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SERC/Urban and Spatial Programme Discussion Paper
Quantitative Easing of an International Financial Centre: How Central London Came So Well Out of the Post-2007 Crisis
Ian Gordon September 2015
Paper No' SERCDP0193:
Full Paper (pdf)

JEL Classification: R11; R12; E58; E32

Tags: spatial imbalance; regional economic fluctuation; financial centre; monetary

This paper documents and seeks to explain the remarkably positive employment trends of a central area of London in the years since the onset of the financial crisis. The volatility of this economy since the 1980s had suggested the likelihood of a sharp loss of jobs, maybe followed by a strong bounce-back, if the finance sector could overcome reputational damage from its role in the debacle of 2007-8. In fact this area proved both the most resilient in the downturn and the most dynamic in the upturn, accounting for all/most net job gains in the UK. This paper considers three types of explanation for this positive outcome - in terms of: fundamental economic strengths allowing it to keep going through generally tough times; an advantaged position in relation to elite choices about resource allocation and restructuring in the face of a general fiscal/commercial squeeze; and (less conventionally) the impact of massive support to/through the banking sector, in first mitigating impacts of the downturn for the financial centre, and then fuelling another global city boom. The last of these is argued to be key to understanding not only why central London has done so well since the crisis, but how it is still liable to be ‘the capital of boom and bust’.