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There is no doubt that the lives of cities and of the businesses located in them are inextricably intertwined. But how closely linked are cities' economic growth and their liveability? A survey of urban professionals conducted by the Economist Intelligence Unit shows that the idea of liveability has a number of different components. Jobs and cost of living, public transport and roads, safety and security and culture and nightlife all rank highly among our respondents' list of factors contributing to a city's attractiveness as a place to live and work.
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  • 1. LiveanomicsUrban liveability and economic growthA report from the Economist Intelligence Unit Commissioned by Philips
  • 2. Liveanomics Urban liveability and economic growth Preface L iveanomics: Urban liveability and economic growth is the second of two Economist Intelligence Unit reports, commissioned by Philips, which examine the issue of liveability in cities. The first report in the series addressed what city residents want from their cities, and how city leaders can deliver on citizens’ requirements. This second report examines the role of business within cities. The Economist Intelligence Unit bears sole responsibility for the content of this report. The findings and views expressed within do not necessarily reflect the views of Philips. Our research drew on two main initiatives: l In September 2010, we conducted a survey of urban professionals around the world. In total, 575 respondents took part, representing cities in Asia (30%), North America (30%), Western Europe (30%) and the rest of the world (10%). See Who took the survey? for more details. l To supplement the survey results, we conducted in-depth interviews with business and civic leaders and other experts in urban affairs. See Interviewees for more details. Sarah Murray was the author of the report, and David Gow contributed. Iain Scott and Chris Webber were the editors. We would like to thank everyone who participated in the survey, and all the interviewees, for their time and insight. January 2011 Who took the survey? who work for a range of industries, with the majority from the financial and professional services, IT Respondents range in age, from 19-80, with most and technology, energy and natural resources, aged between 26 and 60. More than one-third have manufacturing, education and healthcare, lived in their city for more than 20 years, one-fifth publishing and media, and retail. for 10-20 years, and another one-fifth for 5-10 Please note that not all figures quoted correlate years. Three-quarters of respondents are married (of precisely with the charts provided, typically because those, 58% have children). They are professionals of rounding.1 © The Economist Intelligence Unit Limited 2011
  • 3. Liveanomics Urban liveability and economic growth Interviewees l Sam Adams, mayor of Portland, Oregon (USA) l Andrew Carter, head of research, Centre for Cities (UK) l Greg Clark, city expert (UK) l Warrick Cleine, managing partner, KPMG (Vietnam) l Carol Coletta, president and chief executive of CEOs for Cities (USA) l Karl-Heinz Daehre, minister for regional development and transport, Sachsen-Anhalt (Germany) l Ryan Gravel, urban designer and senior associate, Perkins+Will (USA) l Frank Jensen, president, Eurocities and mayor, Copenhagen (Denmark) l John Kasarda, co-author of Aerotropolis: The Way We’ll Live Next and a professor at University of North Carolina’s Kenan-Flagler Business School (USA) l Stanley Litow, head of corporate citizenship and corporate affairs, IBM; and president, IBM Foundation (USA) l Teresa Lynch, senior vice-president for research, Initiative for a Competitive Inner City (USA) l Josh McManus, co-founder and creative strategist, CreateHere (USA) l Harold Miller, president, Future Strategies (USA) l T.V. Mohandas Pai, head of human resources, education and research, and board member, Infosys, Bangalore (India) l Wally Olins, chairman of Saffron Brand Consultants, London (UK) l Deanna Oppenheimer, chief executive of UK retail banking, and vice-chair of global retail banking, Barclays, London (UK) l Professor Philipp Oswalt, head of the IBA and the Bauhaus Foundation, Dessau (Germany) l Paul Romer, economist and senior fellow, Stanford Center for International Development and the Stanford Institute for Economic Policy Research, and Henry Kaufman visiting professor at the Stern School of Business, New York University (USA) l Terry Schwarz, director, Cleveland Urban Design Collaborative, Kent State University (USA) l Todd Sinai, associate professor of real estate and business and public policy at the University of Pennsylvania’s Wharton School of Business, (USA) l Fred Smith, chairman, president and chief executive officer, FedEx (USA) l Regina Sonnabend, an urban planner at the Bauhaus Foundation (Germany) l Colin Tweedy, chief executive, Arts & Business, London (UK)2 © The Economist Intelligence Unit Limited 2011
