What shape is London in, and will the city survive Brexit?
Deloitte chief economist Ian Stewart warned against complacency but emphasised that London has thrived in the wake of the global financial crisis.
“Since 2008, financial services has gone from being 20% to 15% of the London economy. The interesting thing, and it tells you about the strength of London, is that technology, advisory and creative services have taken up the slack. Real estate has also expanded.”
Stewart added: “London has come through the financial crisis in good shape. If London were an economy, it would compare with Australia, which has had a supercharged boom because of China’s amazing growth. You don’t tend to get these rates of growth in industrialised economies, but London has managed it. There is a diversity of sectors, which is a tremendous strength.”
There’s a certain reticence in trying to predict what will happen after October 31. But despite current Brexit uncertainty, Stewart remains upbeat for the future of the capital.
“You have two views of Brexit. It can be this big turning point – a bit like the turning point London saw in the ’80s – but in the opposite direction, and that Brexit is symptomatic of a greater insularity. It represents a permanent de-rating of long-term growth.
“I don’t hold with that. The resilience and flexibility and fundamental pro-business culture of London are big strengths. In the medium term, I’m pretty positive about the UK, though that doesn’t get around the shorter-term disruption.
“Long-term, whatever happens, the UK within Europe will be a relatively fast-growing economy.”
Air pollution: the next priority
Improving air quality will continue to dominate London’s agenda, Stewart said, citing the post-war period when the UK’s population grew but London’s shrank simply because “there were better places to live.”
“To me, the thing to think about is not the conventional threat of London losing its perch to Frankfurt or New York, but that it becomes a less congenial place to live, which is what happened in the ’50s. The Great Smog of 1952 killed around 10,000 people in the space of about five weeks, which is astonishing.”
Nickie Aiken is the leader of Westminster Council, and the borough is home to more than 54,000 million-pound properties – the most of any London borough. She also picked up on the theme around making London a healthier place to live.
“Air quality is now the number one concern, alongside affordable homes. I’m delighted the government has announced its ambition for zero emissions by 2050. It might not be achievable, but if we don’t put in these big aspirations, then what’s the point?”
Air quality has also been in focus recently as a result of the Air We Share campaign. Investec Private Bank’s Emily Bernstein, who took part in the campaign, has seen how this awareness is now affecting the way we think about property.
“Air quality was never something I would think about when looking at a house,” said Bernstein. “But what we saw in the campaign was that just opening a window facing a busy road could cause a huge spike in air pollution inside a home.”
The Brexit Outlook
In the shorter term, the capital’s ability to attract the best young talent will be the key to its post-Brexit success.
Following the 2016 referendum, British Land, one of the UK’s largest property companies, started a major investment programme in London. CFO Simon Carter admitted that “it might seem a little bit counterintuitive, as our view was that economic growth in London would be lower.”
“We believe London will remain a leading global city. We have a lot of advantages in language, legal framework and connectivity, and we have a really talented workforce.” – British Land CFO Simon Carter
So, why did they do it? “First, we believe London will remain a leading global city,” Carter said. “We have a lot of advantages in language, legal framework and connectivity, and we have a really talented workforce.
“Second, there is a ‘war for talent’, and if the workplace becomes a point of difference for attracting that talent, they want high-quality, sustainable buildings with good transport infrastructure. They want an interesting public realm. They are also looking for the workplace to promote well-being.
“Third, the uncertainty of the referendum was probably going to result in supply being pushed out.
“It was a brave but good call. We’ve leased space quicker than we thought we would – and at better rents. We’re providing a product that is focused on people. It may sound ridiculous, but commercial property hasn’t always been as focused on its customers as other industries.”
The London market has helped British Land to ease concerns over its giant retail spaces outside of the capital. It also owns a 53-acre site in Canada Water that will combine office space with 3,000 new homes: a development that has been described as London’s first new town centre in over a century.
Is there any end in sight to the city’s housing crisis?
The subject of new, affordable homes across the capital is one that is consistently in the news.
Aiken pointed out: “The average income for a household in Westminster is £52,000, and the median house price is £1m. If we don’t do something to bring those two numbers together, London will die, and people will move to Manchester and Birmingham. So, we are rebalancing Westminster. It’s about having a range of properties.”
Tony Pidgley CBE is the chairman of Berkeley Group, which recently built an eco-friendly village in Kidbrooke, south-east London. He firmly believes that bureaucracy is the problem: “Nobody wants to talk about the detail. Why does it take so long for us to get planning permission when the policies are so clear? When I started at Berkeley, I could build a house in 20 weeks. Now I can’t build a house in under 40 weeks. This doubles up the overhead and cost.”
Pidgley added: “When you’ve got sites that lay derelict for half a century in places like Southall, they are affordable and you can build 7,000 houses, then there is something wrong with society. And if you gave me long enough, I could take you around London and tell you where there are 200,000 units sitting on these so-called derelict sites. Let’s get this further up the agenda. Why are these sites not being brought back into production?”
But it’s not just about building more properties. As Aiken said: “It’s about being big and brave, and you can’t have development without infrastructure. I’m a big believer in Crossrail 2. (But it would be nice to have Crossrail 1 first!)
“With Crossrail, you will be able to live, and bring up your family if you wish, out in the suburbs and get into Liverpool Street in 35 minutes. That’s a game changer for me.”
Ryan Herman is a journalist who writes about business, entrepreneurship and sport for publications such as Director and Vice Sports.