FORSEVERAL DECADES, but particularly since the late 1970s, the number of jObs in the London Borough of Hackney has been declining. In the period 1971-80 there was a reduction of 27 per cent. 1By far the greatest part of this was in manufacturing industry which lost over 38 per cent of its workforce. However the service sector, since 1979, has been hard hit by cuts in public expenditure and consumer demand resulting from the recession. Many Hackney residents look to the immediate area rather than Greater London for a livelihood, and thus the unemployment rate, currently over 20 per cent, reflects to some degree the depressed state of the borough's economy.2 This situation appears to be the product of two sets of factors, which reinforce each other. The first is the fact that employment in manufacturing is declining in the conurbations, and in London in particular. Various reasons are put forward to account for this: regional policy;4 the rationalisation of plant by large companies;5 lack of suitable labour;6 a dearth of entrepreneurs;7 obsolete premises.8 London seems to be an unfavourable environment in which to operate. At least between the years 1971-5, Hackney proved to be no worse than the rest of the conurbation, despite the fact that the dominant sectors within the Borough are in decline nationally. However the 'local factor' was considerably more important than the 'structural factor'. Between 1971 and 1975 the former accounted for the loss of 7000 jobs, whilst the latter for 3700 jobs.9 Nevertheless the Borough does contain firms which have maintained or increased employment. This study focuses on the characteristics of these companies and the way in which they interact with their location. From the point of view of these successful firms, how does Hackney rate as a milieu in which to operate?lO In order to survive a firm has to secure and maintain a place in its market and effectively deploy the factors of production. In pursuit of these objectives location plays a role, be it positive, negative or neutral. The main body of this paper looks at the interface between these firms and their markets, premises, plant, suppliers, labour and financial sources. It concludes with an estimation of Hackney as a milieu, for these firms and others like them, and the policy implications. This study shows that the sort of firms which thrive in Hackney are those which capitalise on its proximity to the City and the West End, ready access to Greater London and the communications network radiating from the capital. It also shows the nature of the negative local factors which operate at both Borough and Metropolitan level. However it is readily apparent that it is the policies of central government which are responsible for these adverse factors. This situation has to be ameliorated if Hackney is to realise its potential as a milieu for successful firms. However the study also demonstrates the great importance of the national and international economic situation to the continued prosperity of these firms, and here again the role of central government is crucial. These findings suggest that the industrial and commercial viability of the inner city is very much in the hands of Westminster and that 'Inner City Policy' is too narrowly conceived.