  • 4. Liveanomics Urban liveability and economic growth Executive summary T here is no doubt that the lives of cities and of the businesses located in them are inextricably intertwined. But how closely linked are cities’ economic growth and their liveability? A survey of urban professionals conducted by the Economist Intelligence Unit shows that the idea of liveability has a number of different components. Jobs and cost of living, public transport and roads, safety and security and culture and nightlife all rank highly among our respondents’ list of factors contributing to a city’s attractiveness as a place to live and work. In the first report in this series, we spelled out the strategies policymakers need to adopt in order to maintain and improve liveability for citizens. Some of the key steps include providing a good public transport system, getting a bigger say in planning policy, taking a more sensitive approach to urban design and handing over more control of public services to citizens. This second report explores the relationship between business performance and liveability in cities, and highlights some of the ways in which business and policymakers are working together to make cities more liveable. Whatever the type of challenge being faced by an individual city, improving liveability can only help to strengthen its attractiveness for residents, workers and potential investors. But coming up with a realistic and effective strategy for boosting economic growth is a hugely difficult challenge, particularly when wider economic forces are working in the opposite direction. History has shown that long-term shifts in patterns of trade across the globe and the introduction of new technologies or production methods can undermine the industries upon which some cities were built. Declining cities in the former manufacturing heartlands of the north of England and in the “rust belt” of the United States provide powerful evidence of this. And, try as they might, policymakers have frequently found it agonisingly difficult to hold back the tide of change. Even in those cities where economic growth is occurring, the challenge of enabling this can be enormously complex. Often the problem is that those people already living in high growth areas resent the changes associated with it and try to block the developments and investments—in housing and transport, for example—that are needed to facilitate growth. Rather than blocking growth altogether, however, these kinds of obstructions frequently lead to congestion and affordability problems as more and more people and businesses try to cram into houses, offices and trains that were simply not designed to meet such high levels of demand.3 © The Economist Intelligence Unit Limited 2011
  • 5. Liveanomics Urban liveability and economic growth It is important to look at liveability—a misunderstood and often misused term—but equally important to understand that for citizens and companies, there is a clear hierarchy of needs. What is clear from our research is that what business primarily wants from city leadership is policy that helps to stimulate job creation, followed by basic liveability factors such as good infrastructure, schools and so on. Mayors and civic leaders can occasionally be beguiled by the “softer” aspects of liveability. Opera houses, parks and other assets associated with liveability are all important components of great cities’ brands, but getting the basics right first helps cities to compete globally on a more equal footing. Among the key findings of our research are: Jobs take precedence over liveability when people are choosing where to locate Our survey shows that the main reason for urban professionals to move to a city is its jobs market and cost of living. Moreover, respondents say that their organisation’s main benefit in being located in their city is its access to talent and labour. But with workforces increasingly prepared to relocate for the best opportunities, there is a question mark over policymakers’ ability to develop local skill levels and encourage skilled workers to remain in their city. Deliver the housing needed to meet demand As we spelled out in our first report, rising house prices are often seen as a sign of a city’s economic success. One important challenge for policymakers who are looking for ways to help maintain their city’s economic growth is to make sure that there is enough housing to meet demand in economically dynamic areas. Failure to do so can result in housing affordability problems, dissuading talent from moving from low-performing to high-performing areas. This is not simply an issue for policymakers. As Todd Sinai of the University of Pennsylvania’s Wharton School of Business points out, “in a city that’s more expensive, the first thing that has to happen is that workers need to get paid more”. Open the door to foreign investment In difficult economic times, policymakers are often pressured into favouring support for local businesses over foreign companies. But such strategies are not necessarily the right way forward, according to our survey—only 15% of respondents see that as a priority for their civic leaders, as opposed to almost one-third who would prefer it if multinationals