Cheaper City tries to lure its refugees

In a couple of weeks' time the chief executives of 200 companies that have moved their offices from the City of London over the past 15 or 20 years will receive a letter from the City Corporation. This will point out that times have changed a bit since these companies were around, that the City now offers lots of cheap space, that its rates are going to come down next year, and that far from being an expensive location the City has become a rather cheap one.

In itself this might not seem a particularly significant event. Anyone involved in running a business is deluged with letters from places like Telford or Livingston proclaiming the wonderful incentives on offer to anyone seeking to set up there. But it is interesting that the City should be taking a leaf out of the new towns' book, and it reflects a general rethink about the future of the City as a place of business.

Much of this thinking is happening within the corporation itself, but it links in to the Government/business initiative to promote London more generally and to the British Invisibles campaign to sell the City's services to countries like Russia.

The central proposition is that in strategic terms the City has too many eggs in one basket: the financial services industry. At the moment (and despite all the fears about job cuts during the recession) this is a wonderful basket, for not only does the industry directly create a lot of highly paid employment but it also generates secondary jobs in the various support services. By building the string of hi-tech 'factories' - the giant dealing rooms - in the 1980s, the City has bolted in this industry for another generation. But on a long, strategic view it is dangerous to depend on one industry.

Go back to the pre-war era and the City was home to large numbers of commercial (as opposed to financial) activities, mostly merchants, which individually might be quite small but which collectively gave the City the ability to weather the 1930s depression without grave unemployment. Many of these jobs survived into the 1950s and 1960s, but have now largely disappeared. The City has become purely a financial centre.

One response would be to say there is not much to be done about this; that one cannot really plan where jobs will come from and that instead of trying to second-guess the market, one should simply be nimble in responding to any market signals. This has been the City's strategy to date, and a successful one too.

But being nimble should not preclude initiatives to try to drum up business.

If one acknowledges that the City may face a problem in 15 or 20 years'

time, were financial services to shrink, it makes sense to see now whether other types of activity could be attracted to it to broaden its options. All that would be happening would be some modest reversal of the process of specialisation that has taken place over the past two decades. The City would be going some little way back to its roots.

What kind of activity? One obvious area to look at would be things that have been squeezed out - hence the letter to the 200 refugees - but realistically, the more promising propositions will come from expanding ancillary services for the finance industry: activities such as public relations, computer back-up, advertising and design.

Another area with great potential is retailing. It has always seemed odd that the 350,000 highest-paid people in the country should not face greater efforts to extract money from their bank accounts. The problem is space.

Marks & Spencer has been highly successful on (for it) quite small sites, but there are few potential places where larger stores might be established.

A slightly different approach is to target new regions, rather than new types of business. Here, much effort is being made to attract business from central and eastern Europe: the corporation, which owns a lot of property in the City, has created a very cheap service centre for organisations from the former communist countries. It also has an initiative called Easy Space which seeks to fill inexpensive office suites.

Maybe, too, the City could do better in attracting large companies to use it for their headquarters. The three largest non-financial companies with headquarters there are Unilever, BP and BT. All three might move in the next few years, which would be a serious blow, so keeping them has become a high priority. Attracting others is difficult enough, but were these to leave it would be tougher still.

The message to be put across is that, given the services it offers, the City is now quite a cheap location. Ultimately, that is what will attract business: promotions arouse interest, but the size of the bill is what matters in the end.