London is still, just about, the capital of the western world: the most international city in Europe; a global financial centre linking Asia and America; and a powerhouse of art, culture and innovation. But it is facing two potentially existential challenges — the legacy of the pandemic and the loss of automatic access to the EU single market. Both of these will have profound effects on the future shape of the capital, but both are survivable. London has reinvented itself many times before —with a bit of vision it can do it again.
The most visible challenge is from the pandemic — just walk around any of London’s commercial hubs during the working day. Things will pick up a bit as more of us start returning to the office. But working patterns are never going back to how they were before. For those who can, working from home for several days a week will become the new normal. That means less spending power in the centre of town and a painful adjustment for many shops and businesses. It also opens up new swathes of the country to families seeking out more space and more affordable housing.
But this challenge can also sow the seeds of a new opportunity. So many cities have gradually lost their character under the pressure of congestion, declining affordability and the consequent rising uniformity. A popular internet meme in the US involves sharing a property that’s available to rent or buy in San Francisco alongside the absurd contrast of what the same money could get you almost anywhere else in the country. A city where only tech bros can afford to live is creating its own limits — witness the rapid growth of alternative tech hubs like Texas. Central London was already at risk of becoming inaccessible to most.
With the added bonus of the Elizabeth line opening next year, central London stands to benefit from a little less congestion, some more homes on the market and a few more school places. But this isn’t the time for complacency — the city may have bought itself some time, but the pressures will return before too long. Crossrail took decades to become reality, so why is there so little focus now on the potential for Crossrail 2 to open up new north-south links? What about the Bakerloo line extension to Lewisham? Where are the next equivalents of the Tate Modern, the Olympic village or the Turing Institute at King’s Cross? Where are the plans for more green spaces, more sustainable developments and more pedestrian zones? The Mayor’s Green New Deal is a small start but London needs a serious strategy to secure a better quality of life if it is to reinvent itself successfully for a post-Covid world.
Quality of life is part of the answer to the second challenge — the City’s future outside the European Union. The UK’s global reputation for the rule of law is another hard-wired advantage, for now. But again, there’s no room for complacency. The debate in the City has moved on from so called “equivalence”, whereby London would maintain access to the EU single market in exchange for agreeing to follow most EU rules. Instead the new strategy is increasingly to calibrate those rules to meet our own needs and open up new global markets.
The Treasury, the Financial Conduct Authority and the Bank of England are working in a surprisingly co-ordinated and effective way to start carving out a new future for the City. Just this week Boris Johnson held a high-profile Downing Street meeting with financial services leaders. We’ve already had the Hill review on what London needs to do to attract new companies to list their shares here, and the Kalifa Review on FinTech, a natural area of advantage for London. But new plans are now emerging in sustainable finance, social finance and alternative investments like infrastructure — all areas where London has a realistic chance of leading the world. And it is still the natural European hub for Asian finance, a huge opportunity given that’s where most of the world’s growth is now happening.
Even within the EU, the UK always had unique experience and expertise when it came to financial services regulation. Now we can combine that with a new agility that comes from going it alone. If used smartly then the opportunities that agility creates can outweigh the costs of lower market access in Europe. London will find new ways to thrive in the post-Covid, post-Brexit world, just as long as we remember the old adage: don’t let a crisis go to waste.
Rupert Harrison is a former chair of the council of economic advisors and multi-asset portfolio manager at BlackRock