The Clustering of Financial Services in London*



4.2.3 Inter-firm Linkages

There is clear evidence of close and important inter-firm linkages among local firms,
particularly those with complementary expertise, which above-all translate into the ability
to provide high level services to clients e.g., by the ability to form multidisciplinary teams
which can work well together quickly. The ability to form inter-disciplinary teams is
particularly important in respect of client meetings and again a particular advantage of
location in the cluster. The policy implication is that it is very important that the cluster
remains multifunctional and diverse.

Proximity to the customer is highly important, perhaps more so than has been revealed
in the existing clusters literature. This relates to major clients based themselves in or near
the cluster, to firms who rely on other firms in the cluster for a derived demand for their
services and also to the ease for international clients of doing business, perhaps with a
range of firms based in the cluster. All three of these have the policy implication that it is
important to maintain a compact cluster. It also has implications for transport policy. The
convenience and efficiency of geographical propinquity are being undermined by problems
of traversing the city. In terms of international clients there is the added issue of getting to
London from airports.

4.3 Sources of Help with Innovation

Location appears to be most important in helping to develop new markets and better
ways to deliver. The co-location of a pool of skilled labor and customers is an important
stimulus to innovation. The link with innovation is particularly strong for banks. The
implication for policy is that physical clustering of service firms and customers should be
sustained and promoted to support innovation.

4.3.1 Institutional Thickness

Many firms in London benefit from being close to a relevant exchange and/or other
important institutions such as a regulator or trade association. The policy implication is
that the benefits derived from this source would be weakened by dispersing the cluster.

39



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