were encouraged to set up shop in their city, in order to make it more competitive for business. The presence of multinational companies in a city can raise its image elsewhere, and branding can play a big role in the business life of a city. More than one-half of respondents regard their city’s international profile and good reputation as important benefits to their organisation’s decision to locate there, and nearly three-quarters believe their city’s image helps it to attract important industries. Enlist the help of the commercial sector Respondents to our survey consider that it is the public sector that should shoulder most responsibility for services such as public transport and the maintenance of parks and schools. But the business sector already plays a key role in developing cities’ liveability, supporting culture, sporting events, healthcare © The Economist Intelligence Unit Limited 2011
  • 6. Liveanomics Urban liveability and economic growth facilities, transport infrastructure and environmental initiatives. As civic leaders face tighter budgets they should be prepared to take the initiative in asking business for more help. The cost to the city of London’s ambitious cycle hire scheme, for example, would have been far greater without a substantial investment from Barclays, a bank. Of course, in engaging in philanthropic endeavours an organisation’s ambition may largely be to generate brand awareness. But Londoners, for their part, have shown that they are prepared to become two-wheeled advertisements for Barclays in exchange for a more convenient journey around town. Focus on the basics of urban life – transport, roads, houses, schools and safety When a city secures a major sporting event such as the Olympic Games, is it a boon for business? Urban professionals don’t think so. They think it is far more important to get the basics right by improving public transport and roads, providing better schools and improving safety. CEOs such as FedEx’s Fred Smith agree. “Ultimately, you have to have both good economics and good quality of life—they feed each other,” he says.5 © The Economist Intelligence Unit Limited 2011
  • 7. Liveanomics Urban liveability and economic growth Introduction F rom the earliest times of human commerce, when trade crossroads became sites for settlements, the world’s greatest cities have arisen and flourished around commerce. Florence had its Medici bankers; Flanders its wool merchants; Manchester its cotton mills; and Detroit its carmakers. Wherever you look around the world, business has often played a pivotal role in the story of urban growth and change. Business continues to play a central part in the development of the world’s cities, but the economic role played by different cities has evolved over time as the forces of globalisation and technological change have reshaped patterns of trade and shifted the focus of business growth. Some cities, including Manchester and Detroit, have declined as the industries on which they were built have shed jobs. Others, such as Bangalore in India and Beijing in China, have grown rapidly as economic growth in developing countries has surged. Against the backdrop of intense competition and long-term change, urban policymakers must find ways to maximise their city’s economic growth. In attempting to do so, many have become interested in the relationship between economic growth and liveability. The thinking is that businesses and highly-skilled workers, particularly those in mature industrialised economies, are increasingly basing their location decisions on the quality of life on offer in a city as well as the strength of its economy. The basic idea, therefore, is that if city leaders can improve the liveability of their city, they can attract the businesses and skilled workers needed to grow their economies. This argument seems straightforward enough, but how strong is the relationship between liveability and economic growth in cities? Can a modern city thrive without having a high quality of life? Which other factors influence economic performance in cities? And, after looking at the evidence, what should be the priorities for city leaders trying to stimulate economic growth in their areas?6 © The Economist Intelligence Unit Limited 2011
  • 8. Liveanomics Urban liveability and economic growth Key points n What businesses want from cities varies enormously. n However, some requirements are common to all: talent, transport, affordable housing and good governance. n Experts differ on the importance of quality of life as a driver of economic growth. Part I: What businesses need from cities W hat businesses want from cities varies enormously. As Greg Clark, an adviser to city agencies around the world, says: “If you’re in film, fashion and TV you want London or New York—big and dirty, with lots of different people and real edge that creates a buzz. If you’re doing bioscience or pharmaceuticals, you want precision labs and so you might prefer Boston, Zurich or Singapore.” But despite the diverse range of needs that businesses have, there are some requirements that are important to all. We