Economic structure and importance of cities, 2010


Observations for policy

Territory and places matter in a globalised world. A typology of European cities’ economic structure and importance illustrates the territorial organisation of Europe’s integration in a global economy.

The interest in cities is growing in Europe and the idea of cities as growth poles re-emerges in debates on policies to promote growth and competitiveness. Cities are perceived as increasingly important component of European economic performance. The question is how to enhance their role: should one spread investments more widely across the urban network or focus on a more limited, but polycentric, set of cities?

The concentration of high level services in Europe’s largest cities is not only a result of globalisation. It is also a product of the historical paths these cities have taken. This lead to a sector diversity across Europe ranging from big metropolises concentrating on high level functions in finance and business services to smaller but highly specialised second tier cities.

Policy context

European policies underline the importance of cities. Urban areas are the concentrations of innovative and creative activities. In this regard urban cities and their economic structure are important to enhance Europe’s competitiveness.

A typology of the economic structure and importance of Europe’s cities gives more insight into the polycentric development in Europe. EU policies like Cohesion Policy but also the Territorial Agenda 2020 acknowledge the importance of a balanced polycentric development integrating urban centres and rural areas.

Map interpretation

The map illustrates the economic structure in the most important European cities and shows their importance in their regional and national structure. Large metropolitan areas like London and Paris are dominant European cities, however other capitals and second tier cities play a significant role in the global economy as well.

The concentration of economic weight of the big cities in the regional context is obvious. In the UK, London produces more than one third of the total national GDP, other major cities play minor roles. The more polycentric the national system the more important is the contribution of other cities to national GDP, e.g. in the cases of Poland, Italy and Germany.

Capital cities like London also show a very high share of high-level functions in finance, business and non-market services. These high-level services are more present in the large and prosperous metropolitan areas of Western Europe. The highest levels can be found in the four major world financial cities London, Paris, Frankfurt and Amsterdam.

Centre-periphery pattern at both European and national levels can be observed, particularly in relation to the share of manufacturing in European cities. In some parts of Europe the manufacturing industry remains important even in the most prosperous cites: this is the case in Germany end Northern Italy but also some Scandinavian cities. By contrast, the Mediterranean cities with relatively low GDP per inhabitant have low shares of manufacturing industry. Finally in Eastern Europe, some small and medium sized cities have the highest share of industry while the most developed capital regions have gone through a deindustrialisation process.

Some second tier cities make a substantial contribution both to the national economic development and to the European economy itself. In some countries the second tier cities are more competitive than the capital cities due to their specialisation and specific economic structure.

Concepts and methods

The economic structure and importance of cities is illustrated by a typology in terms of structure, type of city and share of cities in regional gross value added.

The typology is based on a principal component analysis of shares of added value in six sectors: agriculture, manufacturing industry and energy, construction, trade and transportation, financial and business services, other services (mainly administration, health, education and personal services). Subsequently, the typology focuses on two important indicators for economic structures in European cities the share of high level services – which include finance, business services and real estate – and the share of manufacturing industry, including Energy and construction. The seven defined typologies represent different degrees of these two indicators.

Secondly, the type of city is illustrated in the map by different symbols. Besides the demographic size of each city, a distinction is made between capital cities and second tier cities. Second tier cities are non-capital cities whose economic and social performance is sufficiently important to affect the potential performance of the national economy many of those cities contain major concentrations of economic activity, substantial wealth creation potential, human capital and creativity.

Finally, the share of cities in the regional gross value added (GVA) is shown. This shows the importance of each city in its region and at the national scale. Some regions contain no major cities.