The Evidence Base for London's Local Industrial Strategy - Final report


The Local Industrial Strategy (LIS) for London is an opportunity to shape a more inclusive and sustainable economy. It is widely understood that improvements in productivity underpin increases in living standards and therefore are a necessary (although not sufficient) condition for inclusive growth.

The chapter focuses on London’s innovation performance. Innovation is a critical driver of productivity growth, at the national and local level. The economic literature points to the key role of technological change (brought about by innovation) in supporting long-term growth, allowing output to be increased without requiring more inputs. Local innovation, especially in partnership with other community stakeholders, can also help to generate solutions to local challenges, for example around sustainability or the delivery of public services.


The evidence presented in the chapter provides an overview about the strengths and key Key challenges, risks and opportunities of London’s innovation performance: 

Strengths: London has a number of strengths concerning ideas and innovation. These include the quality of its higher education institutions and the presence of many global/European headquarters of highly innovative businesses. Generally speaking, it offers good access to loan and equity finance for innovative firms. And critically, it has competitive strengths in several leading R&D sectors, including tech and digital, low-carbon and environmental goods and services, advanced urban services, life sciences and the creative industries.

 • Key challenges, risks and opportunities: notwithstanding its great assets, reported levels of innovation among London businesses are only average in comparison with other parts of the UK, and there is also significant scope to raise business spending on R&D. As in the rest of the UK, there is capacity for the greater diffusion of innovation (including artificial intelligence) among London’s business population. Longer term, there are significant opportunities to be gained (but also a need to manage the potential disruption) from transformative innovations.


The chapter presents evidence on London’s innovation performance across a range of indicators. It examines both inputs to and outputs from the innovation process, barriers to innovation and industry research strengths. It also presents data on the inclusiveness of innovation in London – the extent to which all of London’s businesses and all Londoners can participate in innovative activities. Finally, it touches on how innovation is likely to impact on the London economy in the future.

Hesketh, R. E., Mosca, L., Pittini, M. (2020). The Evidence Base for London's Local Industrial Strategy–Final report. p. 121-151.

Project team/contacts:

Rachel Hesketh, Research Associate, King’s College London,
Luigi Mosca, Research Fellow, CSEI Imperial College London,
Michele Pittini, Senior Economist, GLA,