxing
Can the same be said of Britain more broadly?
To answer that question, let’s look at North West England. Home of Britain’s first Nobel Prize win (Liverpool), Industrial Revolution (Manchester), highest intensity cluster of private sector R&D (Cheshire), core of Britain’s Chemical, Nuclear, and Defence industries, and the centre of Europe’s third largest city macroregion after London and Paris. It’s also where I think ARIA should have been located.
Comparing London and North West England has a nice feature. With similar populations (7.8m vs 8.9m) we don’t need to adjust for population. The 12% difference in population is insignificant compared to the differences I’m about to show. We can just compare absolute numbers.
The UK public sector has always spent much more on R&D in London than in the North West. The gap has widened in recent decades even while we talked about levelling up.
In stark contrast, the private sector long spent much more on R&D in North West England than in London.
Richard Jones and I wrote our paper The Missing £4bn on the seeming misallocation of public money that this implied. The boom in London’s R&D changes that story. Decades of high spending by the state on R&D in London have done exactly what we would expect and finally attracted the private sector.
Meanwhile, decades of neglect by the state have left R&D spending by businesses in the North West to continue their stagnation. The most recent data shows the lowest business spending on R&D in North West England on record.
The ratios of public to private spending on R&D are now about the same between London and North West England and the case for reallocation of funding has faded away. Some will celebrate that. I am frustrated at the opportunity we ignored and the comparative strengths we have now lost to build on.
Self-interested capitalism is a fantastic antidote to prejudice. Despite my infamous views on the topic, the incentives that the public sector offers to locate in London are so large that my company opened an office there last year. We cannot access the ecosystem that our national government built there from a distance, and we cannot afford to opt out completely.
The wasted opportunities for the North are not limited to R&D investment. Transport investment has been stronger in North West England than most other regions outside of the South East, but they remain far lower than London.
Manchester is the largest city in Europe without a metro system. HS2 is cancelled to it. Large upgrades such as Northern Powerhouse Rail have been booted into the distant future yet again.
To return to the first graphs in the blog post, we see that the Greater South East has much to celebrate. R&D is growing fast, supported by decades of public sector support, most recently in a new funding body ARIA that is supporting innovation there with huge preference. And the rest of the country is falling behind.
Londonmaxxing is a good meme. It expresses a positive feeling that is evident in the data and well founded in the economy. Extending it to Britain is done with good intentions, to not leave the rest of us out, and I appreciate the sentiment.
But I would urge those tempted to do that, especially anyone with any power at all to change the underlying economic and political patterns at play, to think how regions whose underlying data is so different feel when they are encouraged to show the same positivity.
Manchester will always talk itself up. As will Leeds and much of the rest of the North. But talking ourselves up on foundations that are weak and weakening risks veering into delusion. Fake it until you make it only works for a while. You cannot meme an ARIA in Manchester, a National Data Library in Leeds, or a modern transport system into existence. And you cannot build a modern, innovative, thriving economy worthy of Britainmaxxing about online without that.