Can London remain a world-leading city?June 21, 2013
On Friday 21 June, London First Chief Executive Jo Valentine spoke to LondonLovesBusiness.com about how to safeguard the capital’s competitiveness:
By any credible measure, London remains one of the world’s top two or three cities. It is the preferred head office location for the majority of major British businesses and hosts the European headquarters of around a third of the world’s largest companies. It remains one of the world’s two leading financial centres, and is still the place where the world comes to insure its risks.
While the UK government has influence on the world stage, the capital boasts as its Mayor perhaps the only leading political figure who is identifiable simply by his first name. Last summer gave our Mayor a worldwide profile, as well as reminding us all that, even in times of austerity, London knows how to put on a good show.
Our transport system, while not perfect, still manages to move millions of people to and from work each day – and will benefit greatly from improvements currently being made such as Crossrail. London leads Europe as the destination for foreign direct investment and is now starting to establish itself as a centre for Technology, Media and Telecommunications. But we face challenges.
In the past, the consistency of our tax regime helped attract international companies and globally-mobile individuals to make London their base. That stability has been lacking in recent years, evidenced by the ineffectual (from a revenue-raising perspective) raising of the top rate of personal tax to 50p; the illogical bank levy; the raising of stamp duty on high-value properties; and the continued murmurings about other wealth taxes. The government needs to commit to restoring personal tax rates to revenue-maximising levels – around 40% – and stop springing surprises on the business sector with new measures that have not been properly thought through.
Financial services contributes more to the economy than any other sector. Without it, many of the other businesses that make London tick would have no reason to be here. The sector needs to be defended from those at home who fail to understand its value and from those elsewhere, notably Brussels, who wish to make it responsible for the more fundamental flaws in the design of the Euro and capitalise on negative sentiment to drive through potentially damaging regulation.
Retaining London’s reputation for welcoming talent from all over the world is a challenge when the government has committed to driving down all migration but can control only some. Many businesses find it difficult to recruit the skills they need from an often poorly-educated indigenous workforce, but are unable to recruit abroad. This policy is short-sighted. For those who are here, factors that can undermine their commitment to the city include the expense of accommodation, overcrowded and inefficient public transport, concerns over personal safety and even a shortage of good schools.
Were all of these risks to crystallise, London’s position could well be compromised. Worryingly, as is often the case with irreversible change, the decline would likely be sporadic and incremental. The individuals who create wealth, and the investment that they bring, would not necessarily pull out in a fanfare of publicity. They simply wouldn’t come at all.
Fortunately, I do not think that any of these particular dice are yet cast. At times, the pace at which challenges to London’s competitiveness are dealt with is achingly slow. The 17 years that it took to get a government commitment to Crossrail and the 40-plus years of dithering over building additional runways are extreme examples. But London’s inherent strengths have seen it through in the past and I have no reason to doubt that, provided both city and national government implement policies that foster a business-friendly environment, they will continue to do so. Will London still be a leading world city in 30 or 50 years’ time? You bet!