Today’s world is changing, perhaps faster than ever. Global warming, urbanisation, digitalisation, pandemic: many forces extrinsic to London and the UK will combine to profoundly influence London’s future. In this chapter we explore six of the biggest factors shaping our world – all of which intersect in ways that are as yet little understood.
The recovery from COVID-19
At the time of writing, August 2020, global deaths from COVID-19 stand at
over 780,000. No fully tested vaccines or effective therapies yet exist. Until they do, the virus will continue to affect the daily lives of billions of people whilst governments, businesses and families struggle to manage the impact of the worst contagion for a century. How the world will recover, and how fast it will do so, is still difficult to judge. But it looks probable that the impact on our lives and the economy will be felt for years. It will mark, and perhaps scar, a generation.
Our closest (or at least most recent) reference point is the chaos and stagnation caused by the financial crisis of 2007/08, from which in some respects (for example ultra-low interest rates) we have yet to fully emerge. This suggests the timeframe for full recovery could be five or perhaps ten years.
Beyond the immediate health crisis, profound impacts of the pandemic are already being felt. Many sectors of the UK economy have entered freefall. Some, such as hospitality and entertainment, should re-emerge fully once the deep-freeze effect of COVID-19 is finally banished. For others, however, the outlook is graver. The airline industry has been dealt a blow from which it may never fully recover, as it now tries to manage the combined pressures of viral infection, global economic crash, and climate change goals. Some aspects of the retail sector also risk being permanently altered.
The crisis has also accelerated more benign changes that could have lasting positive benefits. Many workers and employers have discovered that remote online working is both possible and productive. Similar accelerations of previously existing trends are happening in retail, food, education, entertainment and personal services. Online personal services, digital-only conferences, and remote healthcare have moved from the margins to the mainstream. Walking and leisure cycling have had a heyday, with increasing uptake of both. Community support groups have flourished and may leave a legacy of greater cohesion and civic responsibility.
Businesses and other organisations are now likely to invest more in preparing for future epidemics. Efficiencies and personal freedoms could be sacrificed in the name of resilience. “Just in time” supply chains – the dominant logistics ethos of recent decades – could change to a more “just in case” approach. So too the public sector and NGOs. Scaled up, this could damage productivity and stoke the fires of economic nationalism, with more industries designated “strategic”, and national capacity built to withstand future shocks.
Climate change goals
The second major force that will shape our future is climate change, and the goals the international community has set to tackle it. That human activity is warming our planet to dangerous levels is well beyond reasonable doubt. International agreements now provide the bedrock on which to build national and local efforts to decarbonise. The Paris Agreement of 2015 – to limit warming to within two degrees Celsius above pre-industrial levels – was reflected in the UK parliament’s decision to declare a climate emergency in 2019 and embed a net-zero target for 2050. These provided ample impetus for accelerating progress towards removing all but the most stubborn elements of greenhouse gas emissions from our daily lives.
Or so it seemed – before COVID-19 struck. The shutdown of much of normal life in response to the pandemic has led to a dramatic temporary reduction in greenhouse gas (GHG) emissions, projected to be eight per cent down year-on year. By coincidence, this is about level of annual reductions in GHGs needed every year until 2030 to meet targets. 132 Having revealed the dramatic extent of the annual changes in GHGs required, the pandemic paradoxically now risks distracting us from those emissions reduction targets – as well as showing how challenging they would be to achieve simply through economic constraint. Positive, radical measures to decarbonise human activities are still needed urgently.
If this happens, major changes will occur in economies. Fossil fuel energy firms could be replaced by renewable energy companies. Hydrogen could become a viable part of the power mix. Consumer and regulatory pressure could put more focus on carbon emissions across whole product and service lifecycles. Firms that find ways of embracing circular economy principles, reducing emissions and waste, could thrive. Emissions control, permits, trading and accounting could flourish. In short, energy transition opportunities for governments and companies will proliferate, as will challenges for “legacy” companies tied to carbon-intensive technology. Financing the next green revolution will itself occupy much of the attention of governments as well as that of capital and debt markets, and, of course, will compete with other political and fiscal priorities.
Disruptive technologies and services
The third major force for change in the world is the accelerated pace of change and innovation in technologies and services. This matters in view of the potential level of disruption it can bring to previously settled economic, social and political spheres. Only 20 years ago, the original dotcom boom (and subsequent crash) seemed to foreshadow a world where the promise of new technologies perpetually over-sold their benefits and transformative power, particularly in the case of internet-based products. Today that view looks quaint and myopic. Now, significant sectors of the economy are created and transacted exclusively online, from video games to banking. Many of the world’s most valuable and influential companies are internet era “natives” like Amazon, Facebook and Google. And across industries he rate of change stimulated by new technology looks to be quickening – although, as we have seen, links to economic output and productivity may be weak and the gains may not be spread widely. Some call this “the great acceleration”. 133 Technology-led disruption as a phenomenon is becoming better understood too, and is increasingly targeted by startups, investors and even policymakers.
