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London’s resilience as a global city

15 January 2025

London’s resilience as a global city

Last week Christopher Barrow, CEO of Metropolitan Safe Deposits, was asked by a journalist whether he felt London’s position as a global city was under threat.

Everybody has a different definition for ‘global city’. There have been many studies such as the Oxford Economics’ Global Cities Index, which ranks the world’s largest cities based on economics, human capital, quality of life, environment and governance. Like most studies, New York and London consistently rank as the two top cities. The question is whether events of the past two decades have changed people’s perception of London’s standing as a leading global city.

In the past 20 years, the three biggest events affecting our business have been the global financial crisis of 2007-09, Brexit and Covid. All three were landmark events that have had a lasting impact on London. Each provoked different government policy responses, though there was one constant during all three crisis periods. Quantitative easing was started by the Bank England in March 2009 in response to the global financial crisis, and was also implemented during Brexit and again at the start of the Covid pandemic in the spring of 2020. 

Quantitative easing proved to be an effective monetary policy tool in keeping interest rates low without triggering inflation between 2009 and 2021. Each crisis period had its challenges, but business generally remained resilient as costs were kept under control in a period of benign inflation. This suddenly changed as inflation spiked in 2022 and 2023, which proved very challenging for businesses with high labour costs.    

Reflecting on the global financial crisis – it was a classic boom and bust event. The UK’s long period of economic expansion from the early 1990s ended abruptly in 2007, with the freezing of the interbank markets and the collapse of Northern Rock, Bear Stearns and Lehman Brothers. This resulted in a sharp increase in safe deposit box terminations in 2008-09 caused by customers moving away from London or moving/returning overseas. However, whilst it took many years for the UK economy to recover, our business in London experienced a rapid recovery. Confidence returned to financial markets and many people returned to London to live and work. Crisis over, we thought….

Then followed the second major event - the Brexit vote to leave the EU in 2016, which culminated in a final exit in January 2020, a sustained period of uncertainty. The unexpected result roiled global markets and caused economic and political turmoil. London was hit hard by diminishing trade, higher input costs and negative EU net migration. Europeans started to return to their home countries in significant numbers; and London’s ability to retain and recruit high‐quality European employees was reduced.

The third landmark event, Covid with its three UK lockdowns between March 2020 and March 2021, sharply reduced business during these periods. By this time, Boris Johnson had become the third UK Prime Minister in four years. Post-Covid issues persisted including lingering illnesses and remote working (or a reluctance to return to the office). Soon afterwards, Russia’s invasion of Ukraine in February 2022 worsened the situation, creating geopolitical uncertainties and a sharp hike in energy and food prices. The resulting cost-of-living crisis, largely caused by external factors, was then exacerbated by the Truss mini-budget in September 2022 (now the fifth PM in seven years). Fast forward to today and the UK government bond market is again in turmoil, which many attribute partly to Rachel Reeves’ much-criticised budget last October (now under the Labour Party) and partly to fears of the incoming Trump’s protectionist policies.  

Despite everything that has been thrown at the UK (politically and economically) during the past two decades, revenues at our London-based safe deposit vaults have grown every single year. Several factors have been at play, not least the exit of the major banks from safe custody. However, arguably the most important influence has been the extraordinary resilience of London, despite suffering a severe bruising since the global financial crisis of 2007/08.

Whilst some commentators believe that London’s position as a global city is under threat, there is no doubt that its ability to bounce back from the recent battering has been impressive. London has lost fewer jobs to the continent than expected and those have been lost to a broad range of European cities. There has been no big EU winner. It is generally recognised that no European country will replace London in the near future. London has a genuine competitive advantage that has been built up over many centuries. This will prove to be very difficult to replicate or displace.

Compared with New York especially in the Trump era, London should remain as the more international of the two global cities. In the foreseeable future, London is unlikely to be replaced as the most linguistically diverse city in the world. It should also remain a top global financial centre (despite losing significant assets to the EU) and the advanced world’s most visited city. It will continue to be a key safe haven for global investors. Wealthy families will still move to London and invest in residential property, more recently attracted by sterling depreciation. By some estimates, foreign buyers have recently been buying over 40% of homes in central London’s expensive areas.

Ranking or explaining the “global-ness” of cities is a complex exercise. One acid test is why people and companies come to a city in the first place. What goes through the mind of a family, a tourist, a businessperson, an investor or, for that matter, someone seeking protection or security? Why London? Arguably, the most important single factor is the UK’s rule of law. The equal application of the law with a parliamentary democracy has long been at the heart of fundamental rights and freedoms in the UK. This is particularly salient given the growing ascendance of authoritarian populism in the US and Europe.

The UK is a trading, global nation. As a people, the British are pragmatic and principles based. Tolerance and fairness are part of our cultural DNA. We have a long history of stability and engaging with foreign nations and different cultures. The UK still has an enterprise culture with global connections (Commonwealth, UN, WTO, Five Eyes etc). We are in favour of free trade in sharp contrast to Trump’s significant shift towards protectionism. We are inventive and entrepreneurial.

Speculating about London’s position is as precarious as predicting the future of the EU. The political and economic uncertainties in the Eurozone, especially with both France and Germany embroiled in political crises, may see significant numbers of Europeans returning to London. Whilst Frankfurt, Paris and Dublin are regarded as the frontrunners in terms of picking up financial and business service sector jobs from London, other industries, such as the information and communication sector, will be a different story. For example, cities such as Stockholm, Berlin, Amsterdam, Madrid and Milan are as likely to attract top tech jobs away from London as Paris or Dublin.

Ultimately, it is largely a question of whether individuals and families like to live in London. If instructed to move to Frankfurt or another EU city by their employer, how much resistance will there be? Banks and other multinational organisations have established European subsidiaries and moved relatively small numbers of employees across to countries where there is a specific need to service customers. To date, whilst the EU will gradually chip away at London’s influence in the banking and finance industry, there has been little evidence of wholesale moves.

Neither have Brexit fears diminished London’s attractiveness as a place to live and work. It is a dynamic, creative and exciting place to develop businesses and career paths for all ages and nationalities. London has a young population and is often regarded as the most diversified start-up ecosystem in the world. It remains the place to start a tech firm, with world-class research and degree courses at many of the UK’s top universities. London is Europe’s largest hub for generative Artificial Intelligence, with nearly 30% of Europe’s new start-ups based in the UK capital. For all the political ranting about immigration, London continues to be a magnet for ambitious individuals from overseas. Any shortfall of Europeans has been more than made up by arrivals from elsewhere.

It is also a global centre, like Switzerland and Singapore, for the storage of “high-end” items of value, such as art and precious metals. Global vaulting facilities are located only in the safest countries with a strong economy, a stable political system (despite the high levels of political disenchantment) and an independent judiciary that protects individual and property rights. Interestingly, European demand for safe deposit boxes in London remains strong. This may reflect a lower level of public trust in EU institutions. It may also be another indicator that London’s position as the most global of global cities will not be surrendered to a European competitor any time soon.  

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