Over the last 20 years, London has become more rather than less important to Britain’s economy. London now has more jobs and produces a higher share of Britain’s product , relative to the rest of the country than it did before the financial crash of 2008.
Some would call this cause for celebration, London is one of the leading capitals in the world and is promoted as one of the great places to work and to do business.
But a report by think tank Centre for Cities analysing official data has found that the capital’s annual growth in productivity — defined as the value of output per hour worked — had averaged just 0.2 per cent since 2007, slightly below the already feeble national average of 0.3 per cent.
Over the same period, productivity growth averaged 0.9 per cent in Paris — almost twice the average for France — and 1.4 per cent in New York, against an average of 1 per cent for the US.
Far from levelling up, it looks like the regions are being dragged down by our sluggish capital and in particular its financial hub
The report said the main reason for London’s slowdown was the stuttering performance of the most productive businesses at the heart of the capital, while productivity in emerging areas on its fringes grew fastest.
This comes as no surprise to me, a resident in the City of London. The City is turning from a business community to a tourist attraction. Our streets are filled not with commuters but with tourist busses winding from St Pauls Cathedral to Tower Hill. Crowds that used to flow over London bridge to work, now flow over the Millennium Bridge from the Globe and Tate Modern to the shopping experiences and clubs in Farringdon and Blackfriars.
Old City work hubs are departing such as Smithfield market is being relocated to Dagenham and while the City is being reconstructed, the City of London’s corporate plan is focussed on leisure not improving productivity. I attend fraught meetings where the City of London tell residents that Smithfield will not be turned into “another Covent Garden” but alternatives to it becoming another tourist hub have yet to emerge.
The City still resonates to the sound of pneumatic drills and its streets clogged with trucks loaded with building materials or taking away smashed concrete.
But much of the reconstruction is of former offices into retail units and residential accommodation. Hotels , once a rarity, are now common in the City, and they are filled with tourists – not workers.
The report suggests that the rise could be the result of increasing commercial property costs, which had crowded out more productive intangible investment. I can testify to running a business that no longer occupies the City but is run from a series of homes around the UK and the sub-continent. New businesses find City rents unaffordable.
And where there is an office, the office is half empty. The high cost of home ownership in Central London means that work at homers are not coming into town to work, meaning that the offices in the City are under used and increasingly feel a novelty to visit. Physical meetings are typically dominated by large screens on which disembodied faces stare on as CCs and BCCs to the conversation.
Ironically, the report suggests that employment has also grown faster in the capital, meaning it increasingly determines national trends. This comes as no surprise to me, a resident in the City of London.
The financial hub at the core of London is changing. The City is turning from a business community to a tourist attraction. Our streets are filled not with commuters but with tourist busses winding from St Pauls Cathedral to Tower Hill. Crowds that used to flow to work over London Bridge , now flow over the Millennium Bridge from the Globe and Tate Modern to the shopping malls, restaurants and clubs in Farringdon and Blackfriars.
Such underperformance matters because productivity remains far higher in London, with its economy based on “superstar” companies in the professional services, IT and banking sectors, than in other regions.
The City of London is facing an identity crisis and the report suggests that this is not just one of Brexit’s making. Unless the City can show it offers benefits above the costs, it could continue to see a decline where home-working and the impact of Brexit leaves the City as an historical curiosity , visited mainly out of cultural interest.
Britain needs a strong and productive London and it is not getting it. London is lagging the regions in productivity but still sucking labour to it. But the labour I see in the City is servicing tourism, the highest value work could be happening anywhere. The data suggests that much of it is being done in London’s global rivals.
Rather than “levelling up” , Centre for Cities says ministers should devolve more powers to boost the capital, which has trailed global rivals
Rather than bemoaning the loss of commuters I’d champion the rise of home working. Rather than HS2, which increasingly resembles a white elephant, I’d rather see investment in better broadband speeds nationally and the physically remote regions in particular. I agree physical meetings still have a role at present but only because virtual reality isn’t quite there yet.
Brexit may contribute to the decline the Financial Services sector was not protected.
Living in Portugal I have had to close bank account and many other connections with the UK that I would rather have kept. Never mind there are substitutes.
Just not British ones