discuss these below and explain the role that liveability plays in fostering their development. A talented workforce In mature, industrialised economies where knowledge-based services businesses are an increasingly important driver of growth, having access to a skilled workforce is becoming more of a necessity than a luxury. Cities often play a crucial role here, providing a rich source of talent upon which knowledge intensive businesses can draw. What were your main motivations in coming to your city? Select up to three. (% respondents) To seek better work opportunities 39 I was born here/it has always been my home 29 I was posted here by my employer 24 To be closer to family/friends 21 To go to school or university, or to be near to better schools or universities 15 For culture/nightlife 14 For greater personal freedom 11 For existing relationship/To find new relationship 9 For safety/security considerations 8 For healthcare considerations 3 Other 87 © The Economist Intelligence Unit Limited 2011
  • 9. Liveanomics Urban liveability and economic growth In our survey, access to talent and labour were cited by 63% of respondents as being what makes their city a good place in which to locate their organisation, while 58% said that their organisation had chosen its location because it could access a happy, healthy workforce. One-third of urban professionals say improving schooling and education would make their city more competitive for business, making it their second-highest priority. Businesses are looking for a deep talent pool in the fields in which they need to be successful,” says Carol Coletta, president and chief executive of CEOs for Cities, a US network of urban leaders. “Talent pools in places where there are other talented people. That speaks highly to the need for quality of place and quality of opportunity.” Cities’ power to attract talent is why KPMG sited its Ho Chi Minh City offices in the downtown area, rather than where its clients are, in industrial zones outside the city. “The number one reason for being located where we are is the people,” says Warrick Cleine, managing partner of KPMG Vietnam. “What forms part of “What forms part of being an employer of choice is having a high-quality office building and shops and being an employer restaurants around it that staff can go to.” of choice is having a There is a question mark over just how much city leaders and other policymakers can do to retain high-quality office skilled workers, however. “A lot of places are successful in developing talent because they have the building and shops right higher education institutions, but they can’t necessarily hang on to that talent,” says Ms Coletta. and restaurants Andrew Carter, head of research at Centre for Cities, a London-based think-tank, explains that this is around it that staff because workers are increasingly mobile. “When a city is creating jobs, its population tends to increase can go to.” and when it’s losing them its population falls,” he says. “That’s just a normal part of the adjustment Warrick Cleine, KPMG process in all economies. Skilled people find it easier to access jobs elsewhere so they’re often among the first to leave when the jobs begin to dry up. It’s very difficult to see how city leaders in places like Liverpool [UK] can prevent that from happening.” What do you think should be the main priorities for your citys mayor/leadership in order to make your city more competitive for business? Select up to three. (% respondents) Improving public transport/roads 61 Improving schooling/education 33 Encouraging multinational companies to set up business 32 Improving safety and security 29 Raising the citys profile and improving its reputation 27 Reducing corruption 25 Reducing environmental impact 22 Supporting local businesses ahead of multinationals 15 Improving healthcare facilities and access to care 12 Attracting major sporting/cultural events 11 Other 78 © The Economist Intelligence Unit Limited 2011
  • 10. Liveanomics Urban liveability and economic growth The aerotropolis Live Next), points to a shift in many places where airports no longer simply serve the city but have themselves become airport cities. “They’re taking As transport and logistics companies gather on all the functions of a modern metropolitan around the world’s biggest airports and their centre,” he says. “Upscale restaurants, casinos, related transport corridors, a new urban form is hotels, trade and exhibition complexes and emerging: the airport city. Professor John Kasarda financial units are all locating around the airport, of the University of North Carolina’s Kenan-Flagler and this is creating a second downtown.” Business School argues that airports are set to “The aerotropolis should bring together urban shape urban development in the decades to come. and regional planning, and business strategy and “Show me the busiest airports today and I’ll show site planning,” Professor Kasarda continues, “so you the great urban centres of tomorrow,” he says. airports function more efficiently and the region Professor Kasarda
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