Manufacturing industry and inner city regeneration

0305-9006/82/‘030133-55$27.50/O Copyright @ 1982 Pergamon Press Ltd

Progress in Planning, Vol. 18, pp. 133-187, 1982. Printed in Great Britain. All rights reserved.

Manufacturing Industry and Inner City Regeneration An economic study of the London Borough of Tower Hamlets

CRISTJNA HOWICK and TONY KEY Roger Tym and Partners, and CES Ltd.

Contents Acknowledgements

135

1.

Introduction

137

2.

The Context of Inner City Policy 2.1. The ‘Inner City Problem’ 2.2. SmaN Area Economic Initiatives 2.3. Housing Policy

138 138 138 141

3.

Tower Hamlets: The Nature of the Problem 3.1. A Labour Market Imbalance

143 143 150 151

3.2. 3.3.

4.

Unemployment Conclusions

Employment Changes in Manufacturing Industry 4.1. The Nature and Causes of Employment Change

4.2. 4.3.

Components of Employment Change Plant Size and Industrial Performance 133

152 152 154 157

Progress

134 4.4.

4.5. 4.6.

in ~iannjng

160 161 166

The Age of Firms and Plants Structural Change and Adjustment Conclusions

5.

The Development of Manufacturing Plants 5. I. methodology 5.2. Business Performance and Constraints 5.3. Sites and Premises 5.4, Other Constraints on Output 5.5. Industrial Location and Mobility 5.6. Conclusions

168 168 168 171 174 177 181

6.

Employment Policy in Tower Hamlets 6. I. The Policy Frarne~~~or~ 6.2. The Objectives of Policy: Employment 6.3. Strategies for Industrial Policy

183 183 184 185

Balance

Acknowledgements We are grateful to the Gatsby Foundation for their financial support of the project. The work could not have taken place without the co-operation and assistance of members and officers of the London Borough of Tower Hamlets. Our thanks also go to the many firms in the area who submitted to lengthy and demanding interviews. This report has benefitted greatly from the assistance and advice of a number of the Centre for Environmenta Studies staff. Our thanks to Marnie Caton, Sylvia Gilpin, Tony Harrison, Lucian Hudson, Stephen Job, Ross McKay and Stefan Markowski.

135

CHAPTER

1

Introduction The research on which this paper is based was conducted in 1978-79 in the East London borough of Tower Hamlets. The study aimed to investigate the economic problems of this inner city area, and to put forward recommendations for local authority economic planning. The bulk of the paper deals with three research exercises: an analysis of labour market trends, a study of the components of employment change in manufacturing, and an interview survey of local manufacturing employers. The presentation of these results is prefaced with a general discussion about the context of inner city policy, as conceived, and in part financed, by central government. This context places severe limitations on the results which may be expected of local authority economic action in the inner cities. At the time of writing (1981), the most recent of the research findings reported below are over two years out of date; while the results of the study are not altogether encouraging, they do reflect general economic circumstances very much better than the present. Disappointingly, however, there would be only limited scope for updating our work even if we were able to do so. Despite the accumulation of research studies critical of the official view, the general framework of inner city policy has changed very little since its adoption in the late 1970s. Of the three pieces of empirical research discussed in this paper, two make use of official employment statistics for the years to 1976; it is a matter for serious concern that such figures are still not available for any date later than 1977. Similarly the cancellation of the 1976 Census means that up-to-date population statistics are still unavailable, pending on the results of the 1981 Census. The interview survey of employers, on the other hand, would benefit greatly from being repeated in the changed economic climate. Longitudinal studies of firms are all too rare in this area of research, and would provide important evidence on the urban repercussions of macroeconomic trends. Our findings can only be generalised insofar as Tower Hamlets is typical of inner cities generally. The borough clearly has the socio-economic features commonly associated with the ‘inner city problem’; and a number of our results strongly bear out general hypothesis about inner cities, or parallel findings from other areas. Nonetheless, the present research suffers from the inevitable limitations of a case study: in looking at a single local economy, it is difficult to distinguish between features peculiar to the area, and those which are of wider relevance.

137

CHAPTER

2

The Context of Inner City Polk y 2.1.

THE

‘INNER

CITY

PROBLEM’

In sharp contradiction to the earlier consensus on these matters, it has by now become generally accepted that the residents of inner cities suffer from serious economic disadvantage; and that this disadvantage, of which the most obvious measure is high relative unemployment, is a persistent problem rather than a short-term symptom of economic transition. Most commentators also agree on the general causes of the problem. Firstly, there is a shortage of jobs in the inner cities in relation to the resident population, owing to the decentralisation of employment away from the urban cores. Until recently, the effects of job loss on relative unemployment rates have been mitigated by the even faster decline of population. On the other hand, however, the fall in population and employment has given rise to occupational imbalances in the labour market, or ‘mismatch’. Specifically, the losses of both population and jobs have been selective. The decentralisation of employment has particularly affected manufacturing and the ‘lower-order’ services; while out-migration has been strongly biased towards white-collar and skilled workers, leaving behind those at the bottom of the occupational precisely those groups for whom local job opportunities have been structure -i.e. disappearing fastest. The second factor contributing to economic disadvantage in inner cities also relates to selective migration and population structure. The inner areas contain exceptionally large proportions of low-skill workers, who are at high risk of being unemployed regardless of where they live, because they have difficulty in competing with their better qualified counterparts. Consequently, even if unemployment rates for inner city residents within each occupational group were no higher than the national average, their overall unemployment rate would still be above average.

2.2.

SMALL-AREA

ECONOMIC

INITIATIVES

In response to the increasingly apparent problems of economic disadvantage, the second half of the 1970s saw the development of an economic policy for inner cities. Although initiated by central government, the policy was to be largely implemented by local authorities, whose responsibilities were thus extended into an unfamiliar area. Inner city policy seeks to influence both population and employment change in the areas 138

Manufacturing

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139

concerned, and in the same direction - upwards. In respect of population, a related objective is to ‘improve’ the occupational mix by keeping or attracting white-collar and skilled manual workers. If one accepts the above account of inner city economic problems, the aim of stemming employment loss can hardly be faulted. However, the implementation of this objective is open to serious criticism. There is a glaring inconsistency between the spatial scale of inner city policy and that of the employment loss it attempts to counter. Over the last twenty years or so, all large urban areas, including both the conurbations and major free-standing cities, have been losing manufacturing jobs. Employment decline, which was earliest and most severe in the inner areas, has extended to the outer areas; while growth has shifted to smaller urban centres and to rural locations. This ‘urbanrural’ shift has been identified, by a large body of research, as the dominant feature of spatial change in the British economy. Earlier views of employment change, and the incidence of unemployment, stressed the difference between prosperous and ‘problem’ regions; in the last ten years, the emphasis has shifted to differences within regions, with the large cities in the worst position. The policy response to these massive trends has been to grant economic assistance to small, arbitrarily selected areas within the inner cities, without any comprehensive attempt to reverse the severe economic decline of the much larger cities and conurbations of which these ‘pockets of deprivation’ are part. The Inner Urban Areas Act of 1978 created a complicated hierarchy of small priority areas, comprising the Partnerships, Programmes and Designated Districts. Since then, small area economic initiatives have proliferated, and not only in the inner cities. Local authorities, and other public agencies, have created countless Industrial Development Areas, Business Development Areas and so forth; the central government has recently added the Urban Development Corporations and Enterprise Zones to this ever-lengthening list. These fragmented efforts may or may not add up to an overall programme large enough to slow down the urban-rural shift; even if (improbably) they do, there is no overall strategy, either at national or metropolitan level, to guide and co-ordinate the various piecemeal measures, or to determine priorities for the allocation of public resources between areas. The current approach compares most unfavourably in this respect with traditional regional policy, which was based on a systematic hierarchy of areas receiving different levels of assistance according to theseriousnessoftheirunemploymentproblems. If the stimulation of employment in small, arbitrarily selected parts of cities fits uneasily with a wider perspective of the general decline affecting the urban economic base, this strategy appears even more ill-advised if we consider the operation of labour markets. Put at its simplest, if areas in which the condition of the population is worst are to be favoured by the stimulation of local employment, how are we to ensure that it is the residents of those areas who benefit from the jobs created? Inner cities have labour catchment areas extending throughout their respective conurbations, and workers resident in inner areas tend to be short of the skills and abilities attractive to employers. Therefore, a policy confined to stimulating employment in small areas seems likely to provide an insignificant boost to employment opportunities in the conurbation as a whole, rather than a dramatic boost to the small areas in which the new jobs are placed. If the policy is to benefit disadvantaged residents, it should, at the very least, specifically

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encourage the employment of these groups, by offering appropriate incentives to firms, or by making the achievement of employment targets a condition of other assistance. Nowhere are the lack of a coherent spatial policy, and the contrast between small area policies and a conurbation-wide problem, more evident than in Greater London. The most recent attempt to develop an economic strategy for the area is embodied in the early versions of the Greater London Development Plan (e.g.) the Draft Written Statement, (1973). By the time the final version of the Plan was published in 1976, this attempt had manifestly failed, thanks to the decision of the Layfield Enquiry that economic objectives were inappropriate to a planning authority. In the intervening years, there has been no attempt to revive the economic aspects of the GLDP, although the economic role of local government has become entirely accepted, and in London there have been a number of economic initiatives. Under the Inner Urban Areas Act of 1978, the worst affected local authority areas have been allocated priority status, and varying powers. The coverage of the core area is by no means uniform: only three of the eleven inner London Boroughs have been granted full Partnership status. Obviously, this means that areas of population deprivation, industrial decline and dereliction receive equal treatment only insofar as they fit into artificial local government boundaries. There are inevitably striking anomalies, with neighbouring authorities showing the steepest possible gradient between no special powers at all and the maximum possible under the current urban policy, both within London’s core area and at its boundary. This complex pattern of priorities and powers is still further complicated by the fact that individual boroughs, whatever their status, hold the responsibility for identifying their particular problems, defining objectives and implementing economic policies. While all must operate within the constraints laid down by central government policy, a brief review of their activities and publications is sufficient to show very considerable variation in their perceptions of economic problems and their proposed solutions to them. The boroughs vary considerably in the extent and depth of their research into their local economies. Some, most notably Southwark, have gone much of the way towards establishing continuous and detailed monitoring of local industry. When this is based, as in Southwark, on a land use/property register the system looks very like that originally envisaged by the GLDP, with employment being controlled through the medium of industrial floorspace. In other areas, a substantial research effort has gone into investigating ‘problems’ in the local economy by means of sample surveys, rather than establishing a comprehensive monitoring system. This approach is of course appropriate to the local ‘action’ approach to employment problems, using limited resources to attack the main constraints on the development of local firms, or meet the needs of those most exposed to economic deprivation. The fragmentation of research inevitably means there are considerable overlaps. Many boroughs, for example, have been drawn into a detailed investigation of local industries, collecting a mass of statistical and survey material on manufacturing in general, and in particular industrial sectors. It is impossible to avoid the impression that many such studies are being duplicated in different, often adjoining areas. They are also often hamstrung by the extremely limited areas they cover, which cut across what

~aRufacturjng

industry

and inner

City ffege~era~jon

141

natural boundaries industrial concentrations in London exhibit. Any attempt at understanding what is happening in a particular local industry very quickly involves factors which spread over artificial borough boundaries, most obviously in the determinants of demand and in the linkages between firms and industries in different parts of London. Despite this serious weakness in the nature of local industrial studies, there have been only the thinnest attempts at providing general studies of London’s industries, which would provide a framework of reference into which the ground level activities of boroughs would more appropriately fit. Such efforts have been confined to a few cursory sector studies published by the GLC in recent years. The same handicaps apply to components of change analyses, industrial surveys and labour market studies being done throughout London, This massive effort has signally failed to provide the information which would enable boroughs to identify how their ‘local economies’ compare and how they differ -which would justify the devolution of so much basic research to the lowest tier of local government. The fragmentation of research is, of course, paralleled by that of policy. Each borough’s employment policy is primarily determined by the authority’s perception of the employment needs of its own residents; accordingly, there are considerable differences between councils, regarding, for example, attitudes to office and warehouse development. The system whereby each authority is in effect regarded as a selfcontained economy is quite inconsistent with the actual operations of the London labour market, in which there are large commuter flows across borough boundaries; so that there is only a tenuous link between the jobs created in any one borough, and the employment opportunities open to its residents. The continuing small area basis of inner city policy is, then inconsistent with what we know about both the processes of industrial location, and the operation of urban labour markets. For these reasons, inner city policy, despite presenting the appearance of a new urban strategy, is only a very partial and inadequate attempt to come to grips with the issues involved in such a strategy.

