CBI: The future of cities
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The future of cities

By 2050, 70 per cent of the world’s population will live in cities, putting increasing pressure on the infrastructure that makes them work. Can the UK’s conurbations grow successfully – and can business benefit from helping them to surmount their challenges? By Peter Curtis

View Of Selfridges Store In BirminghamThis article appeared in the October edition of Business Voice, the CBI magazine

And to think that people once predicted the death of the city. Back in the 1990s there was a school of thought that the internet’s rapid growth would allow people to substitute electronic communication for the face-to-face interaction that is the heartbeat of cities’ success.

Technology would bring about a population shift from the suburbs to more rural areas, the theory went, by enabling people to retain the economic advantages offered by cities while enjoying a better quality of life living away from them.

Two decades on, such predictions couldn’t have been more wrong: the economic, political, cultural and social vibrancy of cities has proved impossible to replace.

Today more than half of the world’s inhabitants live in them, generating more than 80 per cent of global GDP. And urbanisation continues apace.

The UN forecasts that 70 per cent of people worldwide will live in cities by 2050 – with the world’s population expected to rise from 6.9 billion to 9.3 billion in that time.

Many UK cities are also growing fast. Results from the 2011 census revealed that between 2001 and 2011 Manchester’s population grew by 19 per cent, London’s by 12 per cent and Milton Keynes’s by 17 per cent. Cardiff, meanwhile, is forecasting a 42 per cent growth in its population by 2033 (compared with 2008 figures).

But rapid urbanisation poses big challenges. Urban centres are having to face up to increased pressure on resources and tackle problems ranging from traffic congestion to a lack of social cohesion.

Most experts agree that cities need to pursue three key objectives. They must be economically successful places that attract investment, create jobs and have an education system equipped to develop their future workforce.

They need to offer a quality of life that makes people want to live and work there. And they have to reduce their environmental impact – according to the UN, cities already account for up to 70 per cent of global greenhouse gas emissions.

As Rick Robinson, executive architect for the “smarter cities” programme at IBM UK, says: “It’s imperative for cities to find ways to create social and economic growth more sustainably.”

But, while cities in some developing countries may have ready access to investment – and some have the benefit of starting from scratch – many developed nations are having to modernise ageing infrastructure and meet demands for better services at a time when public-sector austerity drives are placing significant constraints on municipal finances.

The pressures are highlighted by the “Barnet graph of doom” – a chart presented as part of a consultation at the London Borough of Barnet last autumn that showed that, without radical change, the council would be unable to provide any services except adult social care and children’s services within 20 years.

Yet Andrew Carter, director of policy and research at think-tank the Centre for Cities, says that cities can save money with the right approach: “If they can get it right and make systems work more efficiently, that should be a cost saving, both in a real sense and also in lower levels of traffic congestion, crime and so on.”

David Gann, professor of innovation and entrepreneurship at Imperial College London, says that one of the biggest issues facing cities is what he calls “peak load” – when a city’s infrastructure can’t cope with the pressure placed upon it.

“The most obvious manifestation is traffic congestion or electricity power cuts,” Gann explains. “As cities become bigger and more densely packed, the problems of peak load are going to get harder to manage.”

He adds: “For citizens to be happy to live and work in a city, they don’t want to have frequent peak load problems of congestion. If you want to have a dynamic, business-friendly city, you need one with infrastructure that can cope with all sorts of things.”

But developing more resilient, efficient infrastructure is easier said than done. One of the main difficulties in making existing cities function more effectively has long been the need to join up local government functions. “The traditional way in which we manage infrastructure and operate the city is in silos of different utility companies,” Gann says. “You’ve got a water authority, electricity suppliers and transport companies. They can manage peak load in their own domain quite well most of the time. But, as cities become more complex, we will increasingly see one type of infrastructure impinging on another.”

He outlines a scenario in 20 years’ time where lots of people in London drive to a football match in electric cars and recharge their vehicles in the car park. “These will have a huge pull-down of load into the charging points. If the electricity companies don’t understand that, the lights might go off at Wembley.”

A system of systems

It’s a point echoed by Richard Miller, head of sustainability at the government-backed Technology Strategy Board (TSB), which has recently launched two initiatives to help Britain’s cities plan and businesses to exploit the opportunities that this will offer (see panel, page 37). 
He says that cities should be treated as a “system of systems” – a concept increasingly favoured by urbanists.

