Describe this change and explain the possible economic benefits for the city

City centres and the benefits of agglomeration

The primary gain for business of locating in a city centre is proximity, or agglomeration, and this offers three main benefits to businesses locating in city centres. These are:

The ability to share inputs and infrastructure, such as roads, rail and street lights

The ability to recruit from a deep pool of workers with relevant skills

The ability to exchange ideas and information, known as ‘knowledge spillovers’

While the first two benefits operate over a city wide level – a business based on a business park has access to the same potential recruits as a city centre business – the third operates over a much smaller geographic area.3 It is this third factor which is so important to the services-based knowledge economy: knowledge is best spread via face-to-face interactions and these face-to-face interactions are more likely to occur over much smaller distances in more dense areas, where both formal and informal meetings are more likely to come about. Within a city, this area is the city centre.