2.3. HOUSING

POLICY

As noted earlier, current policy aims to stabilise population in the inner cities, contrary to the massive dispersal which has characterised the post-war period. The main way in which policy affects these trends is through the provision of public housing. The end of large-scale slum clearance removed one source of population loss. The building of overspill estates, and publicly sponsored migration to the New and Expanded Towns, have been discontinued; to a larger extent than ever before, inner city authorities are expected to meet the housing needs of residents within their own boundaries. A further policy development has been the attempt to diversify (or ‘improve’) the population mix: authorities seek to retain or attract the higher occupational groups by encouraging owner-occupied housing and experimenting with non-traditional forms of tenure. However, there is no attempt to complement these measures by easing the outmigration of the unskilled and semi-skilled; in the past these groups have generally been

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denied the opportunity to move out, because they cannot afford to become owneroccupiers, and New Town schemes discriminated in favour of skilled workers. We have seen that inner city employment policy seeks to improve the employment opportunities of residents, by closing the gap between demand for labour - or the numbers of jobs on offer - and labour supply - or the numbers of economically active residents. This gap, or labour market imbalance, is particularly large for manual workers at the bottom of the occcupational structure. It follows that any policy to increase or stabilise population, particularly in these low skill groups, is at odds with the economic objective of balancing population and employment. In other words, the more successful are inner city authorities in stabilising population, the more difficult will be the task of ensuring adequate employment opportunities for that population. Nor can the objective of diversifying the socio-economic mix be met without easing the outmovement of the ‘lower’ socio-economic groups, which are heavily over represented in the inner cities. It follows that a reasonable urban policy should improve the outward mobility of the socio-economic groups trapped in the inner cities by earlier housing policies. In putting forward this view - which runs counter to the present conventional wisdom - we are not, of course, advocating any kind of forced movement. Rather, we are saying that the consumers of public housing should be afforded a privilege already possessed by owneroccupiers: an effective choice of where to live. That there is considerable frustrated ‘demand’ from council tenants wishing to leave the inner cities cannot seriously be doubted; we have attempted to make an economic case for satisying this demand, quite apart from the obvious argument on grounds of social justice. In this general discussion of urban policy, we have suggested that, in seeking to ensure adequate job opportunities for its residents, any inner city authority is getting itself a very difficult task. The rest of this paper is more specific, focussing on the particular case of Tower Hamlets. The next chapter attempts to identify the area’s ‘inner city problem’ by looking at labour market balance and unemployment. The remainder of the paper narrows the focus of discussion still further, in examining the causes of employment loss and how it may be prevented or slowed down.

CHAPTER

3

Tower Hamlets: 3.1.

A LABOUR

The Nature of the Problem

MARKET

IMBALANCE

The decline of population and jobs in Tower Hamlets is nothing new. On the contrary, population has fallen continuously from a peak reached, in common with the rest of inner London, around the turn of the century. It is less clear when the turning point in employment occurred, but there has certainly been a continuous decline ever since the early 1950s. Employment decline in the area has tended to accelerate steadily through the postwar period. The annual rate of decline has increased from 1% p.a. (195 1-61) through a 2.5% p.a. (1961-71) to over 4% p.a. in the years since 1971. Population decline has shown a more erratic trend, with the rate slowing or accelerating in response to changes in both birth and net migration rates. The five years to 1978 show a consistent slowing of the rate of population decline, to the point of near-stability between 1976 and 1978. Whether this is a permanent or temporary check to the borough’s historic population loss, it is as yet too early to say. But there is no doubt that there has been a change in the trend of population loss sharper and more sustained than any previously recorded in the post-war period, and that on this basis a much slower rate of population decline can be expected in future. Comparing population with employment change, the two series have moved in parallel to a remarkable extent over the post-war period. There is, therefore, very little in the long-term trends of aggregate population and employment to suggest that the process of decline is in itself a problem. If ‘balance’ in the local economy is defined, on the crudest possible measure, as the maintenance of established relationships between resident working population and local jobs, it is only in the very recent past - the last 3-5 years of our series - that this balance has been significantly disturbed. The depiction of inner city problems as a labour market imbalance discussed earlier does not, however, rest on such crude measures; rather it alleges that dislocations have arisen in the composition of inner city populations and of the jobs available to them. It is worth, however, staying with the aggregate figures for a moment to consider what their future trends may be. In addition to the trends discussed above, a number of other pieces of evidence suggest that the future population of the borough can be expected to stabilise. Largescale housing clearance in the borough is almost at an end; furthermore, new housing is now being built without loss of existing stock, on vacant sites within the docks. On these 143

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grounds, the total amount of housing available in the borough may be expected to increase. The relationship between the housing stock and the resident population depends on notoriously unpredictable indices such as household formation rates and occupancy rates; but, at the upper limit, estimates based on housing capacity plausibly show substantial population increases occurring in the early 1980s. Since the area has also been experiencing very rapid and accelerating decline in local employment, which has shown no sign of a parallel tendency to stabilise, it is reasonable to expect that the aggregate balance between population and employment loss, which persisted throughout the 1960s and 1970s will be replaced in the 1980s by a decline in employment relative to population. For an analysis of the borough’s current problems, however, we must consider the rather more subtle imbalances between the composition of the local working population and that of local employment. This analysis is very seriously hampered by the inadequacy of available data. The exercise demands measures of the skills extent in the residential population and of those demanded by employers, of changes in both these variables over time, and, ideally, of the different causes of those changes. None of these are available from any source other than a full-scale Census of Population. While a good deal has been made of unemployment and vacancy statistics, and of industrial surveys, as evidence of imbalance, any conclusive proof must rest on data from full Censuses of Population. Since the results of the 1981 Census are not yet available, the most recent evidence is for 197 1. Table 3.1 gives a first, fairly crude, version of the borough’s changing labour market balance. It shows a threefold breakdown of jobs and residents in employment for Greater London, the Inner North East Sector of London and the Borough of Tower Hamlets for the years 1961 and 1971. The occcupational classification simply divides the workforce into “operatives ” , “office workers” and “other workers”. There are two major, and perhaps surprising, points of interest. If we examine changes in population and jobs in each occupation group and in each area over the period 1961-71, it is clear that in all cases these changes were closely matched in scale and direction; insofar as there were differences between the two there was a systematic tendency for the decline in population to exceed that in jobs (and for population growth to exceed employment growth). In other words, residents in almost all occupation groups in each area experienced over the decade a relative increase in the availability of local jobs. The only instance in the Table where this was not the case is the category “other workers” in Tower Hamlets: for this group of workers, the level of local employment did fall faster than the number of residents. It should be borne in mind, however, that the period covered included massive, once-and-for-all losses of jobs in dock closures between 1966 and 1968. Even with this unrepeatable impact, the drop in the relevant element of the borough’s labour supply came close to equalling the fall in jobs, and was still considerably faster than the decline in that category of employment in the Inner North East Sector as a whole. Broadening the scale, an identical analysis by the GLC of all sectors of London showed that the same picture can be found throughout the conurbation: almost invariably population decline (growth) in each occupational group ran ahead of (behind) employment decline (growth). These statistics convey the impression of a

Manufacturing

Industry

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City Regeneration

145

TABLE 3.1. Employment and residents in employment: Greater London, Inner North East, Tower Hamlets, 1961, 1971 Residents

in Employment

Employment

1971

1961

1961

1971

No. (000)

%

No. WOOI

%

No. WOO)

%

No. (000)

%

Operatives Office Workers Other Workers

1,459 1,209 1,402

35.9 29.7 34.4

1,104 1,252 1,298

30.2 34.3 35.5

1,507 1,404 1,473

34.4 32.0 33.6

1,163 1,527 1,395

28.6 37.4 34.1

TOTAL

4,070

100

3,654

100

4,384

100

4,086

100

Operatives Office Workers Other Workers

288 130 215

45.5 20.5 34.0

198 124 178

39.5 24.8 35.7

256 93 195

47.1 17.1 35.8

183 100 165

40.9 22.2 36.9

TOTAL

633

100

500

100

544

100

448

100

33 14 41

48.8 12.9 38.3

36 13 33

43.7 16.3 40.0

69 26 57

45.5 17.1 37.4

49 29 41

41.1 24.2 34.1

107

100

100

100

152

100

119

100

Greater London

Inner North East

Tower Hamlets Operatives Office Workers Other Workers TOTAL Source: Census of Population

harmonious labour

and, for London

market.

This picture

residents, obviously

favourable,

adjustment

process

within

the

is at odds with the belief that there has been a imbalance, in Londoners’, or even East Enders’,

progressive dislocation, or worsening employment prospects. In order to improve on this aggregate picture, we undertook a more fine-grained analysis of local trends in labour supply and demand for the Borough of Tower Hamlets. We looked for any actual imbalances in the labour market at the level of the detailed occupational categories - skilled as against unskilled workers, men as against women -which are subsumed within the GLC’s three broad ocupational groups. Unfortunately, this more detailed analysis was restricted by data availability to using figures from the 1966 and 1971 Censuses, and the substantial amount of re-coding required to produce finer and more meaningful occupational categories meant that the analysis could be done only for Tower Hamlets. Even these very limited results, however, effectively dispel the impression of harmonious labour market adjustments conveyed by the cruder analysis. Table 3.2 bears out many of the assertions of ‘mismatch’ theory. It shows that, for a large number of male occupational categories, there were very large disparities between changes in resident population and changes in employment. There was, moreover, a pattern in the nature of disparities, associated with the position of individual occupations in a hierarchy of skill, status and income. Thus the local supply of white-collar and skilled manual workers tended to fall against available local jobs; while less-skilled manual and

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TABLE 3.2.Residents

and employment

by occupation: Tower Hamlets,

Residents

1966, 1971 Employment

1966

1971

% Change

1966

1971

% Change

2,290 1,990 5,940

2,460 1,520 4,660

+7 -24 -22

10,350 6,570 10,250

9,620 5,950 8,140

+7 -9 -21

Services Transport

1,930 5,710 14,430

1,490 5,750 11,210

-23 +1 -22

3,500 6,820 20,790

3,650 5,650 14,320

+4 -17 -31

Skilled Semi-skilled Unskilled Const~ction

15,360 5,010 7,700 4,020

11,180 4.350 61080 3,290

-27 -13 -21 -18

21,930 5,750 7.720 4,440

17,980 4,760 5,660 3,610

-18 -17 -28 -19

MALES Managerial Professional Clerical SeIling

Inadequately

Described

TOTAL

890

2,140

+109

510

850

f4

65,290

54,130

-17

98,650

80,190

-19

880 2,240 9,490

920 1.880 8;670

+5 -26 -9

1,670 4,710 10,960

1,730 4,530 10,350

+4 -4 -7

2,010 11,680 590

1,440 8,650 420

-28 -26 -29

2,100 8.750 640

1,330 7,350 440

-37 -16 -32

3,950 9,450 480 30

2,690 6,450 740 40

-32 -32 +54 +33

4,780 12,660 470 30

3,460 8,430 530 20

-28 -34 +13 -33

580

1,630

+169

270

580

4 1,400

33,530

-19

47,050

38,750

FEMALES Managerial Professional Clerical Selling Services Transport Skilled Semi-skilled Unskilled Construction Inadequately

Described

TOTAL

fll9 -18

Source: Census of Population

service workers experienced a relative shrinkage of local employment opportunities, as jobs contracted faster than the numbers of economically active residents. This labour market dislocation is, in fact, rather more widespread than is generally assumed to be the case. Among men, there were only two occupational groups (clerical workers and construction workers) where there appeared to be any stable relationship between local supply and demand. If disparities of this type are to serve as the basis for policy intervention, the range of occupations to which policy should be directed would seem to be considerably broader than is usually thought, and particularly to include service as well as manufacturing occupations. The results for women are in sharp contrast to those for men. For women workers, job/resident relationships were much more stable between 1966 and 1971. This is likely to be an outcome of three factors. First, the labour market for women is considerably more restricted in space than that for men; in 1971 Tower Hamlets residents made up 48% of the women working in the borough, against 33% for men. Secondly, changes in the composition of female employment were much less dramatic than those in male employment. Thirdly, both the number and the occupational composition of women

~anuf~ctur;ng

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and fnner City Regeneration

147

recorded as economically active probably adjust to demand more flexibly than does male labour supply; this is both because large numbers of married women leave the economically active labour force when demand is low, and because occupational boundaries for women tend to be less rigidly defined by apprenticeships and the like. Before moving on, there is a further point to be gleaned from the analysis in Tables 3.1 and 3.2. Looking only at the figures for 1971 and ignoring the changes that occurred, we can derive simple job/resident ratios - the number of jobs in the area divided by the number of residents of the same area - for each occupational group. Such ratios give,

TABLE 3.3. Job/resident

ratios by occupation group: Greater North East, Tower Hamlets Employment/Residents

A.

London, Inner

in Each Area

1961

1971

Operatives Office Workers Other Workers

1.03 1.16 1.05

1.05 1.22 1.08

TOTAL

1.08

1.12

Operatives Office Workers Other Workers

0.89 0.71 0.91

0.93 0.81 0.93

TOTAL

0.86

0.90

Operatives Office Workers Other Workers

1.32 1.88 1.38

1.37 2.18 1.23

TOTAL

1.42

1.46

Greater

London

inner North East

Tower Hamlets

MALES

B.

