Human Capital: Disruption, Opportunity and Resilience in London’s workforce


London’s economy has been on a roll in recent decades, establishing the city as a leading global centre for finance and business services, cultural industries, higher education and tech. But times are changing: the growth of automation, Brexit and wage pressures are three factors with potential to shake up London’s labour market.

This report undertakes fresh analysis of data on London’s workforce, skills and specialisms in order to consider which jobs and businesses will be most affected. It also reviews the factors that will help the capital adapt to change, and considers the implications for businesses and policymakers.

Automation is expected to affect more and more jobs in coming decades…

  • Machine learning and mobile robotics are enabling the automation of ever more complex tasks, though the human skills of creativity, dexterity and social intelligence remain more challenging.
  • The cost of robots is falling, by around 10 per cent each year.
  • The impacts of technological change on work are uncertain, but estimates suggest that between 10 and 47 per cent of current jobs in high-income countries could be automated over the next 20 years.

…and in London, automation combines with other disruptive factors.

  • Reduced access to European labour following Brexit could pose a particular challenge in a city where 15 per cent of workers come from other European countries.
  • Pressure on wages resulting from national policy and rising costs within London may be amplified by labour shortages, creating more pressure for automation.

London’s workers and employers are expected to face a perfect storm of disruption…

  • Around one-third of London’s jobs could be automated.
  • The impact is likely to be greatest for low- and medium-skilled workers in secretarial, administrative, sales and routine trade jobs.
  • Their occupational makeup means that wholesale and retail, transportation and storage, and accommodation and food – together accounting for around one million jobs in London – are the sectors most likely to be affected.
  • Automation in some of these sectors (such as accommodation, food and retail) may be accelerated by wage pressures and labour shortages.

…but London is also well placed to weather the storm.

  • Jobs in retail and food service in the capital are often more specialised than in the UK as a whole, with more focus on personal service and less capacity for automation.
  • New jobs are likely to be created in finance, IT, education, manufacturing, and health – some of which are London specialisms.
  • London’s workers are better qualified: 53 per cent have degrees compared with 31 per cent in the rest of the UK, suggesting a greater capacity to adapt to change (though international comparisons are less favourable).
  • London’s “global city” clusters offer high productivity and a concentration of higher-skilled functions, suggesting sectoral strength and resilience.

Businesses are already working to capture opportunities and ready themselves for change…

  • Diversified, artisanal and bespoke products are offered to increasingly discerning consumers.
  • Business services are “moving up the value chain” – offering specialised consultancy services rather than the routine services that are already being automated.
  • As routine cognitive work is automated, employers are seeking staff with adaptable, creative and people-focused skills.

…but policymakers should also think radically about how to respond.

  • Education and skills policy should increasingly focus on developing cognitive skills and the capacity to learn, not just delivering vocational and academic qualifications.
  • Immigration policy must reflect the need to secure and retain the skills necessary to grasp the new opportunities emerging from technological, social and demographic change.
  • Regulatory systems need to be progressive – capable of making London a centre for the development and adoption of new technology, while safeguarding worker and consumer interests.