Vanessa Hale
Director, Research
The phrase, Flat White Economy, was created by economist and author, Douglas McWilliams for his book of the same name. While it might evoke an image of hipsters in cool cafes drinking their coffee of choice, it’s actually more to do with the rise of the digital economy in East London.
The phrase, Flat White Economy, was created by economist and author, Douglas McWilliams for his book of the same name. While it might evoke an image of hipsters in cool cafes drinking their coffee of choice, it’s actually more to do with the rise of the digital economy in East London.
Focussed around the UK’s new digital hub of Old Street/Shoreditch, this new economy contributed 7.6% of the UK’s GDP in 2012, with McWilliams predicting rapid growth. Between March 2012 and March 2014, 32,000 new businesses were created in a single Old Street postcode – EC1V.
The new firms take in everything from media and internet to any form of creative businesses.
London-centric
One of the defining factors seems to be its attachment to London, especially East London. While other regions have their own digital hubs, the focus of the Flat White Economy is distinctly London-centric.
This was due to a confluence of past events including the affordability of housing and office space in the region, the technological breakthroughs at the time, and the availability of a creative labour force in the area. It was also a response to the financial collapse. Since then, the Flat White Economy has provided four times more jobs than the City lost during the crisis.
East London’s high levels of migrants, who had moved from recession-hit countries to the capital, also helped as many were well-trained and highly-educated, helping these new companies to grow.
Not what they sell, but who sells it
One of the defining features of the Flat White Economy is not necessarily the products, but the people behind them.
While many dub them ‘hipsters’, it’s not just about fashion but more a state of mind. These are people who value ethical behaviour and pushing equality. Growing their wealth is not as important to them as it is to their City counterparts – in fact they’re more likely to be sharing a flat with a colleague than spending their earnings on a penthouse apartment. Bikes are preferred to flashy cars, and if they do spend their money it’s on artisan products or hi-spec electrical items.
Their lack of desire for instant wealth is one of the defining factors of this new economy, as it gives them the freedom to experiment. Their end game is not to get rich and retire but to create a new product or upset the apple cart and find a new way of doing things.
Is it here to stay?
In his book, McWilliams claims that by 2025 the Flat White Economy will provide 15.8% of the UK’s GDP and will be the largest single business sector in the UK. And while the digital economy continues to grow, whether it will remain in the form it is now is another question altogether.
Some have questioned the ability of the Flat White Economy to continue growing at such a rate, suggesting the very thing that drove its early success could actually be its downfall - its ability to disrupt.
A lot of Flat White Economy companies’ success is not simply based on growing current business areas, but in changing the way we do business from the ground up. It has been argued that we’ve passed the stage at which this disruption has happened. Whether they can continue to disrupt in new ways is another matter and harder to predict.
There’s also the concern that many of the original founders of leading Flat White Economy companies were based in East London due to relative affordability when compared to other areas of the capital. As prices shoot up in the area, as well as elsewhere in the capital, the types of people likely to provide new and innovative ways of thinking are being forced out of the city.
It might be that it takes another type of entrepreneur to take the ethos and style of the Flat White Economy forward. The Yorkshire Pudding economy?