The Clustering of Financial Services in London*

3.3 The Importance of Personal Relationships

The defining characteristic of a cluster is the close proximity of related firms. We
asked how this was advantageous (Table 5).

Table 5: The Importance of Close Proximity to Other Firms

The supreme importance of maintaining personal contact and being able to interact
face-to-face is clear. In the questionnaire survey as a whole, the importance of maintaining
personal contact and being able to interface face-to-face were the second and third most
highly ranked factors. The compactness of the City also aids the ability to establish
relationships of trust. There are no significant differences between lines of activity
regarding the importance of trust. The existence of common understanding and
complementary expertise are classic characteristics of dynamic clusters and are much in
evidence here. Larger firms are significantly more likely to rate trust and ease of
communication as being important and have a distinct, though not quite significant,
tendency to rate personal and face-to-face contact as being highly important.

The importance of face-to-face contact was underscored by the interview survey,
which cast light on why it is important. Several firms emphasized the importance of a face-
to-face meeting for conducting complex transactions where it is important to fashion
agreement while reducing the chances of misunderstandings or creating antagonism. A
face-to-face meeting has the advantage that more information is conveyed, including

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