The study reported in this paper contributes to this emerging understanding of the link
between clustering and economic performance. It examines the benefits and costs accruing
to financial services firms located in London, Europe’s largest and most important financial
services cluster. The paper is structured as follows. Section 2 details the study’s
methodology. Next the study’s findings are presented and analyzed. A final section
concludes and draws key policy implications.

2 Methodology

The London financial services cluster is depicted in Figure 1. The cluster includes
companies and institutions engaged in banking, insurance, securities dealing, fund
management, derivatives, maritime services, foreign exchange, bullion markets, legal
services, accounting and related services, management consultancy, and other professional
and support services (advertising and market research, recruitment, education, financial
publishing, software development). There are five distinctive sub-concentrations. First,
Canary Wharf to the East which is the home of some of the largest investment banks.
Second, the very dense “square mile” that is the City of London (“the City”) featuring
banks, insurance and law firms. Third, a less dense West End, concentration featuring
banks near Mayfair and advertising in Soho. Fourth, an incipient concentration north of the
City featuring services such as architecture and business support. Finally, a concentration
that lies in-between the City and the West End consisting of law firms located in close
proximity to the law courts. Each of these sub-concentrations are fundamentally
interdependent and make up the general London financial services cluster.

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