1966 ----

FEMALES 1971

1966

1971

Tower Hamlets Managerial Professional Clerical

4.5 3.3 1.7

3.9 3.9 1.7

1.9 21. 1.2

1.9 2.4 1.2

Selling Services Transport

1.8 1.2 1.4

2.4 1.0 1.3

1.0 0.7 1.1

0.9 0.8 1.0

Skilled Semi-skilled Unskilled Construction

1.4 1.1 1.0 1.1

1.6 1.1 0.9 1.1

1.2 1.3 1.0 1.0

1.3 1.3 0.7 0.5

0.6

0.4

0.5

0.4

1.5

1.5

1.1

I.2

Inadequately

described

TOTAL Sowce:

Census of Population

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albeit crudely, a measure of the availability of appropriate jobs for different groups of residents. Table 3.3 gives these indicators both by broad occupational group, and, for Tower Hamlets, in terms of more detailed categories. Taking the crude ratios first, it can be seen that London as a whole was a net importer of labour in 1971, i.e. that its daytime workforce exceeded the resident working population, with the heaviest inflow occurring among office workers. For the Inner North East Sector the reverse was true, with net outflows in all three occupational groups. Tower Hamlets very clearly remained a major employment centre within London’s travel-to-work flows, with a substantial net daily inflow of workers in most occupational groups. These indices, of course, show no more than the generally accepted representation of urban form mapped in terms of commuter flows. The centres or cores of conurbations contain high densities of jobs of all types, and attract workers from ‘dormitory’ areas defined by the pattern of road and rail networks. Thus the high job/resident ratio for Tower Hamlets simply reflects the wide labour catchment area of local employers. What the ratios do highlight, however, is a large gap in the methods available to assess the employment needs of small areas within the conurbations. It has become standard practice, in Tower Hamlets as in other areas, to talk about a shrinkage in manufacturing jobs against the available labour supply, and about the need to increase the availability of local jobs to meet the employment needs of residents. The job/resident ratios, however, show that the simple availability of manual manufacturing jobs in Tower Hamlets was very much higher than the London average in 1971, that this ratio improved in Tower Hamlets during the 1960s and that it improved faster in the Borough than London generally. The more detailed classification for Tower Hamlets, however, rather alters this impression, showing a large variation between the ratios for manual workers with different levels of skill. Among men, unskilled workers stood out very clearly as the only occupational group in which Tower Hamlets was a net daily exporter of labour. This analysis throws doubt on the notion that Tower Hamlets suffers a general shortfall in the manufacturing jobs available to its residents. On the contrary, in 1971 the borough supported an exceptionally high density of operative jobs in general, which more than compensated for its exceptionally high share of residents in that category. Within this general surplus of operative jobs, however, there was a substantial deficit of unskilled jobs against residents. A policy of expanding operative employment would provide - assuming the occupational composition of the additional jobs was the same as that of 1971 employment - one unskilled job for every five operative jobs. Given this ratio, any significant improvement in the local employment prospects of unskilled residents would demand a substantial increase in total operative employment in the borough. For example, to have maintained the 1966 unskilled job/resident ratio of 1.0 through to 1971 would have required a reduction in the decline of total operative employment of roughly 30%. Relatively minor adjustments to the job/resident ratio for a particular disadvantaged occupational group, therefore, demand major changes in the overall employment trend. The final question arising from this discussion reflects the major weakness of the analysis: it is some ten years out of date. We have, however, some broad indications of how the balance between employment and residents in Tower Hamlets may have

Manufacturing

Industry

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149

changed since 197 1. It has already been noted that the recent population trend has shown a marked break from its long-term decline, and shows every sign of stabilising; and that at the same time employment decline has consistently accelerated. It is clear, therefore, that the global labour market balance is changing quite rapidly in Tower Hamlets, and changing in an unprecedented way. The two main determinants of population change - the availability of jobs and that of housing - which have hitherto worked in the same direction in the borough, are beginnng to work in opposite directions. Table 3.4 gives an illustrative account of how the imbalance in population and employment breaks down between occupation groups through the 1970s. It must be illustrative because of inadequacies of the data, and also because population and employment have been projected separately although they are interdependently linked through the labour market. What the Table shows, therefore, are not ‘forecasts’ but the burden of adjustment to labour market trends that is likely to be falling on the resident population, an adjustment which must be achieved through either changed commuting patterns, occupational change or unemployment. We have used a mid-range forecast of economically active population calculated from the GLC’s 1977 demographic forecast for the borough. This was converted to an estimate of ‘employees in employment’, assuming 1981 unemployment rates of 10% for males and 5% for females, and broken down into three occupation groups by assuming that the occupational structure changed in the 1970s exactly as it did in the 1960s. The employment estimate is, emphatically, on the high side. It is based on employment projections produced in 1977. Since then, of course, general economic prospects have deteriorated considerably, while the projections assume that employment in Tower Hamlets through the 1970s performed broadly as it did in the 1960s. Even on this extremely optimistic assumption, Table 3.4 suggests that the borough has undergone a dramatic shift in the relationships between residents and jobs, which had remained stable through the 1960s. While the local availability of jobs for office workers may have continued to improve slightly (assuming, as the employment projection does, that this category of employment grew four times faster in the borough than in London), both operatives and other workers can only have experienced a very marked deterioration. Both show a relative decline in employment against population (i.e. the number of additional 1981 jobs which would be necessary to maintain the 1971 job/resident ratios) in excess of 5,000 jobs.

TABLE 3.4. Job/resident

ratios: Projections to 1981 -Tower 1961

1971 Actual

Hamlets

1981 Projection

Operatives Office Workers Others

1.32 1.88 1.38

1.37 2.18 1.23

1.16 2.22 0.96

TOTAL

1.42

1.46

1.30

Source: Census of Population

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There will be no possibility of determining how far these speculations are correct until the results of the 1981 Census are available. Nor will it be possible until then to examine how the burden of adjustment they imply has been distributed between an increase in unemployment over and above the high level already assumed, changes in gross in and out-commuting flows, and greater occupational mobility. The indications are, however, an advance warning that the 1981 Census is likely to point to even more serious inner city economic problems than did the 1971 Census.

3.2.

UNEMPLOYMENT

The preceding section showed that there have been growing disparities between the skills of Tower Hamlets residents and those required by the jobs available to them, both locally and in wider areas of London. This does not necessarily mean that residents of the borough are more likely to be unemployed than they were in the past. As journey-towork distances have lengthened everywhere, we would expect to find a progressive weakening of the correspondence between labour supply and demand in any area. An increasing disparity between the occupational structures of local employment and the resident workforce, such as we have seen for Tower Hamlets, could thus simply indicate that residents of the borough were increasingly tending to find jobs elsewhere, just as jobs in Tower Hamlets were increasingly being captured by residents of other areas. Unless the local authority takes the view that commuting is in itself undesirable, or that the polarisation of population is undesirable, such a process would not be a cause for concern. In fact, it is a general assumption that increasing divergence between job and residential structures is at the root of unemployment and deprivation in the inner areas. Thus it is common to link together the rapid decline in manufacturing and the rise in unemployment inner areas have experienced. As Table 3.5 indicates, there has indeed been a steady long-run increase in the prevailing level of local unemployment, apparent both between 1961 and 1971, and in the more recent annual Department of Employment series. The Table also shows, however, that the rise in Tower Hamlets’ unemployment has roughly paralleled that in London as a whole: expressed as a proportion of the general unemployment rate for London, the rates for Tower Hamlets remained stable between 1961 and 1971, and only worsened slightly between 1971 and 1980. A further striking feature of the Table is the presence of large disparities in unemployment rate between neighbouring employment exchange areas: Stratford, falling partly in Tower Hamlets and partly in Newham, has consistently experienced a rate of unemployment considerably lower than that of Poplar. Both these observations suggest that true unemployment rates in the borough have been surprisingly unaffected, over the long-term, by the particularly high rate of local job loss. Taking the period 1966-71, for example, the enormous employment losses associated with dock closures within that period did not appreciably raise unemployment in the borough over and above the general rise in unemployment in London. Between 1976 and 1980, however, relative unemployment rates did worsen in three out of the four Employment Office Areas considered.

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Industry

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TABLE 3.5. Unemployment rates: Greater London and Tower Hamlets A.

Census of Population

(Unemployed, Greater

excluding

sick, as % of economically

London

active residents) Tower Hamlets/ Greater London

Tower Hamlets

MALES 1961 1971

1.4 3.7

2.6 6.2

1.9 1.7

1.2 3.4

1.0 3.4

0.8 1.0

FEMALES 1961 1971 B.

Department

of Employment

(Males registeredasunemployedat

Poplar

1971 1972 1914 1976 1978 1980

Greater London -

Rate -

2.8 3.3 2.3 5.4 5.8 5.1

6.6 8.1 6.8 13.8 14.8 14.7

Poplar/GLC 2.4 2.5 2.9 2.6 2.6 2.9

EOs,as%ofeconomicallyactiveresidents)

Stepney Rate 9.1 10.5 7.4 11.9 13.6 14.9

Stepney/GLC 3.3 3.2 3.2 2.2 2.3 2.9

Shoreditch Rate Shoreditch/GLC 2.9 3.5 2.6 6.3 7.9 8.5

1.0 1.1 1.1 1.2 1.4 1.7

Sources.Census of Population, Department of Employment Gazette, GLC Note: Poplar and Stepney Employment Office Areas cover the bulk of Tower Hamlets’ employment.

3.3.

Stratford Rate -

Stratford/GLC

3.7 5.3 2.6 7.7 7.7 7.0

population

1.3 1.6 1.1 1.4 1.3 1.4

and

CONCLUSIONS

The evidence presented supports, for Tower Hamlets, the conventional view of growing labour market imbalance in the inner cities. This view is that the availability of jobs in relative to population is deteriorating, and that the least skilled workers are the most severely affected. However, in aggregate and in terms of broad occupational groups, this imbalance is surprisingly recent; in this sense the ‘inner city problem’ has only hit the borough’s working population in the last few years, and is likely to be worsening sharply at present. A further interesting point is the direct connection between housing provision - as reflected in actual and expected population trends and labour market imbalance. Our projection of likely changes in the 1970s assumes employment trends similar to those in the previous decade; even on this over-optimistic assumption, the results point to a severe reduction in the availability of jobs, entirely due to the economically active population stabilising.

CHAPTER

4

Employment

Changes in Manufacturing

4.1. THE

AND

NATURE

CAUSES

OF

EMPLOYMENT

Industry CHANGE

There is general agreement that the decline of inner city manufacturing over the last thirty years or so cannot be attributed to their industrial structure. In other words, the origin of the inner areas’ loss of manufacturing jobs is not a dependence on industries in long-term decline in the way that steelmaking, shipbuilding and coal-mining have led to job losses in Britain’s development areas. For Tower Hamlets, analysis of the ‘structural’ effect over such long time periods is ruled out by the absence of reliable data. In crude terms, however, it is clear that Tower Hamlets like other inner city areas has not depended on a group of national weak industries. Thus the six industries which dominate manufacturing employment in the borough - food and drink, shipbuilding, leather and fur, clothing, timber and furniture, paper and printing - have, in the country as a whole, shown an employment trend no worse than that of manufacturing as a whole. Between 1965 and 1976, for instance, employment in these industries in Great Britain fell by 14%, compared with a decline in manufacturing as a whole by 15%. Over the same period, manufacturing employment in Tower Hamlets declined by more than half. In other words, the borough’s basic industries lost jobs at roughly four times their rate of decline in the country as a whole. A fuller analysis is possible for the period 1973-76, the regrettably short span of time to which much of our statistical work is limited by absence of recent data. Over these three years Tower Hamlets lost one quarter of its manufacturing jobs, while the equivalent figure for Greater London was 18%. The manufacturing sector was also in decline nationally, where there was a 7% employment fall, and in the South-East Region where there was a slightly greater drop of 9%. The result is similar to that of our crude comparison over a longer period: Tower Hamlets was losing manufacturing jobs at 3.6 times the national rate of decline. If each industry had followed its national rate of employment change between 1973 and 1976, the borough would have lost 9% - a moderate decline similar to the national trend. To sum up, these comparisons show that Tower Hamlets, like other inner city areas, has not suffered from an overconcentration of employment in nationally declining industries; but nor has it been fortunate in specialising in industries which have shown national growth. Rather, its problems have resulted from an enormous differential between the performance of local firms and plants, and that of firms and plants 152

Manufacturing

Industry

and Inner

City Regeneration

153

belonging to the same industries but operating elsewhere in the country. This has been true both in the long-term, and in the sharp cyclical downturn of 1973-76. Thus there is a sharp distinction between the nature of the inner cities’ manufacturing job loss and the problems of depressed regions. The decline of the latter has been traditionally ascribed to a weak industrial base dominated by nationally, often internationally, declining industries, most obviously in coal-mining but also in heavy manufacturing - shipbuilding, steel-making, electrical generation equipment. This diagnosis carried with it a straightforward policy prescription: declining sectors should be replaced with new growth industries - pharmaceuticals, electronics, vehicles - both to make up the immediate need for replacement jobs and to provide a better, broader base for long-term employment growth. And, since such industries were not present in development areas, they would have to be ‘imported’ through the movement of firms and plants from the Midlands and the South East. The diagnosis for Tower Hamlets is different: the borough has lost jobs as a result of other factors relating to the characteristics of its firms, of the operating conditions they face in the area, or - most plausibly -some interdependent mixture of the two. If these factors apply irrespective of industry, it is not clear that broadening the industry mix would be of any benefit to the area. A more appropriate solution demands an understanding of the factors which inhibit the performance of indigenous industries and firms. About the nature of these factors, and their relative importance, there is still no generally agreed view. From the massive recent literature on the subject, one may distinguish three broad hypotheses about the decline of inner city industry:

(9

‘Relict’ industry: inner city century capital investment capital stock deployed and would expect employment contraction and closure of

(ii)

Constrained industry: represents the view that a significant proportion of plants operating in the inner city are restricted in their development by local operating conditions. In particular, constraints relating to sites and premises have led to the run-down, closure or out-movement of many plants which would otherwise have been successful. Public action, in association with the firms themselves, to remove various operating difficulties, will be able to effect a rapid turn-round in output and employment trends, by allowing firms to stay and expand in inner city locations.

(iii)

Restricted Potential: This - rather awkwardly -denotes the most optimistic viewpoint, which suggests that inner cities have a specialised economic role in housing certain types of industry and, perhaps more importantly, small businesses. By focussing on the factors which have prevented this potential being realised, and particularly by concentrating on the encouragement and support of small business, public policy can greatly enhance the employment generated in such areas.

industry is dependent on a residual base of late 19th and entrepreneurship. Given the obsolescence of the the maturity of the firms and products involved, one in such an industrial base to decline sharply by firms wherever it was located.

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These alternative descriptions provide the hypotheses employment change which begins in the next section.

4.2.

