The Location and Concentration of Businesses in Britain: Business Clusters, Business Services, Market Coverage and Local Economic Development

An important debate has recently developed around the significance of business clusters for the development of the economy. This paper assesses the extent to which concentrated clusters of businesses exist in Britain, using the fine spatial mesh of postcode districts. It identifies the major clusters using a development of the methodology to define local labour market areas. The paper demonstrates the high degree of localization and uneven development of businesses in Britain. It also shows that business service firms are even more highly localized and clustered than other businesses. Moreover, the larger the business centre, the more localized and clustered the firms. The pattern suggests that there is a strong influence of increasing returns of scale, and that, as well as local clusters, much of the British economy is covered by one metacluster. Implications from these results are drawn for the likely future development of the economy, the location of business service suppliers in order to develop their market coverage, and local economic development policy.