Below are my notes from “The Flat White Economy” by Douglas McWilliams; a few stats and thoughts about London; and a specific segment regarding its economy and geography.
East London, characterised by the EC1V post code, saw 32,000 new businesses in 2013/4. The Old Street Roundabout – known as Silicon Roundabout – is the “headquarter” of the Flat White Economy.
Why Flat White Economy?
Flat White economy is the term initially coined by Cebr to define the “techie geeks” and creative types, which can often be found in London’s coffee shops (or “Coffices”) and shared office spaces consuming a lot of coffee, particularly a type of white coffee: the Flat White. They work in creative, scientific, or technical jobs, often in sectors such as financial technology, digital retailing, and digital marketing.
Why the UK?
- It is impressive the speed with which the UK has taken to online retailing and marketing, which makes it a fertile spawning market to test out a new product.
- Online retailing: 13.5% of all purchases in the UK, compared to 11.4% in the US and an average of 7.2% in Europe (Germany 9.7%).
- According to the Centre for Retail Research, in 2014 67% of British people shopped online on a regular basis.
- Why? Many reasons. Congested road traffic discourages shopping in person; British people are temperamentally diffident about face-to-face dealings, which may also encourage online spending over and above purchasing in person; and furthermore, UK people are not concerned about the usage of their credit card online unlike many other countries, which makes the transition faster.
- It has one of the fastest growing economies in the Western world. Let’s put that in context and compare London with Hong Kong – just 2.7% of growth in HK compared with 4% in London.
- 30.7% of the UK economy is in business and financial services (which contributed to 54% of the GDP growth between 2010 and Q2 of 2014)
- London is characterised by a strong migrant-based labour market with a high level of available skills and high level of creativity. 4 out of 10 employees in London were born outside the UK, with three quarters outside of the EEA. 50% of the 2 out of 4 work in skilled jobs and are often particularly highly qualified, a surprisingly (or perhaps not?) large number have academic qualifications well in excess of those required for their jobs – even for low skilled jobs.
Why East London?
- This is the cheapest part of the central areas in London, and rent claims a big chunk of everybody’s income over here. Between 1995 and 2007 property jumped by 4 times. (8 times from the ’80s).
- However, the cost of labour cannot remain affordable forever if the cost of accommodation continues to spiral.
Signs of a ‘Change of Guard’:
- Lifestyle change in London between the ‘Heyday’ that started in the ’80s up until the financial crisis in 2007. The lifestyle trickled down from the traders to the people who serviced their requirements.
- Finance Boom: ’80s and ’90s Londoners distinguish themselves by their appetite for champagne.
- Flat White economy: the bicycle has replaced the Porsche, skinny jeans have replaced suits, and flat white coffees have replaced champagne. Champagne sales are down a quarter since their peak in 2007, yet coffee is up 50% since 2007. Is this a signal of a change of guard of the labour force driving London?