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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
For London, the past 15 years have been particularly bruising. The city’s productivity growth has been sluggish since the global financial crisis. Its standing as a launch pad for trade with mainland Europe also took a blow following the Brexit referendum. And the rise of remote working post-pandemic now means Londoners spend just 2.3 days per week on average in their plush offices.
Few cities would be able bounce back after such a pummelling, but London has proved resilient. Its cosmopolitan talent base and cluster of industries — ranging from global banks to tech start-ups — coupled with its favourable international timezone, has given it staying power. Its world-class financial and professional services sector attracted the most foreign investment projects of all global financial districts from 2019 to 2023. Fewer traders fled to the continent than expected, and its population is only projected to grow.
But London’s strength should not be taken for granted. Its growth is limited by space and high living costs. Taking on fierce competition from rivals like New York and Singapore, for highly skilled workers, also requires strong leadership — which it lacks. The ruling Conservative party risks deterring global talent as it clamps down on immigration. Labour, which leads the polls ahead of this year’s election, has proposed higher taxes on the wealthy. The latest campaign to be London’s mayor, which last week saw Labour’s Sadiq Khan return for a third term, did not inspire.
The city contributes over a fifth of the UK’s output — and national revenue. Despite the need to “level up” less thriving regions outside London, it cannot be achieved by “levelling down” the capital. One priority ought to be giving it more space to grow. London is hemmed in by a greenbelt of protected land on its edges, and height restrictions. A dearth of housing has sent property prices and rents soaring, which makes the city less attractive for workers. Developing commuter hubs outside the city with improved public transport links would help.
Existing land and buildings within the city could also be utilised more efficiently. For measure, one study estimates that London’s golf courses could provide space to home 300,000. Office vacancies in the West End, Square Mile and Canary Wharf are also forecast to rise this year. The multipurpose use of underutilised commercial space — such as for start-up hub and science labs — could help create a larger community to ensure the capital stays alive, particularly on remote work days. Companies also have a role in encouraging staff back into the office.
London’s wider appeal as an international business destination needs fortifying too. Maintaining close ties with the EU, to minimise regulatory divergence, is important for the financial sector, and efforts to unlock long-term capital pools are needed to support innovative firms to scale up in London, rather than abroad. Lowering application costs for skilled worker visas would help businesses compete for talent. Indeed, the cumulative burden of regulation and taxation matters when places like Dubai are luring professional services expats with tax-free salaries. Raising livability — including by cutting traffic, raising air quality and supporting cultural services — also adds an edge.
The next government needs to work with Khan to help drive London’s growth. The city’s fortunes will depend on national-level strategies on regulation, transport investment and taxation. The devolution of further powers, including for planning reforms and revenue-raising, will also determine how effectively the mayor can lead the city. Khan’s growth strategy — and his ability to manage its implementation with various boroughs and suburban regions — will in turn matter for the rest of the country. London is the brightest jewel in Britain’s economy. It must be kept shining.