The Clustering of Financial Services in London*



most firms were large by international and London standards, prominent small, specialized
organizations were included. The sampling strategy was weighted towards banks and
auxiliary financial services due to their strong representation, concentration and importance
in London.

The plan was to conduct 30 interviews - 14 banking, 6 auxiliary financial services, 3
insurance, 3 legal and 4 accounting/consulting, selecting up to 20 firms in the City and up
to 10 from elsewhere in the cluster. For practical reasons, interviews were arranged on a
first come first served basis regardless of location so, to ensure a reasonable representation
geographically, more than 30 interviews was actually conducted. In total, 39 interviews
were conducted across seven sectors. The interview results were coded numerically and
sorted by both sector and location variables and offer an understanding of the processes that
constitute the clustering phenomenon as seen through the eyes of some of the most senior
decision-makers in the London cluster.

3 Questionnaire and Interview Survey Findings

This section reports the key findings of the questionnaire and interview surveys. It
begins with an overview of the benefits of clustering and then proceeds to investigate four
major themes (the labor market, the importance of personal relationships, sources of help
with innovation and interdependencies) in more detail. Attention then shifts to the
disadvantages of a London location and the nature and extent of declustering.

3.1 An Overview of General Benefits

There are several important benefits of a London location. The findings are
summarized in Table 1 in total score rank order. The importance of a credible address
stands apart at the head of these advantages and indeed has the fifth highest total rank of all
factors in the questionnaire. It is also among the most consistently mentioned themes in the
interview survey. Location can perform a valuable economic role by transmitting a
credible signal of a firm’s history and quality to its customers. Economic theory suggests
that firms that provide the highest quality will have the greatest incentive to acquire the
most favorable locations. Accordingly, the occupancy of the most prestigious address is a
signal conveying valuable information in the market. Reputation effects are themselves a



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