COMPONENTS

OF EMPLOYMENT

for the detailed study of

CHANGE

One way of looking at employment change in an area, known as the components of change approach, is to break down aggregate net trends into a set of gross changes at the level of individual plants. This provides a means of identifying very closely which sectors of an industrial population are particularly strong or weak, and thus of focussing policy initiatives where they are most needed. These insights are of particular importance for inner city policy, because the resources available are limited, and because the instruments used are highly selective, in that there are no ‘blanket’ measures applying to the whole stock of firms in the areas concerned. This section presents the results of such an analysis of manufacturing in Tower Hamlets over the period 1973-76, and compares these with results from two other inner city areas. The main shortcoming of this analysis is the short time-span it covers; where possible this is supplemented by using data from our sample survey, which allows us to follow the history of more than 100 local firms from 1971 to 1979. For 1973-76, Table 4.1 shows the broad components of employment change in manufacturing. This change is split into four elements: -

exits, or closure and out-movement of plants entries, or the opening of new plants and the in-movement of existing ones expansion of plants present in the area throughout the period (survivors) contraction of plants present in the area throughout the period (survivors)

The last two components ‘turnover’ of plants. The most striking feature is the size of the gross flows industry in Tower Hamlets

are referred to as in situ change; the first two represent

the

of the Table, after the sheer size of the net employment loss, ofjob gains and losses. Given the long-term decline of it is perhaps not surprising to find a high incidence of

TABLE 4.1. Components of change in manufacturing: Tower Hamlets 1973-76 Employment

Plants

1973 Total

28,024

1,134

Exits Entries

-7,206 +2,780

-492 +289

Survivors: Contraction Expansion

-455 1 +1,963

319 212

1976 Total

20,910

931

Source: Tower Hamlets

Plant Register

Manufacturing

Industry

and Inner

City Regeneration

155

closures and contractions. But, in view of the scale of these losses and their implication of widespread failure, it is surprising to find at the same time a large number of new plants being established in the area, and also a substantial number which succeeded in expanding their employment. The whole picture is more dynamic and changeable than the decline shown by aggregate employment figures would suggest. Without comparisons with other areas, of course, this can be no more than a casual impression. Table 4.2 gives admittedly crude comparisons with the results of components of change studies for Inner Manchester and Inner Liverpool. It is instructive, first of all, to compare Inner Manchester and Inner Liverpool. Both showed substantial employment decline between 1966 and 1975, but varied considerably in the way this was arrived at. In Manchester the decline was almost wholly attributable to an excess of exits over entries; while Liverpool’s job losses were evenly split between excess of exits over entries, and in situ shrinkage. There is a direct warning here that ‘inner city’ problems cannot be used as a portmanteau explanation of any observed inner city job loss: the pattern and causes of such job losses that are occurring obviously vary. TABLE 4.2. Components of Manufacturing change: Inner Manchester, Inner Merseyside, Tower Hamlets Annual

Average

Merseyside’

in Initial Employment

Manchester’

1966-73 % p.a. Initial Employment

Change

1966-73 % p.a. 76.1

(000)

Tower Hamlets 1973-76 % p.a. 91.5

28.0

Exits Entries

-2.8 +1.7

-7.5 +1.4

-9.5 +3.2

Contraction Expansion

-2.2 +0.6

-6.0 +2.3

Net Change

-3.0

(-1.3)2 (f0.9)2 -6.1

Notes:

‘The Merseyside and Manchester 2Figures refer to 1966-1972 only

data cover manual

employees

-9.1

only

Moving on to assess employment change in Tower Hamlets against Inner Manchester and Inner Liverpool, the Tower Hamlets rate of decline was obviously far greater on a smaller initial total. This is, in part, a reflection of a generally more unfavourable economic climate in the mid-1970s. Even so, there are very strong indications that the process of employment change in the borough was different again from that in Liverpool or Manchester. Clearly each of the components is considerably larger in Tower Hamlets than in the other two areas. Since the borough showed the worst overall performance, it is not surprising that its job losses from exits and contraction should be exceptionally heavy. What is surprising is that Tower Hamlets gained proportionately more jobs in entries and in situ expansion. In other words, the borough is unusual not only in the severity of its net decline, but also in the high rates of simultaneous job creation and destruction within this falling total. How can we explain the high rates of entry and expansion observed in Tower Hamlets? To consider entries first, the distinction between new firms and in-moving

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ones provides part of the explanation. On the basis of our survey results (see Chapter 5), we estimate that, of the 3.2% p.a. employment gain occurring in the borough, about half is accounted for by the in-movement of existing plants. This means that births of genuinely new firms provided an employment increase of some 1.6% p.a. over the period. This is still a comparatively high rate, above that achieved from both in-moves and new births in Manchester and Liverpool. This high birth rate of new firms results from the size structure of the borough’s existing industry. Table 4.3 shows that Tower Hamlets has an enormous concentration of small plants; comparison with national figures (see Section 4.3) and with London as a whole, suggests that the borough is quite exceptional in this respect. A substantial and growing body of research indicates that the generation of new firms is closely associated with the presence of existing small firms. Studies on the background of entrepreneurs show that a high proportion have previous experience of working in small firms, where they have gained the experience and contacts necessary to set up in business. The instability of small firms, furthermore, may be an incentive for employees to set up in business on their own account. These effects can also be observed in geographical comparisons: it appears that the rate of new firm formation in an area is positively related to the proportion of existing small firms. Thus towns dominated by large plants produce new firms at a lower rate than those with many small plants. Such studies remain in their infancy. It is difficult to assess precisely how the birth rates of firms are affected by the extreme concentration of very small plants, or by the presence of closely knit groups of linked distributors, manufacturers and subcontractors, such as those in the borough’s clothing industry. However, it seems clear that these characteristics enhance the ‘birth rate’ in Tower Hamlets as compared with other areas. Thus our evidence contradicts very strongly any notion that Tower Hamlets’ problems result from any lack of entrepreneurship. On the contrary, the area possesses entrepreneurship in abundance, thanks to the nature of its existing industrial base. The second surprising feature of local employment change is the high rate of new job generation in expanding plants. This again relates to the borough’s distorted plant size structure. It is a general finding of employment studies that small plants show better in

TABLE 4.3. Size structure of plant stock: Tower Hamlets 1973 Size Bands -Employees

1973 Plants -

1-5 6-10 1 I-20 ‘l-50 51-100 101-200 201-500 501-t

36 22 17 15 6 2 1 -

TOTAL

100

Source: Tower Hamlets

Plant Register

%

Manufacturing

Industry

and Inner

City Regeneration

157

performance than large ones; for Tower Hamlets, this point will be developed in detail in the next section. Overall, therefore, the manufacturing base of Tower Hamlets can be characterised as dynamic, exhibiting a high rate of plant turnover and rapid redistribution of employment between expanding and contracting plants, despite its very high rate of employment ioss. These features put Tower Hamlets a long way away from the characterisation of an inner city as a stagnating or failing collection of relict plants. On the face of it, this dynamism provides some grounds for optimism. Despite its generally poor performance, the borough does contain an apparently substantial number of young and, in employment terms, successful plants. These would seem to constitute a starting point for an industrial policy: - what are the characteristics which distinguish successful plants for unsuccessful plants? Can the employment generation of the former be enhanced, or can it be emulated in other plants to the point where significant employment gains can be made? These are the questions to which much of the following analysis is directed, examining how far it is possible to identify growing and declining elements of the plant population by analysing characteristics of plants such as industry, size, age and ownership. On the other hand, the same dynamism constitutes, from a labour market standpoint, a further form of economic disadvantage suffered by those working locally. High rates of plant entry and exit, and the rapid redistribution of jobs in surviving plants between those growing and declining, mean that workers face a relatively low probability of remaining in the same job. Of the 28,000 manufacturing jobs present in the borough in 1973, 12,000 had disappeared in plant closures and contraction by 1976. In addition, therefore, to the overall shrinkage of employment opportunities, those working in the area faced the necessity of switching employment on an enormous scale. situ

4.3.

PLANT

SIZE

AND

INDUSTRIAL

PERFORMANCE

We have already suggested that the distorted size structure of the borough’s manufacturing sector is a major factor underlying its distinctive characteristics. Table 4.4 indicates just how extreme this distortion is, giving manufacturing employment by plant size for the borough and Great Britain. In 197660% of employees in Tower Hamlets, against only 25% of employees in Great Britain, worked in plants with fewer than 100 employees. There was a particularly marked absence in the borough of plants at the upper end of the scale. A life-cycle view of how plant populations change suggests that the components will show systematic variation with plant size. Table 4.5 shows in detail that this is indeed the case. Both exit and entry rates of plants (part A of the Table) declined with increasing plant size, exits fairly smoothly and entries with a sharp discontinuity at the boundary of 50 employees. Thus entries were overwhelmingly small piants (90% employed fewer than 21 in 1976; and 60% less than 5); while exits were more evenly distributed, with a substantial complement of larger plants. Among plants surviving through the period, the proportions expanding and contracting also bear out a life-cycle hypothesis. Leaving out the l-5 size band (where

158

Progress

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TABLE 4.4. Manufacturing

employment Percentages

Size Band Employees

by plant size: Great Britain and Tower Hamlets -

of Manufacturing

Great Britain

(%)

(%)

3.7 12.3 9.5 12.0 19.7 43.7

11.6 31.1 11.8 13.2 11.5 13.6

TOTAL

100

100

I-10

1 l-50 51-100 101-200 201-500 5oi+

The Great Britain data refers to extablishments recorded by the Annual Census of Employment. For Tower Hamlets some establishments within a single plant have been combined to accord more closely with a normal definition of ‘plant’. The effect is to bias the size structure of Tower Hamlets slightly toward large plants,

TABLE 4.5. Components

of employment

Gazette

change by plant size: Tower Hamlets Percentage

Size Band

1973 Plants

Exits

-

Entries -

-

1973-76

of 1973 PIants

Growing

Static

Declining

Net Change

---7 -29 -25 -1% -18 -25 -25

O-5 6-10 11-20 21-50 51-100 101-200 201-500 500+

406 246 195 173 71 27 13 3

55 48 36 31 31 22 8 -

41 21 19 14 6 11

-

25 17 25 25 21 I1 8 25

13 28 25 40 45 66 75 75

18 8 4 4 3 8 -

-25

TOTAL

1,134

43

25

19

28

10

-18

Percentages B.

Size Band Employees

Tower Hamlets

Source: Great Britain - Department of Employment Tower Hamlets - Piant Register

A.

Employment

l-10 1 l-49 so-99 100-199 200-499 500+

Note.

1976

Size Band

1973 Employment

Exits

Entries

of 1973 Employment

Expansion

Contraction

Net Change

(000) o-5 6-10

11-20 21-50 51-100 101-200 201-500 500+ TOTAL NO&?:

1.2 2.0 2.8 5.5 4.7 3.8 3.6 4.5

53 47 37 31 32 23 I5 -

28.0

26

40 20 19 14 6 10 10

-2 -1 2 5 12 19 7 3 +7

-10 -1 -10 -8 -3 -32 -25 -39

-7 -30 -25 -30 -17 -27 -33 -36

-17

-25

The figures shown are employment changes between the total of plants in each size band in 1973 and the plants in the same size band in 1976. This method, used for ease of calculation, produces some anomalies in the figures.

Source: Tower Hamlets

Plant Register

Manufacturing

Industry

and Inner

159

City Regeneration

comparisons are distorted because the majority of survivors did not change employment), the proportion of declining plants increased steadily with size, suggesting that the larger and presumably older the plant the greater the difficulty in maintaining competitiveness, output and employment. The proportion of growing plants shows a slightly different pattern, increasing up to the 20-21 boundary, and declining thereafter with a particularly sharp break at 100 employees (ignoring the 25% figure for 500+ plants, which was produced by one expanding plant out of four). This very sharp difference between the performance of survivors with more than 100 employees and that of smaller survivors is interesting, in that there is no apparent theoretical reason why the balance between expansion and contraction should not shift smoothly along the size range. It is a strong possibility that the discontinuity reflects an extreme difficulty in expanding in Tower Hamlets for large plants compared with small ones. The employment figures (shown in part B of Table 4.5) for each component by size of plant show the same pattern: in small plants the bulk of jobs lost resulted from an excess of exits over entries, while in larger plants losses were primarily due to contraction exceeding expansion.* TABLE 4.6.Components A.

of employment change by plant size: Tower Hamlets 1971-79 (sample) Percentages of 1971 Plants

PLANTS

SuNivors

1971

B.

Contracting

Expanding

Static

New

In-Movers

Size Band

Plants

l-10 1 l-20 21-50 52- 100 101-200 201+

18 19 20 13 10 6

39 37 50 38 30 0

50 47 50 62 70 100

17 32 15 0 0 0

17 16 10 8 10 17

TOTAL

86

37

57

14

13

EMPLOYMENT

Percentages 1971

Size Band

110 278 717 882 1,477 1,312

TOTAL

4,776

Note: Plants are classified

Survivors

Employment

l-10 1 l-20 21-50 51-100 101-200 200+

according

of 1971 Employment

Expansion(+) 90 29 &8) 4 0 72(53)

Contraction(-)

New

In-Movers

-23 -16 -19 -18 -24 -44

15 32 14 0 0 9

19 13 9 7 7 27

-45

4

13

to their initial (1071) size

Source: Survey *The detailed employment changes through expansion and contraction are, however, difficult to interpret since (to ease data handling problems) the figures shown are employment changes between totals of plants in each size band in 1973 and 1976, not employment changes initially in each size band.

160

Progress

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For survivors, the results of our survey work provide a more detailed picture over a longer span of time. Table 4.6 shows employment change by initial size in a sample of 86 plants operating in the borough from 1971 to 1979. The distribution of plants between growth and decline in each size band was, in view of the small number of plants covered, remarkably close to the results shown in Table for 1973-76; the proportion expanding increased up to fifty employees and decreased thereafter, while the proportion contracting increased steadily across the size bands. The employment figures of Table 4.6 need adjusting for one, wholly exceptional, plant, which expanded from less than 100 to 1000 employees over the period. The employment figures excluding this plant are given in brackets. This done, it turns out that plants starting with less than fifty employees experienced a net gain of 400 jobs or 36% of initial employment; those with 51-100 employees held their total of jobs; while plants with more than 100 showed an overwhelming net loss of 835 jobs. 4.4.