“We are trying to do something that has been in a lot of people’s ‘too difficult’ box for a long time,” Miller says. “It’s clear that all these city subsystems and parts of the infrastructure interact with each other, but it’s very hard to think about it.”

Cities are increasingly turning to new technologies to provide at least part of the answer – a trend that has created the term “smart city”. The ultimate goal is to use and analyse data generated by intelligent sensors in everything from a city’s transport infrastructure, buildings, energy, waste and water networks, together with information provided by residents, to make systems work together more efficiently and manage the city more effectively.

Volker Buscher, director for smart cities at Arup, believes that this could materially alter the experience of citizens. “You’ve got cloud computing, the internet of things, the consumerisation of technologies – which puts more capability in the hands of the citizen – and more connectivity. These four provide a capability to do things differently,” he says.

There’s no doubt that British cities are increasingly looking to do just that – although their efforts are perhaps somewhat modest and fragmented at the moment in comparison with those of some of their international counterparts.

“I think things are moving very quickly in the UK – the economic environment we’re in is driving some very interesting activity in the public sector,” Robinson says, pointing to a project that IBM is working on with Sunderland City Council to boost the local economy by providing a cloud computing infrastructure for local businesses at low cost.

Economic impact

Birmingham is another city seeking a more integrated structure. In July it established a smart city commission (SCC), which includes council representatives, transport officials, local academics and businesses such as Ferrovial, Arup, IBM and SAP, to provide a focus to its programme to implement smart systems and boost the city’s digital economy.

Mark Barrow, strategic director for development and culture at Birmingham City Council and a member of its SCC, says that it has been established to provide a framework to overcome silos and help it respond to rapid technological developments.

A key priority is to create a digital infrastructure that will encourage the growth of creative SMEs and the city’s already sizeable computer games sector. That will entail the implementation of a 4G mobile network, currently out to tender, that will create an open spectrum offering speeds of 100 megabits per second and enhanced indoor connectivity.

The council is also putting “as much data as possible on to open data platforms” to enable businesses to develop apps and is providing loans to start-ups through its Finance Birmingham offshoot.

Beyond that, the council is looking at areas ranging from the telehealth technology that seamlessly connects hospitals with GPs and other services to an Oyster-style transport pass that doubles as a smart cash card.

On the energy front, it has fitted solar panels to houses and is in discussions with a range of providers to fit 200,000 more. And this isn’t only about meeting emissions-reduction targets.

“By putting smart meters into every one of these properties, we can create a smart electricity grid,” Barrow explains. “We can then move into the realm of being a wholesale provider of energy, reselling electricity to the grid when it’s needed.”

But these initiatives have “got to have a real economic impact”, he stresses. “We have something like 32,500 SMEs in Birmingham that make up about 99 per cent of our employment. This programme is going to be fundamental to those businesses in a productivity sense.”

But, while technology will play a key role, it is only part of the solution. The right approach to city planning, for example, is also vital. Miller stresses the importance of looking at a city in its totality, including the people in it and the way they behave and make decisions.

Robinson points to a project that IBM worked on with the US city of Dubuque, Iowa, which has been rolling out smart water and electricity meters to homes and businesses.

IBM used analytics and cloud computing to collect data from a set of households in the city about their water consumption. “We gave another group of people the same data and augmented it with something called green points – a comparative score that told people how their water conservation performance compared with that of their neighbours using an anonymised aggregate,” he says. “That group was found to be twice as good at taking action and fixing issues.”

Making change happen

So how can cities achieve change? Experts agree that it’s essential to establish a strategic vision and a suitable governance framework in order to overcome the silo mentality that can impede the adoption of a more joined-up model – and also to adopt a holistic view of the future of the city that takes people, technology and urban planning into account.

Strong leadership is paramount. “Mayors and city authorities in this country have got to take a leadership role and create a vision for their cities,” Gann says. “What are they going to stand for, how are they going to operate and how are they going to be better places for business – and actually sell themselves to business?”

One way of doing this might be for councils to develop a new approach to the procurement of services from private-sector partners. Another might be to follow Birmingham’s example and establish a cross-city stakeholder forum to agree common objectives.

Buscher argues that the level of strategy and planning required to conceive the city as a system rather than being split into its traditional vertical structures is new.

