Why growth forecasts for Cambridge are well off the mark

A landmark study is set to rewrite what we think about the city's future and how we plan for it.

Rents have gone up, congestion has got worse ﾖ those are all features of an economy which is out of balance

For the past four years Cambridge Ahead has had its finger on the pulse of Cambridge’s economy.

Everyone knows it’s growing, but the rate at which Cambridge’s indigenous companies are growing – about 75 per cent of companies operating in the city – is far exceeding predictions.

The Cambridge Futures Project is an independent study, sponsored by Cambridge Ahead and carried out by the University of Cambridge. It is revealing the extent of this growth and, while it’s good news for now, the exceptional rate of Cambridge’s employment growth is steadily throwing the city out of balance. Something needs to be done before the bubble bursts – and that could happen in the mid-2020s.

It’s being called ‘Peak Cambridge’.

The master of St Edmund’s College, Cambridge, Matthew Bullock, chairs Cambridge Ahead’s growth projects. For the past four years an independent study has been putting data collected by Dr Andy Cosh of the Centre for Business Research together with spatial modelling used by Cambridge University’s Department of Architecture.

Leader of the Cities and Transport Research Group, Dr Ying Jin, said it’s a unique data set. He has produced the Cambridge Futures Model, which makes informed assumptions and predictions to forecast the city’s future.

He said: “I have worked in London, Beijing and Santiago in Chile, which all invited specialists to look at how to manage growth.

“What is common is that, in this increasingly uncertain world, these low-risk areas tend to face greater pressures of growth.”

It’s this low-risk reputation that is a main driver for Cambridge’s growth. Because there are so many knowledge-intensive businesses in Cambridge – called the Cambridge Cluster or sometimes the Silicon Fen – companies researching innovative technologies, a high-risk sector by nature, see a safe place to establish a geographic base.

If something doesn’t work there are people in the sector who can put it right, or tell you it’s a waste of time and money. If funding dries up, employees have options to move elsewhere. If everything goes to plan there is a pool of the best talent to poach from.

Mr Bullock said: “We know from the last seven years of data that the Cambridge-based companies are the main motor of growth in the area and increasing as a proportion of total employment: we reckon that they account for around 75 per cent of all corporate employment in the area.

“The official view of Cambridge, as seen by the Treasury, is that by and large it’s all OK. Cambridge is growing at about 2.2 per cent and household growth is about 1.2 per cent so what are you worried about?

“We saw that Cambridge companies are growing, on a six-year average, over seven per cent employment, which is way higher than ONS and planners were thinking. Just off the dial. It’s very fast indeed.

“This is an extraordinarily powerful motor which is growing and growing. The question is how long do cities continue growing this fast?”

In short, they grow until they get too far out of balance.

Dr Jin explained: “We start from where people live and work and how they travel to services. That leads to how much they will pay for rents, and that leads to changes in house prices. If rent goes up, prices go up and then wages go up with it.”

“If it balances, what you get is a system that grows without strain,” Mr Bullock continued. “When it starts to grow out of balance you start to get distempers in the system, so you get people starting to share houses. If you talk to people of an older generation they don’t see that, but more young professionals are sharing houses, rents are rising because landlords can get more, so house prices rise and people go further out to try to avoid that and then you get a rise in commuting.”

Sound familiar?

“Anecdotally, you can recognise instantly that occupation has gone up,” said Ian Mather, chair of Cambridge Ahead. “Rents have gone up, congestion has got worse – those are all features of an economy which is out of balance. We haven’t been building enough houses, we haven’t paid enough attention to transport, while at the same time the economy has been growing very quickly.”

With ONS data showing house growth at 1.2 per cent you can get a sense of how fast the imbalance is accelerating.

The economy tips when people decide that working in Cambridge is not worth the quality of life it affords which, for some, can mean hours spent commuting to pay for a room in a shared house and no hope of ever being able to buy a house. Companies then respond because they can’t get staff.

“Growth starts to tail off,” said Mr Bullock, “and that actually is the worst of all worlds, because what you’ve had is groaning roads, multiple occupancy, which people will put up with while there’s growth, but then they just dwindle. The economy then starts to decline and this is a car crash.”

Of course there is potential for improving the quality of life if action is taken soon.