THE

AGE

OF FIRMS

AND

PLANTS

In relating a life-cycle explanation of employment changes to the different sizes of plants, we are in effect using plant size as a proxy measure of age. Our survey results give an opportunity to test the life-cycle hypothesis directly. Almost all respondents gave sufficient information to establish the age of the plant concerned, or the firm, or both. Table 4.7 breaks down the components of change across age bands.* TABLE 4.7. Components of employment change by age of firm: Tower Hamlets 1971-79 (sample) A.

PLANTS

Survivors

Age Band

1971

Expanding

Contracting

Static

Entries

-

B.

O-10 1 I-20 21-30 31-50 51-100 100+

9 23 13 12 17 9

4 9 4 1 7 3

4 12 8 10 9 6

TOTAL

83

28

49

2

13 1

1

I

1 1

1

-

I -

5

21

Survivors

EMPLOYMENT Expanding(+)

Contracting(-)

Entries

Age Band

1971

O-10 1 l-20 21-30 31-50 51-100 100+

210 1,003 490 663 1,458 790

210 184 20 5 106 86

-74 -223 -68 -117 -564 -230

233 11 5 8 471 -

TOTAL

4,614

1,468

1,264

728

Source: Survey *These are based on the age of firms where available and appropriate (i.e. for independent age of plants as the nearest measure where firm age was not given or in branch plants.

companies)

and on

Manufacturing

Industry

and Inner

City Regeneration

161

The life-cycle hypothesis is very strongly supported by examination of the net employment change in survivors in each age band. Only the youngest plants generated a net increase in employment, amounting to two-thirds over the base year. For older plants the net loss increased steadily with increasing age; so that surviving plants older than 20 years showed a net loss of 762 jobs, as against a gain of 97 from plants younger than 20 years. What these figures do not show, of course, are the losses experienced in each age band from closures, which we would expect to occur at the highest rate among small and new plants and involve a large number of jobs in large and old plants. The analysis has, however, succeeded in identifying a successful sub-group within the plant population rapidly expanding, recently established, surviving plants. Thirteen such expanding plants, less than 20 years old, were identified out of a sample of 103; we may infer that such plants account for some 15% of the local plant population.

4.5.

STRUCTURAL

CHANGE

AND

ADJUSTMENT

The high rate of employment turnover does suggest that the borough should possess one favourable characteristic attributed to a small firm economy: flexibility. Since a large number of plants are new, and employment is rapidly switching from declining to expanding plants, there is a large capacity for the area’s mix of activities to be re-cast. The more optimistic paradigms of inner city function suggest that this adjustment capacity should be purposive, that the inner city economy should be increasingly focussed on industries and firms which find definite advantages in such a location. Urban economics texts indicate that clothing, printing, instruments and fine metal working should be favourably located in inner areas. The seedbed hypothesis suggests that the inner city should harbour high technology, inventive and innovative new and small firms. The facts do not, however, support these ideas. The present industrial base of the borough remains firmly rooted in the late 19th century. Over the long run there has been a loss of local industries (e.g. footwear and marine engineering) rather than the creation of new ones. More recently, there have been no industries in the borough which have performed better than in other locations. The components of change, and still more the survey findings, provide the opportunity to examine in very fine detail the effects of plant and employment turnover on industrial structure. Table 4.8 provides a breakdown of plants and employment change in seven industry groups. Looking first at net employment change, all industries showed an overall loss of jobs of broadly the same order. Only ‘other manufacturing’ declined by less than 20% over the three years. In broad terms, therefore, the borough’s industrial structure remained virtually unchanged between 1973 and 1976. Table 4.8 does show, however, that there were considerable inter-industry variations in the way the uniform net changes in employment were arrived at. Taking extreme cases, in the clothing industry jobs were lost primarily as a result of an excess of exits over entries, while surviving plants only showed modest decline in employment. On the other hand, paper and printing succeeded in generating a volume of employment in new

28.0

TOTAL

Plant Register

11.4 5.7 4.6 2.3 2.2 1.8

1973 Employment (000)

Clothing and Textiles Food, Drink, Tobacco Engineering and Metal Working Paper, Printing Timber, Furniture Other Manufacturing

Industry Group

1,134

45 159 91 91 74

Food, Drink, Tobacco Engineering and Metal Working Paper, Printing Timber, Furniture Other Manufacturing

TOTAL

674

Plants

1973

26

35 15 18 23 30 22

Exits

43

33 33 41 43 30

48

Exits

10

8 17 6 9

15 -

Entries

Percentage

25

4 26 29 16 22

28

Entries

7

6 9 6 3 8 17

Expanding

17

13 22 20 22 8 21

Contracting

28

22 30 22 30 19

29

Contracting

of 1973 Plants

1973-76

of 1973 Employment

19

33 19 21 21 28

16

Expanding

Percentage

4.8. Components of change by industry group: Tower Hamlets

and Textiles

Clothing

Industry Group

Source: Tower Hamlets

B.

A.

TABLE

-25

-28 -21 -24 -25 -23 -18

Net Change

10

II 18 16 7 16

7

Static

-18

-29 -7 -12 -27 -8

-20

Net Change

b

$ 2‘

(4 ;6 E .* 5 ‘D ii;

0”

~an~fa~tur~n~ industry and Inner City ~~g~neratjon

163

plants almost sufficient to offset closures, but surviving plants created very few jobs by expansion and lost a large volume by contraction. There is clearly no simple general process of decline applying to all industries: each industry needs to be considered individually. Clothing and textiles is, by a wide margin, the borough’s dominant industry, with double the number of jobs in any other sector; in 1973 it accounted for 60% of the total of plants and 41% of the jobs. Between 1973 and 1976, two-thirds of all entries and exits in the borough occurred in this sector. It is here, too, that the statistics on which our work is based are probably at their weakest. The tiny size of many of the units involved, the dominance of non-English entrepreneurs and the undeniable fact that many firms are operating outside the framework of planning and tax legislation mean that a good deal of activity takes place which fails to appear in our analysis. Clothing showed the highest rates of plant and employment loss through exits, a fairly high entry rate and moderate expansion and contraction rates. This pattern reflects the continually shifting product lines, short production runs to specific contracts and the complex network of sub-contracting between wholesalers, cutters, makers-up, and outworkers which give the local clothing trade its special character. There are no large local suppliers of standard mass-produced items - like jeans, mens’ suits, raincoats or industrial clothing. In an extremely fluid situation, demanding continual adjustment of product lines, the process of adjustment occurs through the creation and destruction of large numbers of small plants. Our survey work amply demonstrated how this comes about: we found a number of firms working as sub-contractors and entirely dependent on a single customer, the loss of whose business would obviously lead directly to failure. On the other side of the coin, entirely new firms were being established with almost no commitment of capital, by employing outworkers or subcontractors to manufacture initially and only moving from distribution into own-account manufacture when turnover has been built up. Food and drink, the second largest sector, provides a complete contrast. Here the employment gain in new plants was negligible, and the overall decline in jobs split evenly between exits and the net contraction of surviving plants. The sector and its employment change were dominated by large plants engaged in large-scale, capitalintensive food processing, most obviously in the large local breweries. Here two-thirds of the 850 jobs lost in closures were in two large plants, both owned by multi-national companies, one American. One was closed outright, as part of a rationalisation of products manufactured by the American parent, the second moved to a new site in South West England. Similarly, half the jobs gained in expanding plants and two thirds of the jobs lost in contracting ones could be attributed to single plants. These cases were, respectively, the build-up of a large, centralised bulk wine bottling and distribution unit through the closure of a national chain of smaller depots; and the rundown (eventually closure) of a large brewery for redevelopment as an office headquarters for the same company. The food and drink sector, on this analysis, comes close to the image of a nineteenth century plant stock eroded by continuous contraction and closure, and marked by an almost complete absence of replacement new firms. The survey work confirmed this impression. Out of nine plants interviewed, only one had been established in the last ten

164

Progress

in Planning

years (the bulk bottling/distribution plant mentioned above), two have since closed down, and four indicated they would eventually like to move out, mainly because of the problems of operating in old buildings. Engineering and metal working covers a heterogenous group of activities, and is difficult to appraise in a few paragraphs. The population of plants showed the smallest net change of any sector, but this was the product of considerable and similar gross rates of both exit and entry. There was a much wider gap between employment changes resulting from entries and exits respectively, suggesting a strong polarisation between large plant exits and small plant entries. Expansion and contraction rates were both close to the manufacturing average, with a single plant (the Royal Mint) accounting for two-thirds of the jobs lost in contractions. The survey work suggested there had been, and perhaps still is, a structural shift in progress within the sector. Two broad groups could be identified. First, a group of large plants dating back to 1900 and beyond. These were mainly engaged in marine engineering or other heavy industries like metal refining. The second group was much smaller, and consisted mainly of plants established since the last war, including a number of recently formed companies. Almost without exception these plants were engaged in metal treatment and fabrication work for the building trade - galvanising, sheet-metal working and light steel fabricating. Broadly speaking, the first group faced poor prospects at the time of the survey, hit by the national recession in marine engineering and the loss of local trade. Our sample included the last major repair yard on the upper river, which has since closed with the loss of 200 jobs. The building supplies plants were also facing poor short-term prospects as a direct result of the building slump, but showed longer term confidence. Out of seven plants in this group, four expected to expand output over the next five years, and none expected to contract. Paper andprinting showed the highest rate of new plant generation, and job generation, of any sector in the borough, accompanied by an average exit rate, a very low expansion rate and high contraction rate. The impression is of a highly dynamic sector, with changes in demand being met by the establishment of new plants rather than the expansion of existing ones. The survey work showed that, out of a sample of 14 plants, nine had been on their current sites for less than ten years, and five of the firms were less than ten years old. The high level of plant movement may explain both the average exit rate and the low expansion rate: this appears to be a sector where expansion is frequently achieved by movement within inner London rather than by in situ change. Paper and printing shares, if in slightly less extreme form, the dynamism of the clothing sector, but, unlike clothing, does have a few large plants which acccount for a large share of some components: two large in-movers accounted for half the jobs gained in entries; three plants accounted for three-quarters of the jobs lost in closures, and onethird of jobs lost in contractions occurred in two plants, one of them the borough’s only paper mill. The entry and exit components do seem to have had a restructuring effect on the detailed product structure of the local print trade. The large plant exits reflected in the main, rationalisation and contraction at the ‘heavy’ end of the industry (letterpress printing, colour printing, etc.) which is now almost exclusively carried on outside London. (One example is given in the case studies of closure given in our survey report). Entries were

Manufacturing

Industry

andlnner

City Regeneration

165

mainly small, and concentrated in fast lithography, photo-printing, silk-screen printing and sub-contract services to the trade such as filmsetting. Timber andfurniture showed a high loss of employment in exits and a relatively low gain in new plants; while, uniquely, surviving plants sustained a constant total of employment over three years. In the sector three main activity groups can be identified. Timber importers, rough machinists and stockists, occupying sites along the Regents Canal, are a survival from the heyday of the Greenland Docks as the premier port for the timber trade. These plants are faced with the loss of local supplies of timber, and a slump in the building trade. A second group - case, box and pallet makers - face similar problems. Local trade has been lost, both because the upper docks have closed and because of the switch to containerisation. Large closures in these two trades accounted for 60% of the jobs lost in exits. The third group - furniture manufacture as such - provides a more interesting picture. Here a set of independent firms, mixed in terms of both age and size (up to a maximum of 200 employees) are engaged in two relatively prospering activities: contract joinery for shop and office fitting, and reproduction furniture. It is the latter which fostered most of the newer firms, and provided an opportunity for older firms to move out of mass market products, which can no longer be produced in small units. In this industry, therefore, there was again a detailed restructuring effect of the components. While timber importing and rough machinery decay, mainly through rationalisation within large companies, reproduction furniture and sub-contract joinery have sustained a number of existing firms, and attracted some new ones. The final industrial category - other manufacturing - is the inevitable residual, covering a heterogenous collection of small industries, none with more than 700 employees (3% of the total) in 1973. Taken together, the sector showed relatively good performance, losing the lowest net total of jobs, and by far the highest rate of job generation in expanding plants, which produced an almost stable level of employment in survivors. Entries were all small, generating only 108 new jobs in total, and scattered randomly through the spread of industries with no pattern emerging. Exits were also widely dispersed. Overall, the only coherent element of employment change was represented by a group of relatively large chemicals plants, all part of multi-plant groups, and facing a rapid erosion through rationalisations. Beyond this, individual plants faced successes and failures without a sufficient number of any one activity and category to provide the basis for a judgement. To sum up, processes ofemployment change have done little to diversify the borough’s largely 19th century industrial base as measured by a coarse industrial structure. Whenever we look for evidence of modern growth industries -light electrical assembly, electronics, vehicle components, pharmaceuticals, plastics - there are not even glimmerings of new activities being established. Within the main elements of the established industrial base, however, employment change clearly is effecting a steady process of adjustment in terms of the fine product mix covered by the traditional sectors. In clothing, a movement from fur into leather goods, from men’s into women’s clothing, from tailored to light goods has been accomplished mainly by the death of old small firms and the establishment of new ones. In other sectors, there is a frequent pattern of shift from ‘heavy’ products and large

166

Progress in Pjannin~

plants - marine engineering, letterpress and colour printing, timber importing and machining - into lighter products, newer Iirms and smaller plants - galvanising, sheet metal working, litho and photoprinting, contract joinery and reproduction furniture. While these shifts do indicate some capacity for self-renewal within the confines of the established industrial base, and suggest some avenues of development for the borough, it should be emphasised that they are shifts within a declining total produced by differential rates of decline. None of the newer industries we have listed are identi~able as employment growth industries at the finest level of disaggregation (i.e. Minimum List Headings) of the Standard Industrial Classification.

