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London’s prowess in financial services has often masked its formidable strengths in other sectors – not least the creative and media industries. The UK capital is a hub of creative talent, with world-class strengths in advertising, broadcasting, marketing communication, theatre, film, special effects and design. This is reflected in its economic impact.

Creative industries account for 5.6 per cent of UK gross value added, a measure of economic output, and make up 8.7 per cent of all UK enterprises, according to the Institute of Practitioners in Advertising (IPA). This is partly because the UK punches above its weight as a consumer of advertising. It is the world’s fifth largest market for advertising after the US, China, Japan and Germany – in spite of being 22nd in population size. While the French spend 3.5 per cent of GDP on media and cultural products, Britons spend 7 per cent.

Claire Enders, founder of Enders Analysis, says: “We have a gigantic industry because we have complicated behaviour: satellite, Freeview, digital TV, Sky. We have advertising technologies coming out of our ears in the UK.”

Much of this activity is focused on London: the IPA puts the capital’s share of national gross income earned by advertising agencies at more than 80 per cent. The city acts as a cluster for disparate media skills, providing a “one-stop shop” for clients. Ms Enders says only Los Angeles and New York rival London for “end-to-end ability”.

“The economic advantages of the density here are only understood when you participate in it all the time. You can get around all the aspects of a creative problem in an afternoon.”

But the city has nonetheless had to deal with profound long-term changes in the industry. Twenty-five years ago, a company that wanted to get its message out to UK audiences could reach up to 80 per cent of the population by placing a TV advertisement next to News at Ten and another during Coronation Street, the soap opera.

Today, there are hundreds of TV channels and the internet and smartphones are tearing up traditional expectations of viewing habits. The shift is happening faster among young people: in the UK, 3 per cent of television viewing took place on the internet and mobile video, but the figure was 10 per cent for 18-34 year olds, according to Nielsen and BARB/InfoSys+, the audience measurement data providers.

So reaching the same proportion of the population is now far more complicated. Paul Bainsfair, director-general of the IPA and a former chief executive of Saatchi & Saatchi, says: “The old clear lines of who did what are changing. Google and Facebook would have been seen as media channels but are morphing into what we used to think of as advertising and media agency territory.”

It is a shift that favours the agile. “London has responded well to fragmentation,” says Richard Exon, former chief executive of agency RKCR/Y&R. “It’s been a huge opportunity for brand owners who understand how to exploit new developments and smart agencies, whatever their scale or heritage. The field is much more open, both for brands and their agencies, than it was before these changes.”

The shift from print media to digital has favoured another growth industry in the capital: technology businesses. A handful of web start-ups scattered around Shoreditch 10 years ago has grown into 1,300 today, according to Tech City, the government’s promotional agency for the sector. As online activity has grown, many of these businesses are playing an increasingly important role in delivering marketing messages to a fragmented audience.

Small companies have an advantage in London: the UK advertising industry is one of the least conservative when it comes to big brands trusting minnows with their custom. Joint, an agency launched 17 months ago by Mr Exon and Damon Collins, former creative director at RKCR/Y&R, employs 20 staff in Soho and has produced work for TSB, BHS and Air New Zealand.

Mr Exon says this would have been much harder to achieve in the US or Asia, in spite of their entrepreneurial reputations. “One of the great things about London is that if you get the right mix of talent and experience, then big businesses will consider you even when you’re a start-up,” he adds.

London’s reputation as a global centre of excellence in advertising goes back to the 1960s and 1970s and the emergence of creative directors such as Ridley Scott and Alan Parker, who later moved into the film industry. In a society still infused with class, it was a sector in which raw talent counted for more than connections.

But there are worries today about the ability of the industry to keep its doors open to young people from all backgrounds. London’s economic success has pushed up the cost of living, with housing costs in particular at record levels. Mr Exon says: “We need to guard against only middle-class kids from comfortable backgrounds being able to afford to start in the industry, because, if we get to that stage, we will be cutting off our supply of talent to a high degree. London is at its best when people from many backgrounds have the opportunity to succeed.”

Another potential threat to the UK capital’s predominance is the emergence of new markets in Asia, Latin America and eastern Europe. While they present an opportunity for British expertise, they are also sparking the creation of vibrant advertising industries in places that formerly had none. “The enthusiasm and energy that some clients find in developing countries is very seductive,” Mr Bainsfair says.

For Ms Enders, the key to the continued success of the capital is its openness to outsiders. “Here, the creative culture is full of originality and the reverse of conformism, which is partly to do with its history as a 2,000-year-old city open to outsiders. It creates a demotic sense of an open future for all.”

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