He points to Barcelona and San Francisco as examples of cities that have successfully taken an integrated view – and adds that central government can play an important role in fostering such an approach in the UK. “It can really make a contribution to look at what has worked elsewhere, but also to look at facilitating governance and strategic planning capabilities across cities,” he says.

But at the same time, Carter at the Centre for Cities argues that it’s easier for cities to implement cross-cutting policies at a local level than it is to harness different departmental agendas nationally. “Allied to that is obviously the money to make it happen,” he says, adding that scale can help to attract investment. Funds are tight – but some government money is available.

One city will receive £24m from the TSB next year (see panel, page 37), while the coalition has announced the first eight cities to gain greater powers and funding to generate economic growth under its “City deal” initiative. The EU, meanwhile, will allocate €365m (£292m) in 2013 to help cities develop smart city technology in the fields of energy, transport and IT.

The government has also confirmed that growth in business-rate income in enterprise zones will be retained for 25 years, and that all local authorities will be able to implement smaller-scale tax increment financing schemes, in order to provide greater certainty about future levels of income that will be available to put towards investment. That will help Birmingham, which has the biggest enterprise zone by value in the country.

“Over its life, that will generate about £875m in business-rate growth, which we’re already starting to borrow against,” Barrow says. “We would expect at least ten times that amount to come in from the private sector alongside this.”

Robinson argues that this government support is helpful. “The objective of making a city smarter is often social, economic or environmental,” he says. “But the requirements of a business case for investment are short-term financial ones. The more government can do to help cities reconcile those objectives with each other – as things such as the ‘City deal’ initiative are doing – the easier it will be for UK cities to make progress.”

Seizing the opportunity

Whatever the financing arrangements are, the challenges facing the world’s cities aren’t going to go away. As such, solving them offers huge potential opportunities for business.

The TSB estimates that the annual market for integrated city systems will reach £200bn by 2030, with the expected total investment in city infrastructure over the next ten to 15 years expected to hit £6.5trn.

If UK companies could secure just a chunk of that market, it would provide a significant and much-needed boost to the economy.

And there are grounds for optimism. Miller says that the UK is already something of a hub for expertise on big city infrastructure projects, with master planners such as Arup and Buro Happold, contractors including Atkins and Balfour Beatty, architects such as Foster & Partners and energy companies. Arup, for example, was the designer and master planner for Dongtan in China, the world’s first eco-city.

“We do quite well in the global market because we’ve got those ecosystems of companies working together,” Miller notes.

He’s keen to bring these and other businesses together with city leaders and academics in the Future Cities Catapult, a TSB-led centre that will develop new products and services and build British expertise in this area.

London’s status as a global hub and Europe’s only megacity will also help. So should the academic research being conducted here. Imperial College London, for instance, is working with companies including Cisco, Intel and NEC.

It has also established a “digital city exchange” to explore how to link city services and utilities digitally and to integrate data to look at the concept of peak loading in a new way. Gann says that his aspiration is to work with Tech City in east London to create businesses to develop services and apps off the back of some of this data.

London’s BusChecker transport app is one example of a small firm using data in an innovative way.

Miller says that one of the TSB’s priorities will be to support what he calls “a thriving SME sector, which is popping up with all kinds of interesting components and bits of software” and enable it to tap into the marketplace. “The reality is that no city is going to ask an SME to supply a big chunk of their infrastructure – that would be way too risky. But, if we can create the hub via the Future Cities Catapult, where SMEs and the big infrastructure companies can work together, then it becomes a route to market for the SMEs as well.”

There’s broad agreement that the TSB’s work in this area could provide a real boost to the UK’s expertise. But there’s also a recognition that it must be supported and funded correctly for its ambitions to be realised.

Gann says that the time for action is now. “Some of our great companies are already building cities in China, India, the Middle East and elsewhere. There’s a net benefit for British business to be at the forefront of this. If we’re not, we’ll be buying expertise in from the US and China.”

A growth opportunity for Britain?

The government-backed Technology Strategy Board (TSB) has launched two new initiatives to help British companies develop market-leading expertise in integrated city systems.

Under the first – the Future Cities Demonstrator – one UK city will receive £24m to test, in conjunction with businesses, new ways to integrate urban systems and solve problems. Thirty city and borough councils nationwide are conducting feasibility studies of their projects, funded by TSB grants of £50,000 each, with the winner to be announced in January.