4.6.

CONCLUSIONS

The manufacturing sector in Tower Hamlets has experienced extraordinarily rapid job loss. This has not resulted from any dependence on nationally declining industries; rather, decline has affected all industries, and plants of all sizes. One remarkable feature of this process has been the large size of gross gains and losses; in small plants these have resulted mainly from openings and closures, whereas in large plants in situ change has been more important. The high birth rate of firms points to a dynamic local economy, where entrepreneurship is not in short supply. Our conclusions so far may be set out as comments on the three main hypotheses described at the beginning of this chapter. Different hypotheses apply for different categories of firms. -Relict economy: The analysis of individual industries has identified a range of mature firms and industries in rapid decline. Marine engineering, food and drink, case and pallet makers are a few examplers. Some ‘relict’ activities are affected by obsolete products, equipment and processes. Others are still able to prosper elsewhere, but are declining in Tower Hamlets because the area has lost the locational advantage which originally attracted these activities in the 19th century. Further evidence of the ‘relict’ hypothesis is provided by the failure of the local economy to diversify in favour of modern, dynamic industries. This may be an indication of a general lack of creativity, dynamism and managerial qualities in local firms. - Restrictedpotential: The area does have a highly specialised economic role, in terms of both its industrial mix and the overwhelming predominance of small firms. However, there is no evidence that this specialisation benefits the local economy. On the contrary, the sectors concerned are declining rapidly in the borough, along with the rest of manufacturing. Moreover, as we have seen, there has been no diversification in favour of the modern, high-technology industries which one might expect to enjoy locational advantages in the inner city. - Constrained economy: The one element of growth in the local manufacturing sector has been provided by small, recently established firms. These exhibit a high failure rate, but also considerable capacity for growth among survivors. This general pattern is in accordance with accepted theories of plant development. What does seem peculiar to Tower Hamlets, however, is the sharp discontinuity in plant performance at a size around 50-100 employees. This strongly suggests that, on reaching this critical size,

Manufacturing

Industry

and Inner

City Regeneration

firms with expansion potential come up against constraints preventing their continued growth in the area. The nature of these constraints is explored by our survey of employers, presented in the next chapter.

167

CHAPTER

5

The Development 5.1.

of Manufacturing

Plants

METHODOLOGY

This chapter reports the main findings of an interview survey of 109 manufacturing employers, conducted in 1979. The structure of the sample was based on the industry and size mix of the total population of 8-900 plants operating in Tower Hamlets at that time.* In addition to the main survey, we also interviewed a small sample of six employers who had moved out of the borough; the results of this exercise are presented in Section 5.5. The main survey aimed to account for employment change in terms of the factors determining the success and failure of individual plants. In particular, we were concerned to identify those features of the local operating environment which inhibit expansion, or force contraction. Accordingly, a central feature of our analysis is the distinction between what we term a market constraint, and other constraints on levels of output. As part of our interview, respondents were asked whether they would be able to sell more goods than they were producing at the time, i.e. whether the level of demand for their products would be sufficient to absorb increased production. Those answering no to this question were classified as experiencing a market constraint - in the sense that their volume of activity was directly restricted by demand. Non-market constraints, such as sites and premises, labour shortages, or lack of loan finance, were said to apply where plants were prevented from meeting demand by supply - side factors - or inability to secure the necessary inputs.

5.2.

BUSINESS

PERFORMANCE

AND

CONSTRAINTS

By conventional profitability criteria, the borough’s manufacturing sector cannot be said to be successful. Thirty-one percent of plants either made losses or broke even; only 20% reported a rate of profit on turnover of over 5%, and average profitability - again as a proportion of turnover - was well belnw lo%, as against some 15% for the UK as a

*However, this sample structure was deliberately distorted to lower the weighting of the largest groups in the population: small plants, and the clothing industry. This was done in order to allow adequate representation of larger plants -whose share of employment is, of course, understated by their numbers -and of other industries. 168

Source: Survey

*These categories

are defined in the text

9 53

5 46

Textiles and Leather Timber Foods and Furniture

Remainder of Manufacturing All industries

7 2

3 23

2 -2

6

3

3

-

Womens’ and Girls’

1

3

Intermediate*

11

9

Sucessful*

Dresses, Lingerie, etc.

Paper and Printing Remainder of Clothing

Engineering and Metal Working

Industry group

No. of plants

1 33

2 65

3

1

3

2

10

Unsuccessful*

13 109

9 14 9

11

11

6

14

22

Total

69 49

56 44 43

18

64

-

79

41

sucessful*

of plants

by industry

Performance

TABLE 5.1. Plant performance

23 21

22 -13

55

27

50

-I

14

Intermediate*

% of plants

8 30

22 43 56

27

9

50

14

45

Unsuccessful*

100 100

100 100

100

100

100

100

100

Total

;; 2.

2 s‘ 3

? 2

2

$ z 2. g 5

$

3

170

Progress

in Planning

whole. Nevertheless, within our survey sample, the consistency of employers’ replies to a number of questions enabled us to identify clear-cut groups of relatively successful and unsuccessful plants; in addition there is an intermediate, or static, category. Specifically, the trend in real output over the last five years turned out to be a very good predictor of a range of answers on future expansion plans, profitability and general optimism. Therefore, plants were classified as successful, unsuccessful or intermediate according to whether their real output had been growing, static or declining over a five-year period. Table 5.1 shows the performance, in terms of these categories, of the different industry groups within the sample. The variation between industries is considerable, and corresponds broadly to the picture of employment change presented in the last chapter -with paper and printing, dresses, etc., and the ‘remainder of manufacturing’ performing relatively well, and women’s and girls’ tailored outerwear, food and drink, and engineering and metal working, particularly badly. Table 5.2 shows the incidence of different constraints for successful, intermediate and unsuccessful plants. Just over half of all plants are demand-constrained. The proportion of plants in this position increase markedly with worsening business performance. Thus, three-quarters of unsuccessful plants, as against less than 40% of successful ones, would be prevented by the level of demand from selling more. It seems that business failure is overwhelmingly caused by wider economic factors beyond the scope of local intervention, including the inherent efficiency or dynamism of the firms concerned. Success, on the other hand, appears inhibited to a significant extent by supply-side constraints. The most important constraint of this kind is the physical capacity of existing sites and premises, which affects one-third of successful plants. The only other important supply constraint on growth is difficulty in recruiting and keeping suitable labour, which affects approximately one-fifth of plants. Difficulty in obtaining capital finance is only seen as a constraint by one-tenth of firms. TABLE 5.2. Plant performance and constraints Constraints

A.

B.

Market

Labour SUPPlY

on the level of output

Premises

Wish*

Capital

Total

-

No. of Plants Successful Intermediate Unsuccessful

20 13 24

10 8 6

16 4 3

9 5

53 23 33

ALL PLANTS

51

24

23

15

109

Successful Intermediate Unsuccessful

38 51 73

19 35 18

30 17 9

17 4 15

100 100 100

ALL PLANTS

52

22

21

14

100

% of Plants

*Owners or management Source: Survey

do not wish to expand,

or to expand faster

~~n~f~~t~r~ng

Industry

and~Rner

City Regeneration

171

In the section which follows we examine more closely the different influences on the development of plants; we start with a discussion of physical accommodation problems, which give every indication of being the most important feature of the inner city industrial environment. Before moving on, however, we need to comment briefly on the relationship between output - which is the main indicator of business performance - and employment growth - which is the ultimate objective of inner city industrial policy. Our survey indicates that employment has typically performed worse than output; in other words, the productivity of labour in our sample plants appears to have increased considerably over the period 1973-79. Some 40% of the plants reporting an increase in output over the period experienced either static or falling employment, and 50% of plants with stable output had reduced employment; in total, plants with expanding or stable output accounted for two-thirds of the gross job loss in the sample between 1973 and 1979. Clearly output growth, while being a necessary condition of employment growth, is by no means a sufficient condition; in this sense, any policy to stabilise local employment will have to run in order to stand still.

5.3.

SITES

AND

PREMISES

Table 5.3 shows respondents’ overall views about their accommodation. Although 60% pronounced themselves either “very satisfied” or “reasonably satisfied”, the vast majority (90%) did experience problems relating to their sites and premises. Table 5.4 analyses these replies: employers report a wide variety of problems, with most experiencing more than one. Although no single problem affected more than 40% of plants, the evidence does suggest that two - the size of premises, and inadequate loading/unloading facilities - are of the greatest importance: not only did these two difficulties receive the most mentions, but they were also dominant among the 22 respondents reporting only one problem. In analysing the relationship between accommodation problems and plant performance, we rely largely on two of the survey questions. The first question, already mentioned, concerned constraints on output; the second invited respondents to describe their ‘ideal’ premises, and then asked whether, if this accommodation were made available locally, the employer would be prepared to move into them.

TABLE 5.3. Premises: Degree of satisfaction Plants

Very satisfied Reasonably satisfied Moderately dissatisfied Very dissatisfied TOTAL Source: Survey

No.

%

14 58 16 21

13 53 15 19

109

loo

TABLE 5.4. Premises: Problems reported Plants No. Size of building Loading/unloading facilities Condition of buildings Traffic congestion Layout of buildings Parking space Repair and maintenance costs Ceiling heights, floor loading, etc. Fire/Health and Safety Regs. Other problems No problems TOTAL-

Responses Plants

39 38 35 26 22 20 19 8 I 6

% 36 35 32 24 20 I8 17 7 6 6

7

6

227 109

208 100

Source: Survey

One quarter of plants, concentrated in the ‘successful’ (i.e. growing) category, turn out to be ‘space-constrained’; that is, their growth is directly inhibited by the physical capacity of their sites and premises. Half of these employers are prepared to move in order to secure room for expansion; many of the remaining half would be prevented from moving by the cost and dis~ption involved. We believe that this lack of expansion space is the most important local factor inhibiting business success and employment growth in Tower Hamlets. It is typical of the inner city environment that there is little room for in situ growth; some 60% of our respondents would be physically unable to expand without moving. While the size of sites and premises is the most important physical constraint, inadequate layout, preventing modernisation and efficient work methods, is also a major problem for many ‘constrained’ firms. In addition to the 13 ‘space-constrained’ employers who wished to transfer to better premises, there were 26 plants similarly prepared to move, but whose present accommodation was not an effective constraint on output. We refer to these two kinds of plants as ‘constrained movers’ and ‘unconstrained movers’ respectively. A comparison of these two groups is presented in Table 5.5. The Table shows that ‘spaceconstrained’ movers were concentrated in the middle of the size range, i.e. 20-100 employees, and covered a wide variety of local industries; all mentioned increased floorspace as an essential feature of their ‘ideal’ premises and felt that the demand was there to justify this extra capacity. By contrast, ‘unconstrained’ movers were predominantly very small plants, employing 20 workers or less, and concentrated in the textiles and clothing industries. Most of these ‘unconstrained’ movers did not require additional floorspace. It seems that their willingness to move was due in large part to their low moving costs, rather than to particularly serious accommodation problems. The possible effects of the hoped-for relocation, in terms of output and employment growth, must be described as

Manufacturing

Industry

and inner

City Regeneration

173

TABLE 5.5. Plants willing to relocate in the borough A.

Industry Engineering and Metals Timber and Furniture Paper and Printing Foods Remainder of Mfg. Women’s and Girls’ Dresses, Lingerie, etc. Textiles and Leather Remainder of clothing

Sample size 22 14 14 9 13 II 11 9 6

Yes

No

2 4 4 1 1

3 4 2 2

1 -

3 4 6 2

109

13

26

l-10 I I-20 21-50 51-100 101-200 200+

33 23 22 17 11 3

2 2 6 3 -

12 6 4 1 -

TOTAL

109

13

26

TOTAL B.

Plants reporting a premises constraint

By Industry

By Sire Size Band (I 976)

Source: Survey

dubious, since many of these firms were static or declining, as a result of market constraints which new premises can do little or nothing to alleviate. Thus it is already successful medium-sized plants, employing 20-100 workers, which are most demonstrably constrained by physical factors; and for whom the provision of better premises would afford the most clear-cut benefits in terms of output and employment. In the last chapter, this same group of plants has already been singled out as facing serious obstacles to further expansion; the survey has allowed us to identify the nature of these obstacles. Before moving on to examine other factors affecting plants, two further issues relating to sites and premises need to be discussed. The first concerns the relationship between the problems which employers claim to be experiencing, and the practical initiatives taken in order to overcome them. Of the 109 plants we interviewed, 14 - or some 35% of potential movers -had actually approached the Council, over the previous five years, with requests for land or new premises (an additional three had asked for financial assistance in changing or refurbishing premises); two of these requests had been satisfied, three were still pending, and the remaining nine had met with no success. Thus, the potential mobility of plants is high (a separate survey result is that some 4% of plants move every year); and a significant minority of employers is sufficiently affected by accommodation problems to approach public authorities for help even without any specific encouragement to do so. If the results of our sample survey are “grossed up” into estimates applying to the borough’s population of 800-900 manufacturing plants,

174

Progress in Planning

the results suggest that some 300 local plants are potential movers, and that approximately 100 of these are likely spontaneously to have approached the local authority for help over a five-year period. A slightly less direct conclusion from our results, which is confirmed by respondents’ comments on a variety of questions, is that firms do experience a marked shortage of suitable sites and premises in the borough. A final question about the accommodation of plants concern the potential employment gains from a policy to provide new and refurbished premises. The great majority of plants willing to move anticipated significant increases in output following a move; most expected expansion of the order of 25-50%. However, employment gains would undoubtedly be lower, because all but eight of the potential movers predicted that new premises would enable them to increase productivity. Despite this, the majority of these plants expected increased output to be associated with additional employment: of a total of 39 ‘movers’, only three said that productivity gains would lead to reduced employment, and six that increased output could be achieved with an unchanged labour force. Taken together, the 39 plants willing to move within the borough employed 1,250 people in 1979, i.e. 23% of the sample’s employment. If, by way of illustration, we assume that relocation would enable an average of 25% additional employment, and apply the resulting estimate to the whole plant population, it appears that the provision of new premises for all who want them could, on optimistic assumptions, lead to a total gain of some 8-900 jobs - i.e. slightly less than half of the net job loss which is likely to occur in local manufacturing every year. In practice, it is of course difficult to imagine that the local authority would be able to relocate anything approaching 300 plants in one year.

