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City in focus

In Focus: Why London remains a global city post-Brexit

It has grown from a Roman settlement on the Thames 2,000 years ago to become one of the most interconnected trading centres on the planet. Today, London is still thriving and will continue to thrive, despite concerns about the impact of Brexit on the capital.

01/08/2016

Hugo Machin

Hugo Machin

Co-Head of Global Real Estate Securities

City: London, UK

Schroders Global Cities 30 ranking: 10th (down from 4th)

Share of national economy: 22.6%i

Strengths:

-       More high-skilled, knowledge-based workers than any other global city

-       Four universities in top 35 of Schroders Global Cities University rank

-       A broad and diverse economy

Risks to ranking:

-       Possible curbs on skilled foreign labour

-       The details of Brexit trade negotiations

Why London is a global city:

It has grown from a Roman settlement on the Thames 2,000 years ago to become one of the most interconnected trading centres on the planet. Today, London is still thriving and will continue to thrive, despite concerns about the impact of Brexit on the capital.

To compile the Schroders Global Cities 30 index, we look at the future fortunes of the world’s cities. We do this by examining a range of factors, including projected growth of the economy and disposable incomes, and the size of the working population.

As with other cities high on our index, London not only has a strong economy but a diverse economy, protecting it from shocks. This is contrary to the perception that London is reliant on financial services.

It also has a highly skilled workforce. More than 1.7 million employees are in knowledge-based jobs – comfortably more than you would find in New York, Hong Kong or Paris. The most visible sign of this is the digital hub that once hugged “Silicon Roundabout” at Old Street, to the north of the City of London, but now stretches across to Kings Cross. This is now the third largest technology start-up cluster after those of San Francisco and New York.

We also look at other measures such as the number of well regarded universities, tourist demand, or a city’s cultural appeal. On these measures, London excels. For example, four of London’s universities - UCL, Imperial, King’s and LSE - rank in the top 50 of the QS world university rankings.

Accessibility is also important. The iconic London Underground efficiently moves residents from home to work, with 1.2 billion journeys made a year. It has 600,000 on it any one time – more than the population of Oslo. London’s multiple airports are also an asset. Heathrow saw 75 million passengers in 2015, making it the sixth busiest airport in the world. Gatwick, the world’s busiest single runway airport, saw 40 million journeys. In total, London airports accounted for 61% of UK air passengers.

Meanwhile huge investment in transport infrastructure projects is improving accessibility and liveability, most notably Crossrail which will link east and west. It will bring an additional 1.5 million people within 45 minutes of central London. The benefits are already in evidence with Facebook investing in a new HQ close to a Crossrail hub at Tottenham Court Road.

As investors in real estate, will like cities where sprawl is contained.  This means new supply is limited and rents are supported. While London isn’t a physical island, like Manhattan, it is in a planning sense: the greenbelt that stretches around the outer suburbs limits growth.

Will Brexit undermine Britain’s capital? In short, the answer is probably not. The decision to leave the EU could mean slower economic growth for a time. It is also unclear whether any changes in freedom of movement might affect the flow of skilled labour into London.

The city has fallen down the rankings since the Brexit vote, from fourth to 10th. But it remains an immensely diverse place to live, hosting more nationalities than any other global city, and remains a highly desirable place to live. Despite Brexit, it will keep its status as one of the world’s top global cities.

Did you know?

London is less crowded than many of its peers with 43 people per hectare compared to 83 in Paris and 93 in New York.

 

 

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i * London UK gross value added (GVA) 2014: Office for National Statistics

 

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