According to Richard Miller, head of sustainability at the TSB, the aim is to encourage cities and businesses to be “a little bit more aggressive” in pursuing goals. “There’s a lot of risk, which can make people a bit nervous of going for some exciting opportunities. By coming in with public funding, we hope we can share some of the risk.” The winning entry will, above all, need to show ambition. “We want it to solve real problems for the city and target genuine needs,” Miller stresses.

The second, longer-term TSB initiative is the Future Cities Catapult. Due to open in the first half of 2013, this centre will bring together big companies, SMEs, city councils and universities to develop and accelerate the commercialisation of innovative ideas. It will include a “city observatory” to analyse data from projects taking place in cities to find out what works – and what doesn’t.

“The Future Cities Catapult is about envisaging totally new products and services that make it possible for cities to deliver their requirements – and that UK firms can take the lead in providing,” Miller says. “We would like to have a UK business sector that is recognised globally as having really good solutions to these integration problems.”

Why a fundamental shift is needed in city planning

The way in which cities approach urban design will be an integral part of their success in future. But, according to Tim Stonor, managing director of urban planning consultancy Space Syntax, a "fundamental shift" away from the principles that underpinned planning in the 20th century is needed.

A spin-out from University College London, Space Syntax uses computer modelling to map the flow of people through a city’s streets. It has advised authorities and property developers in cities including Beijing, Sydney, Athens and London on how to design public spaces to maximise their social, economic and environmental performance.

Stonor argues that moves to make cities cleaner by pedestrianising them, taking cars out of the centre and on to fast-moving highways were “all well intended but rather naive” because this overlooked the importance of the traditional high street, as both the centre of the community and a vital link between larger and smaller markets.

“That’s the basis of economic and social trade,” he says. “Cities have known this for millennia; it’s the basis on which they have grown.”

But he’s optimistic that city leaders are realising that “the way we’ve been acting for the past 50 years isn’t delivering. What it delivers is congestion – that’s certainly not good enough.” As an example, he cites a project that Space Syntax is working on in Jeddah, Saudi Arabia: “Jeddah had sprawled, led by car-dominated highway planning, to the point where it wasn’t working as a city – it wasn’t as productive economically and had some significant social problems.”

As a result, the city authorities asked it for help to “create a different type of city”, Stonor says. “The initiative was led by the mayor. In design terms, it has come down to the idea that you can convert some of the fast highways into slower-moving boulevards using historic precedents in the Middle East but also elsewhere.”

By slowing cars down, and by planting shade-giving trees that allow people to stay outside for more of the day, the city can create more of the interactions that underpin economic and cultural productivity, he adds.

Where sustainability is crystal clear

Britain's reputation for expertise in providing the infrastructure and technologies that cities will need in future received a fillip in September when multinational engineering giant Siemens opened the Crystal, its first centre for sustainable urban development, in London's Docklands.

At is opening, Siemens' CEO, Peter Loscher, called the striking, glass-clad 3,500sq m building "our global knowledge hub for urban sustainable development initiatives".

A cable-car across the Thames from the 02 Arena , in an area designated as a "green enterprise district" by Lonon mayor Boris Johnson, the Crystal is the first and bigest of three such centres planned by the firm and cost  €35m (£25m) to build.

Simens chose the London as the location because of its status as an international hub and also because it is one of the company's biggest city customers.

The crystal houses an exhibition highlighting the challenges that cities will face in the future - and possible solutions in areas including building technologies, mobility, power and water supplies, which will be open to the public as well as municipal decision-makers, planners and architects.

Also featuring a conference centre, it will co-ordinate the activities of account manangers for 60 cities worldwide as Siemens attempts to tap into a market it estimates at $300bn.

"This is a thought leadership conduit to show us where the trends are and what we should be looking at in our various businees units," explaines Gordon Wakeford, managing director for Siemens' UK infrastructured and cities division.

As befits its role as a sustainability showcase, the Crystal has been designed to be highly energy-efficient and will receive top scores in the Breeam and Leed international ratings.

Renewable energy sources will meet the building's heating and cooling needs; a photovoltaic system generates green energy; and rainwater is harvested for reuse.

The size of the prize

£200bn - Estimated annual value of global market for integrated city systems by 2030.

£6.5 trn - Expected global investment in city infrastructure over the next ten years.

Source: Technology strategy board

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