5.4.

OTHER

CONSTRAINTS

ON

OUTPUT*

This section summarises the survey results regarding the effects on plant performance of labour supply, the availability of finance, and planning constraints. We argue that these are of considerably less importance than are sites and premises problems as factors underlying local industrial decline, despite the very great importance accorded by employers to labour recruitment problems. We noted in an earlier section that about one fifth of plants were constrained, in respect of the level of their output, by difficulty in finding and keeping suitable labour. The proportion of employers claiming a labour supply constraint is in fact much greater, at 40%; however, analysis of the replies to other questions of the employers concerned showed that almost half of them were not in a position to significantly increase output even if they had been able to recruit more labour because they were subject to other and more immediate constraints - mostly demand. Problems in recruiting and keeping suitable labour were very widespread among the plants surveyed. Only 24 of the 109 employers failed to report such problems, and in

*In reading our findings on labour supply, it must be born in mind that, at the time of our survey, unemployment was much below its current levels.

Manufacturing

Industry

and inner

City Regeneration

175

most cases this was because the plants concerned were in long-term decline and had no recent experience of recruitment. The proportion of respondents either very dissatisfied or fairly dissatisfied with the availability of labour was twice as high, at 80%, than the proportion expressing these sentiments about any other aspect of the plant’s circumstances. Table 5.6 breaks down employers’ recruitment problems according to the level of skill of the workers concerned, and to the nature of the difficulties reported. Clearly the incidence of recruitment problems falls with levels of skill, as does the nature of the problems reported. At one extreme, virtually all the employers experiencing problems with skilled labour were affected by simple shortages of applicants, or suitably qualified applicants. At the other extreme, those complaining about unskilled labour had no shortage of applicants, but expressed concern about poor motivation, unreliability, irresponsibility and the generally poor quality of available recruits. Between these two extremes, those employers whose difficulties related to semi-skilled labour reported both straightforward shortages of applicants, and the more complex cluster of problems associated with the quality of the available workforce. Complaints about semi-skilled workers were heavily concentrated in clothing, the timber and furniture industry and the miscellaneous ‘remainder of manufacturing’ sector.

TABLE

5.6. The nature of labour supply problems -

by skill

No. of plants

Skilled

Semiskilled

Unskilled

12

20

13

-

4

17 2 3 7 8 41

9 1

All manual workers No applicants

for vacancies

Applicants have:

Inadequate skills and experience Inadequate general education Do not meet age criteria Poor motivation Other problems All plants with problems

7 10 24

9 8 31

1 5 3 6

Source: Survey

Table 5.7 presents an analysis of labour supply problems by industry, this time concentrating on the employers reporting the most serious difficulties - i.e. those claiming to be constrained by labour shortages and those who, in response to another question, said that they were curre,ntly seeking to recruit. Although these two groups overlap to a large extent, and display very similar characteristics, they are not identical, and are therefore described separately in the Table. Both groups contained, unsurprisingly, higher shares of expanding than declining plants, and also very few plants with less than 10 employees. The most striking feature of the Table is the heavy weighting of two sectors - clothing, and timber and furniture - in which over half the plants reported a serious labour supply problem as against one-third of plants in other

176

Progress

in Planning TABLE 5.7. Labour constrained

and plants willing to hire by industry No. of plants

Industry Engineering and Metal Timber and Furniture Paper and Printing Foods Remainder of Manufacturing Womens’ and Girls’ Tailored Dresses, Lingerie, etc. Textiles and Leather Remainder of Clothing TOTAL

Sample size

Labour constrained 7 7 5

Willing to hire

22 14 14 9 13 11 II 9 6

5 7 8 2 3

3 8 5 2 5 5 6 2 1

109

45

37

1

Source: Survey

industries. As we have already noted, the problems experienced in these two industries mainly concern semi-skilled workers. Bringing together the different strands of this analysis allows us to draw a general outline of the nature and impact of labour supply problems. Firstly, the survey found a straightforward shortage of skilled workers, such as maintenance fitters and electricians, which closely mirrored the skills shortages reported in all parts of the country, even in the current recession. Although rigorous comparisons between areas are rare, such comparisons as are available, as well as more general evidence, suggest that the skills shortages described do not constitute typically inner city problems. Secondly, we have identified two types of problems which appear to be more specifically local, or at least typical of inner city locations such as Tower Hamlets. The first is the low quality - as perceived by employers - of less-skilled labour, which presumably reflects the area’s history of social stress and unstable employment. The second probiem is a shortage of semi-skilled labour in the clothing and furniture trades, which may affect adversely the performance of up to one half of the plants in these sectors. Other influences on plant performance can be discussed more briefly. To taking planning controls first, 29 respondents, i.e. a quarter of our sample, recalled having made planning applications over the last five years or so; 23 of these applications had been granted, one was pending at the time of the survey, and five had been refused. These statistics admittedly understate the importance of refusals relative to permissions, because most of the applications granted were minor, whereas all the refusals seemed likely to have a significant impact on the plants concerned; three involved proposed expansion over adjacent vacant sites zoned for future local authority use, one resulted in large amounts of modern space being held empty, and the fifth was likely to cause a move away from the area, because the application involved major alterations to unsuitable buildings. Even so, at the time of the survey, planning restrictions did not rank at all highly among the constraints experienced by firms. Finally, the availability of capital finance does not appear to be a significant

~a~~~a~turjflg

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andlnner

City Regeneration

177

constraint on growth and investment in manufacturing plants. Although 23 respondents (21% of the sample) said that it was ‘very difficult’ or ‘fairly difficult’ to raise finance, instances of loans being actually refused were very rare; rather, complaints referred to high interest rates or to the conditions attached to loans. Eleven respondents (10% of the sample) stated that difficulty in raising finance had been a constraint on the development of their plants; only five of those referred to actual applications for loans. Furthermore, serious problems in raising capital appear to be associated with low profitability and business failure, rather than institutional blockages. The group of I1 ‘constrained’ plants was almost evenly divided between declining survivors (i.e. plants operating in the area between 1971 and 1979) on the one hand, and new and in-moving plants on the other. The presence of these six recently opened plants suggests that there may be a limited ‘finance gap’ associated with the costs of relocation and starting up new firms. Generally, however, the evidence suggests that local authority intervention in the role of a “public sector banker”, offering credit to solvent and viable firms with a good financial record, would serve little useful purpose, since existing financial institutions fulfil that role adequately. A more promising option is for the authority to offer credit to individually selected firms as part of a ‘package’ designed to overcome specific with the offer of new sites or premises. Our constrains - most obviously in conjunction results suggest that this would be an effective use of financial resources, since many employers constrained by their acccommodation are prevented from moving by financial and cash flow problems.

5.5.

INDUSTRIAL

LOCATION

AND

MOBILITY

The main survey information on employers’ locational preference can be summarised briefly. Not surprisingly, the great majority of respondents regarded their Tower Hamlets location as being broadly favourable: three-quarters described their location as either “good” or “fairly good’, and 80% on being asked which area they would consider first if they were forced to relocate, expressed a preference for the borough or gave a more general indication which included Tower Hamlets. Furthermore, only ten respondents - a few of whom have left the area since the time of the survey - indicated a definite wish to move away from the borough. The most important attractions of the borough appear to be good access to firms’ suppliers and customers, in that order. Lesser advantages are the availability of manual labour, and the comparatively low levels of rents and property prices. On the other side of the coin, the major disadvantages of the area were traffic congestion and the difficulties of transporting goods; the quality of the physical environment; and the level of rates. One interesting result is that the perceived disadvantages of Tower Hamlets seem to be shared with the rest of Inner London, and to some extent Greater London: of the 18 employers who would prefer a location excluding Tower Hamlets, 13 wished to locate outside London, four in Outer London, and only one - which had already arranged a move to Islington - elsewhere in Inner London. The industries showing the strongest preference for their existing location were

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textiles and clothing; apart from the general tradition of the area, the location of plants in these two industries appeared largely determined by their mutual linkages, with the textiles industry supplying the clothing industry. A further group of plants with strong preference for the borough is the furniture industry, which is strongly dependent on linkages internal to itself and with the timber industry, on London and overseas customers, and on the availability of manual labour. Finally, irrthe printing industry plants are strongly dependent not on Tower Hamlets itself but on London - and more particularly Inner London - with the dominant factor being the presence of customers concentrated in the City and the West End. We have already seen that the printing sector is a relatively recent arrival in the borough, historically displaced from central London locations; thus it is not surprising to find that plants in this category are mainly attracted to the borough by the availability of cheap premises, and that their potential mobility within London is high. The remaining three industry groups - engineering and metal working, foods, and the miscellaneous ‘remainder of manufacturing’ sector - exhibit a low level of preference for the borough, especially marked for the last two industries mentioned. Engineering and metal working plants, while having seen a disastrous erosion of the locational advantages which the borough historically offered, are largely immobile for technical and perhaps financial reasons; whereas the food industry, which has also been strongly affected by the decline of the docks, appears relatively footloose, with a high proportion of plants likely to transfer away from the borough in the long term. Finally, the plants in the ‘remainder of manufacturing’ group are seemingly in a rather different position since they neither are, nor have ever been, strongly dependent on the area. As a final comment on the locational factors affecting different industries, Table 5.8 presents average floorspace per head (the reciprocal of job density) by industry group in our sample. Apart from engineering and metal working -whose average job density appears quite extraordinarily low - the ranking of industry groups in order of floorspace per employee closely parallels the locational preferences shown by plants in the different sectors, with those industries most strongly tied to the area exhibiting the highest job densities. In other words, the inner city environment is most attractive to these industries which require the smallest amounts of space in relation to employment: TABLE 5.8. Floorspace

per employee by industry

Recorded Floorspace (sq. ft.)

Sector

Womens’ and Girls’ Dresses, etc. Paper and Printing Textiles Timber and Furniture Remainder of Manufacturing Food, Drink Metals TOTAL

Associated Employment

(82 plants)

Source: Survey

77,750 140,500 93,100 62.841 213,000 455,900 120,000 469,370 1,647,461

Floorspace Per Head (sq. ft.)

375 559 299 169 487 766 154 253 3,095

207 251 311 371 437 595 779 1,900 532

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fndustry

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City Regenaration

179

yet again, our results point to the importance of the physical constraints imposed on manufacturing firms by the crowded inner city environment. If our results on individual industries confirm, and to some extent explain, the advantages of the area for the conventional range of inner city industries - clothing and textiles, furniture and printing -what of the equally accepted view that the inner urban environment is particularly appropriate for small plants? Table 5.9 provides evidence in support of this hypothesis, insofar as the proportion of plants whose preferred location excludes Tower Hamlets increases steadily with plant size, from 6% of plants employing 20 people or less to nearly two fifths of those employing 100 or more.

TABLE 5.9. Plant size and locational preference Preferred Iocation excludes Tower Hamlets Size Band (employment l-20 21-50 51-100 100+ Ail plants

1979)

No. of plants

No. of plants

%

49 26 18 16

3 5 6 6

6 19 33 38

109

20

18

Source: Survey

In addition to our main survey, we interviewed six employers who had moved away from the borough between three and six years before the date of the survey. Table 5.10 analyses the factors involved in those relocation decisions; the remainder of this section comments on the most salient features of the Table. As in the main survey, the wider economic processes excluded from our detailed investigation appear as a crucial determinant of industrial movement, through the intermediary of the changing market conditions, which in every case provided the impetus to relocation - whether by producing a need for physical expansion, or by prompting rationalisation in response to falling demand. However, these economic pressures do not compfetely explain relocation; a further set of factors, pertaining to local operating conditions in Tower Hamlets in relation to opportunities elsewhere, determine the spatial incidence of both expansion and rationalisation. Of the local factors involved in firms’ relocation decisions, two are familiar from our main survey: the physical capacity of plants’ accommodation in Tower Hamlets, specifically plants faced with growing demand, and the inadequacy of existing buildings - particularly in respect of their obsolete and inconvenient layout. The Table picks out a further important factor: the obsolete nature of plants’ capital equipment, In relocating, four of our respondents scrapped, in whole or in part, their existing machinery and equipment, and four introduced new technology. The decision to renew the capital stock was closely related to the decision to move, since the existing accommodation of the plants concerned put obstacles in the way of installing new equipment and changing production methods. New equipment and technology are not

*To preserve confidentiality,

TOTAL

6

falling at London plant

Fashion

Furs/

growing at time of move, slump since

Timber Packing Ltd.

