The Business Case for Diversity

Diversity provides opportunities for business growth, and diversity is one of London's greatest strengths.

Diversity gives business the opportunity to:

• move into new markets and source a wider range of customers
• create an inclusive working environment, motivating existing employees and improving productivity
• find better suppliers and new investors
• gain a competitive advantage by providing consistently better services to existing customers
• find and retain skilled and versatile employees
• increase creativity and innovation
• increase penetration of overseas markets in a globalised economy
• win larger public and private sector contracts, which are increasingly being awarded on the basis of non-financial criteria such as diversity.

Diversity gives business the opportunity to grow, and the challenge for every company operating in London is how to utilise this massive potential for the benefit of their business. Diversity Works for London provides support for business in responding to this challenge.

London: a leading world city

London is a key player on the global stage, a leading world city. Dynamic, creative, culturally inspiring, commercially successful - our only rivals in the global economy are New York and Tokyo.

The city's historic creativity in theatre and the arts is unrivalled and our international transport links are second to none, making London a true gateway to the world.

And the city is growing – economically, physically and demographically. By 2016 over 800,000 more people are expected to make London their home. The region is also seen as a substantially more attractive location for business headquarters than any other European city, with 33% of Fortune Global 500 companies who have European headquarters choosing to locate here.

All these factors add up to a city which is globally competitive and commercially unique. But it is London's rich diversity - and the physical, economic, social and cultural advantages this diversity brings - that really sets it apart from many other major cities, and gives it its unique atmosphere, vibrancy and heritage.

London's diverse economy

The identity of London's population, and therefore its workforce, is changing. It is being shaped by irrevocable demographic, global economic and social trends which are prime opportunities to boost and improve the status of the city's economy and people.

• Londoners speak over 300 languages and belong to at least 14 different faiths.
• Nearly a third of the city's population is from black, Asian or other minority ethnic (BAME) groups and over the next 10 years they will account for 80% of the increase in London's working age population.
• By 2010, 40% of the workforce will be over the age of 45.
• London's BAME communities have enormous spending power, with an after-tax income of around £16 billion.
• At least 5% of London residents are gay or lesbian – the economic value of the 'Pink Economy' in the UK is estimated to be around £95 billion.
• BAME-owned businesses generated a combined sales total of £90 billion in 2004, and made a significant contribution to the London economy in terms of job creation, GDP, income and wealth creation.

It has been estimated that more than 600,000 new jobs will be created in London over the next 11 years and people from London's diverse communities will make an important contribution to filling these jobs and to boosting London's economy as a result.

Despite these visible economic, demographic and social changes there is strong evidence of existing inequality of opportunity in the London workplace. This is illustrated by disparities in rates of employment, in rates of unemployment and in the high levels of under-employment for many diversity groups:

• women make up almost half of the workforce but less than 10% of directors of FTSE 100 companies are women and they earn on average less than 75% of similar male incomes
• London's economic output would be £1.5 billion higher if part time employment rates for women with children in London were raised to equal those in the rest of the country
• Black, Asian or other minority ethnic graduates are less likely to secure good jobs compared to similarly qualified white graduates
• employment rates for Bangladeshi and Pakistani men are at least 20% below those similarly qualified
• one fifth of the working age population has a disability, yet only 11% are in employment
• Government statistics show that by 2015, more than two-fifths of the workforce will be over the age of 50. People over 50 are less likely to become unemployed, but once unemployed take longer to return to work and are more likely to leave the labour force altogether.

Increasing globalisation and the eastwards shift of the centre of gravity of the world economy means that to stay competitive London’s businesses really need to ensure they are attracting the full wealth of available talent. Not doing so is a missed opportunity to strengthen competitive advantage that no organisation can afford to ignore.

An opportunity for London's employers

The demographic, global and social changes mean that many leading organisations in London are realising the long-term business benefits that equality of opportunities can bring to their organisation.

For example, by encouraging greater supplier diversity, these businesses are better placed to attract a wider customer base and recognise new markets. Success in their own business will contribute to the success and competitiveness of the London and national economy.

In addition, there is evidence to suggest businesses with a diverse workforce are more strongly placed to attract and retain quality staff. Well-led diverse teams can outperform homogenous teams by as much as 15%. Research also confirms that many major companies have identified the benefits that the different perspectives and experiences of a diverse team can bring to their workplace. It enables them not only to be more competitive in serving the needs of their customers and in expanding into new markets, but also in recruiting talent from a workforce that, in London, is increasingly highly mobile. Both of these are essential requirements for the survival and expansion of businesses of all sizes and types operating in London.