Some Londoners—like young people looking to get on the housing ladder—could get used to their city being a little bit less extraordinary. But if the capital suffers, the rest of the UK will lose out tooby Kat Hanna / July 18, 2017 / Leave a comment
London is going through a post-Brexit wobble. Decelerating job growth, declining business confidence and falling foreign direct investment suggest uncertainty about London’s future trajectory. An intriguing result of this slowdown is that London is beginning to look more like the rest of the UK. But what exactly does this mean for the capital, and why does it matter for those of us who don’t live there?
Centre for London’s latest publication, The London Intelligence, provides a quarterly analysis of the city’s prosperity, demographic changes, infrastructural challenges, and quality of life data—in terms of environment, crime, and health.
Several indicators show London’s economic trends falling into line with the rest of the UK. Average rents are now growing faster in the rest of the UK than they are in London. The rate of job growth is no longer highest in London, having historically outpaced the rest of the country, particularly in the post-recession years.
Nor are Londoners’ views as distinct from the rest of the UK as we may have expected. Recent polling from Ipsos Mori asked about the most important issues facing Britain today—the top two common issues in London and the UK were alike; Brexit and the NHS. Those from the capital are not out of touch with “real issues.”
How should we react to this news? Well, it depends who you ask. The image of an ever-expanding capital, unbalancing the UK economy with its voracious appetite for talent, trade, and investment has suited some people well. London-bashing is in vogue, as was seen in the metro mayor elections and the Labour Party’s election manifesto. The government seems to have chosen not to bash the capital so much but to wholly ignore its existence, despite being headquartered here.
In the capital, some elements of a slowdown in growth may be greeted with relief—especially by younger Londoners with an eye on the housing market. Many Londoners are quite simply exhausted. It’s been years since wage increases have kept up with house prices. Traffic congestion is at an all-time high, and public transport infrastructure is pushed to capacity. A period in which we can pause to catch our breath is a welcome break from years of sprinting ahead. Perhaps Londoners could get used to their city being a little bit less extraordinary.
But slowing growth in London has consequences that go beyond matters of ego and reputation, and the chance of finally being able to buy a house. Nationally, a levelled down London means lower growth and lower tax contributions. And if London is beginning to wobble post Brexit, then what do we expect to happen in the rest of the UK? A decline in foreign direct investment in London is highly unlikely to be balanced by an increase in investment in the rest of the UK. London thrives thanks to the principles of agglomeration—it may cost a lot for businesses to be here, but it pays too, thanks to a critical mass of talent, knowledge, and services. We undermine that critical mass at our peril.
Finally, the challenges of Brexit, particularly in terms of attracting talent and remaining competitive, means that London’s liveability matters more than ever, as our previous research has shown. Despite the best efforts of campaigns like London is Open, the latest data suggest a decline—registrations for new national insurance numbers have dropped 15 per cent since this time last year, with a fall in EU applicants accounting for three quarters of this. 93,000 people (net) left the capital for the rest of the UK in the same period, compared to 77,500 in the previous year. The EU Referendum result may have shown that being successful and internationally popular has its downsides, but the loss of people, power, and investment that may result from Brexit could have a negative impact that resonates far beyond London.