Global Agenda: Save the City

London continues to attract a flow of well-heeled foreigners who remorselessly buy up its homes.

building311 (photo credit: Ariel Jerozolimski)
(photo credit: Ariel Jerozolimski)
‘This Friday, I have an 8:30 a.m. meeting in the office. To make sure I am there in time, I will leave home at 6:45. That way, I am covered against any normal problem that can arise. If everything goes smoothly, the whole journey will take only 25 minutes or so – but I can’t rely on that. One or more sections of the journey can experience delays, and then it can take three times as long.”
The quote is from a partner in one of the largest law firms in the City of London, whose office is adjacent to a rail (not an Underground) station. The conversation took place a few days ago and, as usual, was not focused on the trials and tribulations of commuting to work in London, but somehow or other found its way to that vexatious subject.
A few days earlier, I was at BNP Paribas, whose large London operation is located, uniquely and to the delight of its employees, just next door to Marylebone station. This is an area right across town from the traditional center of financial activity, namely the City of London, and even further from the new and still growing hub for big financial firms in the Canary Wharf complex at Docklands.
Why BNP chose to go to Marylebone is lost in the mists of history; they have been there since the mid-1990s. But the positive aspects of this unusual location include not just being close to the West End, where many employees like to live, but also the proximity to the only high-speed rail connection between Heathrow Airport and the center of London.
I mention all this apropos the cover story and lead editorial in this week’s Economist magazine, which bears the headline used for this column. The Economist is very concerned about the upsurge of anti-banker feelings among the general public and (consequently) among politicians in the UK (and almost all Western countries). This and the ongoing crisis that is forcing the financial sector to downsize have generated threats to the future centrality and wellbeing of London as a preeminent global financial center.
But while the global developments are beyond the control of the British government, the magazine argues, there are three key issues that are very much under its control but that are now undermining London’s status. These are high taxation, a much more intrusive regulatory regime for the financial-services sector and much tougher rules on immigration. Were the British government to view these from the standpoint of the financial-services sector’s potential contribution to the British economy, it would not be pursuing the policies it has adopted.
That analysis is itself open to dispute. Will a top tax rate of 50 percent on earned income really serve to drive the fat cats of finance out of the UK and to the greener pastures of Switzerland or Hong Kong? Although lower taxes are a big draw, most people – especially both the singles and the young couples who make up the key group of employees under discussion – would not like to live in the crashingly boring environment of Zug, or bring up children in the artificial atmosphere of expatriate Hong Kong. As for regulation, the disastrous British experience with “light touch” regulation via the Financial Services Authority was a major contributor to the financial crash and to the country’s woes of the last several years.
On the other hand, entirely missing from The Economist’s assessment of the threats facing the City are the humdrum issues of getting to work and back to home in London. The shabby and decrepit state of the country’s and its capital’s infrastructure – symbolized by the appalling lack of access to central London from Heathrow, its main airport – finds eloquent expression in the testimony cited above.
Leaving aside connections to overseas destinations, you cannot assume that journeys within London will be completed in a reasonable time frame. Barely a single day passes without at least one of the lines on the London Underground suffering major disruptions – and that for technical and functional reasons, let alone labor disputes. The train system is not much better, and to rely on buses or even taxis is usually a mistake, especially during the peak travel periods.
Getting to and from work is inextricably linked to where your home is. Despite the supposed threat from high taxes and tougher immigration controls, London continues to attract a flow of well-heeled foreigners who remorselessly buy up its homes, pushing prices higher and the locals further out from the center into ever-more-distant suburbs, in search of affordable places to buy, or at least rent.
An amazing but true statistic is that the average age of firsttime home buyers in London last year was 40. This is not a mere “factoid”; rather, it is a reflection of a hugely distorted property market that will generate continued social unrest and growing populist pressure to curb immigration, tax the foreigners or whatever else it might take to enable ordinary people to actually live and work in London.
The biggest threats to the City of London and its future are not abstract items like tax rates and immigration laws, important though these undoubtedly are, but hard objects like rail tracks and houses.
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