PQ

scrapped

badly laid out

too small

growing

Electra Components

4

-

the plants have been given fictional

3

-

badly laid out

scrapped

outworn

split sites

growing

TL Chemicals

names

partly replaced

scrapped

falling at time of move, now recovering

GandC Printers

-

multi-storey badly laid out

too small traffic problems

growing

Shelley Paints

-

TH premises inadequate

TH site inadequate

4

-

-

Plant/machinery in TH obsolete or outworn

Ye

yes

yes

4

-

-

some new processes

New Technology introduced after move/transfer

plant

2

-

unreliable unskilled

skills shortage unreliable unskilled workers

-

-

-

supply unsatisfactory

TH labour

involved in decision to close Tower Hamlets

Change in demand

Name of plant*

Factors

TABLE 5.10. Case studies of movement and transfer: Main factors involved in plant closures

blight

3

rates

4

physical environment

rates

air polution

-

-

-

Other

-

demolition of TH building

Factory Inspectorate fire, planning controls

Planning, etc.

Manufacturing

Industry

and Inner

City Regeneration

181

exclusively associated with growing output: in the case of the printing firm, the introduction of more efficient modern methods was, on the contrary, prompted by falling demand and profitability. One further feature of the Table confirms our earlier conclusions, this time regarding the view that shortages of skilled labour are not a problem peculiar to inner city economies. Altogether two respondents mentioned labour supply problems as a factor in their decision to move; both complained about the poor quality of unskilled labour, whereas only one mentioned a shortage of skilled workers in Tower Hamlets. The subsequent history of this one employer further confirms our point. While the problem in Tower Hamlets was difficulty in replacing an ageing, high-quality skilled workforce, labour supply at the plant’s new home in Swindon presented a simpler difficulty: skilled workers were simply not available. The company now recruits young unskilled workers, and generates internally the skills required by means of an extensive training programme. Finally, instructive evidence is provided by the experience of plants following their moves. The most striking result of relocation has been the achievement of dramatic productivity gains. Increases of the order of 40-50’3 were typical; even in the cases where equipment and technology were unchanged, reorganisation of production and materials handling produced spectacular results, Although we might be discussing extreme cases, these findings do provide a rough measure of the obstacles to efficiency caused, at least for some plants, by the operating conditions typical of inner cities.

5.6.

CONCLUSION

Again, our survey findings may be summarised by commenting main hypotheses of inner city job loss, discussed in Chapter 4: -

in turn on the three

Relict economy: In the last chapter, we pointed to the presence in Tower Hamlets of mature firms and industries whose rapid decline results either from national economic factors, or from the erosion of the area’s historical advantages as a location for their activities. The survey provides further evidence on this latter point. In particular we have seen that heavy engineering, and the food and drink industry, view the borough as an unfavourable location. In addition, our small survey of out-movers points to the age of the capital stock present in the area as an important factor in closure and relocation. Restrictedpotential: it will be recalled that in their view, the inner city offers specific advantages to new and/or small firms, and to a range of specialist industries. The analysis of employment change in the last chapter showed that Tower Hamlets does offer an environment favourable to the birth of new firms. Our survey results indicate that the area has special locational advantages for small plants; and for the traditional inner city industries of textiles and clothing, furniture and printing, which are characterised by high employment densities. However, this relative strength fails to produce a good employment performance, because small plants have exceedingly high death rates, and those

102

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Progress in Planning

which do survive fail to grow into large plants; and because there has been little or no diversification away from the traditional inner city activities. Constrained economy: The major supply-side constraint experienced by manufacturing plants in Tower Hamlets is lack of space for expansion; this is typically combined with the problem of outdated, inefficient premises. These physical constraints primarily affect successful, growing firms in the middle size ranges (20-100 employees) irrespective of industry; they seem to explain in large part the contrast between the good employment performance of surviving small plants, and the decline or stagnation of those employing 50-100 people or more. The same physical problems are important in causing moves away from the area. Other supply-side constraints are minor in comparison; in the area of labour supply, two specifically local problems are the poor quality of the unskilled workforce, and the shortage of semi-skilled workers in the clothing and furniture industries.

CHAPTER

6

Employment

Polk y in Tower Hamlets

6.1. THE

FRAMEWORK

POLICY

Our discussion of inner city policy, and the more detailed examination of labour market trends in Tower Hamlets, pointed out a number of serious flaws in the framework. These are: the difference in scale between the nature of urban industrial decline -which applies to the outer rings of cities as well as to inner areas - and the restricted patchwork of small areas within which policy is being implemented; the difference in timing between the housing elements of the new urban policy which are as much to do with the current impact of the end of widespread housing clearance as with any deliberate new initiatives - and the inevitably long time-scale associated with even a successful policy of industrial intervention. This difference means that the population of inner cities is stabilising now, whereas the number of jobs in inner cities will inevitably continue to decline for some years, before current policy initiatives product results; within London particularly, the extreme fragmentation of both fact-finding on the nature of the economy, and attempts at solution to its problems: the status conferred on different parts of Inner London by central government varies between boroughs, within boroughs, and even, in the continuing procession of Docklands initiatives, cutting across boroughs. All these strictures are arguments for raising ‘inner city policy’ to the status of metropolitan urban economic policy. It is only at the metropolitan scale that a coherent view of the nature of employment change can be obtained, and in particular that the decline of inner city manufacturing can be put in its proper context, as one aspect of a general decline in urban manufacturing. It is, moreover, only at the metropolitan level that a meaningful equation can be drawn between the level and composition of employment and the economic needs and aspirations of a city’s population. These matters are, under existing legislation, the province of strategic planning - i.e. structure planning. London’s problems in this respect are particularly acute because of its unusually fragmented structure of local government, and because of the (in retrospect) anachronistic view of the economic elements of the GLDP taken by the Layfield Inquiry. 183

184

Progress

in Planning

This is not to deny that there is an appropriate and necessary role for local authorities on the scale of individual London boroughs. On the contrary, industrial policy will only achieve the best possible results by very close contact between local authorities and firms. This is, of course, already being done - most obviously through the appointment of Industrial Development or Liaison Officers. Indeed, perhaps the most impressive and useful work being done by local authorities has been at the smallest scale, that of the local plan. It is in the rarely published reports of studies for these plans that the keenest understanding of the local economy is to be found, rather than in the investigations of ‘skills mismatch’ or individual industrial sectors which made up so much of the output at borough level. The small-scale and selective nature of policy has, of course, more to do with the availability of resources for industrial intervention than with ignorance on the part of policy-makers of the factors we have discussed. It would be unrealistic to suppose that these limitations are likely to be lifted in the near future. Any hopes of an expansion to more realistic boundaries of the policy areas over which ‘inner city policy’ operates would therefore, given currently available resources, produce an even thinner distribution of those resources. Even so, we are convinced that a better deployment of available resources in current policy areas could be achieved by a better co-ordination of activities at the metropolitan scale. Perhaps more importantly, a coherent evaluation of the path down which inner city policy is heading would put urban authorities in a much stronger position to challenge the assumptions underlying the policy package presented by central government.

6.2.

THE

OBJECTIVES

OF

POLICY:

EMPLOYMENT

BALANCE

The overall objective of inner city policy is to arrest the decline of population and employment, while at the same time providing a better balance between the two. Within London, this is unfortunately translated into a requirement to self-sufficiency within individual boroughs. The reports produced by the boroughs abound with references to the ‘employment needs’ of residents, presumably to be met within their home areas: none, so far as we have seen, make any reference to what levels of commuting would be regarded as reasonable or acceptable, and how such levels might permit adjustment of existing relationships between residents and jobs, in total or in specific occupational groups. The inadequacy of the data available to define and monitor labour market imbalances, however, means that policy is extremely coarsely defined, simply in terms of regenerating manufacturing employment on the one hand and providing housing more attractive to skilled workers on the other. Our analysis of what data there are suggests two things. First, that imbalances and dislocations within the Tower Hamlets labour market are spread more widely across occupational groups than the usual simple skilled/unskilled dichotomy, and the policy emphasis on manufacturing, would suggest. Second, that on reasonable assumptions about underlying population and employment trends any balancing of skills demanded and supplied in the area is beyond the hopes of even the most successful employment policy. The early 1980s will inevitably see a

~anu~a~iuring

fndustry

and Inner

City Regeneration

185

massive relative fall in employment against population, unless there is rapid decline in the resident workforce, particularly in less-skilled occupations. If these views are borne out, the first effects of inner city policy in Tower Hamlets will be precisely the opposite of what was intended: by stabilising population while employment continues to decline, the policy will have worsened further the availability to residents of local jobs. In these circumstances the task facing the borough is not to promote an improvement in the existing labour market balance, but to stave off the imminent collapse of that balance.

6.3.

STRATEGIES

FOR

INDUSTRIAL

POLICY

We have argued that industrial policy should be only one element of a more coherent approach to inner cities. As things stand, far too much is expected of the regeneration of manufacturing; this should be accompanied by a careful examination of population mobility, the true causes of inner city unemployment and the development of appropriate policies in the areas of training and housing. This is not to deny that the manufacturing sector in the inner city faces extremely serious problems, which are in part a consequence of a long period of official neglect; the prospect of the eventual disappearance of manufacturing from major cities can only be averted by sustained and large-scale action. Any policy of industrial intervention aimed at empfoyment levels faces a dilemma which has long been evident at the national level. This is the choice between supporting activities which face the most serious problems, are in the most rapid decline, and hence constitute the main threat to employment totals in the short term; or supporting activities which show actual or potential success. These might be termed respectively strategies for job retention or for regeneration. British regional policy has, in practice, followed both courses, aiming at a long-term restructuring of the industrial base of depressed areas by ‘importing’ growth plants, while also bolstering shipyards and steel plants which would otherwise have lost jobs catastrophically. Inner city policy, in contrast, virtually excludes effective job retention measures: the package of instruments available does not include the kind of blanket subsidy or specific capital restructuring grants which would be necessary to support firms or industries facing the problems of adjustment to declining or shifting markets. Regeneration has, indeed, become a synonym for industrial policy in the inner city. The agents of regeneration are, furthermore, clearly specified to be small businesses, and often new businesses. Large existing or in-moving plants are effectively ruled out by the lack of resources on a sufficient scale to influence their locational decisions, and by the absence from most inner cities of sites large enough to house them. (A single-storey plant with 300 employees requires a minimum of 4 acres). It has, furthermore, become accepted that the main role of local authorities is to provide very small ‘nursery’ or ‘starter’ units for small firms, on the grounds that there is a general shortage of such units, which is unlikely to be met by the private sector. The vast majority of such units will be less than 3,000 square feet, adequate for plants with an absolute maximum of 15 employees.

186

Progress

in Planning

For areas where there are very few small and new firms, and where a shortage of suitable premises is an important reason for this, such as strategy might be appropriate. It is, for example, being energetically pursued by Tyne and Wear County Council, which claims that there has been a measurable increase in the local rate of new firm formation as a result of a five-year building programme producing 100 new small units. The value of such an approach to an area such as Tower Hamlets, with a large stock of existing small firms and a high rate of new plant generation, is, however, much harder to see. Analysis of the local process of employment change indicates that Tower Hamlets’ problems do not originate in a failure to generate new plants. The critical problem of current employment loss is rooted in the high rates of closure among small plants and contraction among large ones. No feasible level of activity and success concentrated on the tiny new firms spontaneously generated in the area can hope to achieve a significant offsetting effect on these losses. Even over the longer term, when, as we have demonstrated, the minority of successful firms can grow at dramatic rates, a small firms policy concerned with the supply of premises is highly unlikely to lead to the regeneration of the economic base. Local entrepreneurship, as expressed in the activities of new firms and plants, is heavily circumscribed, and takes place almost exclusively within a highly specialised industrial base. Thus a high level of entrepreneurship has done little to broaden, upgrade or modernise the local product mix. If, as has been suggested, part of the difference between the economic performance of cities and that of rural areas arises from different types of entrepreneurship, then a small firms policy should seek to draw in or train more innovative and inventive entrepreneurs, rather than rely on those currently present in the borough. Our results indicate that the failure of the area’s seedbed role to create greater local prosperity is partly due to a shortage of large rather than small premises. The local high levels of plant formation and mobility suggest that there is no absolute shortfall in the supply of small industrial premises. This is not to say that very small firms are satisfied with their accommodation; but our survey did suggest that these firms are ready to move for relatively minor reasons, and that, for many of them, new premises may not lead to immediate expansion. Furthermore, the employment performance of surviving small plants is good, and small employers are the most satisfied with their Tower Hamlets location. For larger establishments (from say fifty employees upwards) however, there appears to be little prospect of finding suitable premises locally. The limited mobility of such plants means that those still growing and (as is commonly the case) unable to expand within existing buildings, are more often heavily constrained. These problems are reflected in the extremely low employment generation by expansion in medium-sized and large local plants. We believe that it is among these plants that local authority intervention should find its clients. Such plants have an employment potential far greater than that of the smallest plants; in the absence of suitable accommodation, this potential is either repressed through failure to expand, or directed away from the area through movement and transfer. To sum up the implications of our results, the most effective strategy for the local

Manufacturing

Industry

and Inner

City Regeneration

187

authority will be one of regeneration, in the sense of releasing the potential for expansion of those firms which are at present frustrated. This strategy needs to comprise two strands. The first is a systematic programme of providing new and extensively refurbished premises for plants wishing to move, together with phased redevelopment of the accommodation vacated to house a further generation of movers. The second aspect of the strategy should be very close contact with, and monitoring of, the local plant population, to identify those which are genuinely constrained by the physical limitations of their accommodation, and therefore would benefit most from assistance. In terms of the resource requirements of such a policy, our results suggest two things. The first is that the provision, extension or improvement of firms’ physical accommodation will involve a significant element of subsidy; in effect the policy amounts to the public purse compensating firms for the cost imposed on them by the nature of the area’s existing industrial accommodation. Secondly, the policy is likely to have considerable land-use implications: if, as it seems, the need for more and less densely occupied space, is the key element constraining the development of local firms, then the counterpart of an improved employment performance must be a significant increase in the amount of land in industrial use.