Technology continues to promise extraordinary improvements in people’s lives. Technological breakthroughs can upend relationships (for example, ride hailing apps), deliver a step change in costs (photovoltaic cells) and demand (smart phones), remove intermediaries (travel websites), or automate previously labour-intensive tasks (washing machines, tractors). Incumbents suffer, consumers can reap benefits, and power may be redistributed. Technological advances can also lead to even greater concentrations of market power.
Artificial intelligence (AI) and other advanced technologies could transform industries and society at large. Some worry that AI in particular will lead to a new wave of human redundancy as machines start to better people at tasks – especially in service industries that were previously considered far too complex for machines. Human ingenuity and adaption in the face of prior threats from “replacement” technologies from the plough onwards, however, might suggest otherwise – although any transition may have uneven impacts, be difficult for low-paid and low-status workers, and make a case for better training or improved welfare measures. Regardless of how this argument resolves, cities cannot afford to be complacent, especially in an age of virally induced disruption. New products and services can help to improve cities; fast-moving cities may benefit more and thereby become cradles for tomorrow’s successful companies.
Nationalism and populism resurgent
Our fourth major force has many faces. Together, loosely connected, they represent a general shift against globalisation and a rise in populist sentiment. Open borders, especially for capital and tradeable goods and services, dominated and drove the decades of globalisation following the fall of the Berlin Wall, as well as the expansion and deepening of the European Union. Reforms in Asia too unlocked a new round of increasingly globally connected development. Flows of people were also significant, especially amongst the highly educated, as well as the poorest and most desperate. Within the EU, transnational freedom of movement was legally enshrined, and elsewhere, it often occurred despite the law. Opportunities drove migration amongst elites, while conflicts in West Asia and North Africa pushed people of humbler means beyond their frontiers in search of more secure lives. Many headed to central and western Europe.
Within the EU territorial expansion went hand in hand with increasing integration. Both moved at pace, especially following the end of the Cold War. By 2013 there were 28 member states, more than double the number when the UK had joined the (then) European Economic Community in 1973. Integration took the form of a single market, the creation of a European currency and central bank, and a free travel area. The UK joined only the first of these, reluctant to relinquish sovereignty.
Globalisation, and far freer flows of capital across national boundaries, played a role in the greatest shock to the global economy in the 30 years leading up to 2020. The 2007/8 banking crisis, provoked by a credit boom and bust, evolved into a full-blown crisis of the global financial system. This, in turn, led to a decade of economic woes across much of the developed world. Contrary to many expectations, mass unemployment did not follow. Instead, companies and workers adapted, shortening hours or cutting take-home pay. Wages stagnated or declined in real terms for many over this period: the boom years were over. Stagnation led to a crisis in the eurozone, which played out in slow motion over years, with a focus on Greece.
Almost in split-screen, the migrant crisis came to a head. Images of desperate migrants arriving by boat to a continent seemingly locked in an existential crisis of its own making were hard to process and fully understand.
The seeds of a retreat from openness and globalisation were sown. The impact manifested differently across nations. Nationalist-leaning administrations took power in many major states, including the USA, India and Turkey. Trade disputes grew, and global trade stopped expanding for the first time since the 1970s. In the UK in 2016 a vote was held on EU membership, which was won by the “leavers” – and Brexit changed from fringe obsession to a destiny-altering national decision.
The rise of Asia
This leads us to the fifth major force shaping the world, the continued rise of Asia. The post-war world up to 1990 had witnessed some extraordinary national economic successes. The reconstruction of Germany and Japan was remarkable to the extent that, by the end of this period, they were the second and third largest economies in the world. The economies of some smaller Asian states or regions – South Korea, Taiwan, Singapore, Hong Kong – had also grown fast.
The next phase of global development, however, was dominated by the rise of two new economic superpowers – China and India. Together, they hold around a quarter of the world’s population. Home to ancient civilisations, the Chinese and Indian economies had in recent centuries been relatively low-performing, but 30 years ago their economic output started to accelerate. In 1980 China accounted for less than two per cent of the global economy, but subsequent reforms turbocharged its growth. By 2050 it is projected that China will produce 20 per cent of world output. But openness in its economy, albeit with plenty of state-based strings attached, has not been reflected in liberalisation of its politics – and political tensions with the US and other western countries rose sharply in 2020.
In contrast, India’s opening economically was delivered by democratic governments. Though smaller than China’s at present, its economy looks likely to generate 15 per cent of global output by 2050. It is an extraordinary change, and one which has lifted hundreds of millions out of poverty. Recent shifts in India towards nationalism, however, could threaten its liberal democratic model.
Looking at the developed and emerging Asian economies and their trajectories, many now speak of the 21st century as “the Asian century”. And of the seven global megacities (see Chapter 6), four are Asian.
Today Asia’s middle class totals wtwo billion people, 54 per cent of the global total. By 2030 it will be 3.5 billion strong (65 per cent of the total). 134 These changes are likely to have continuing and profound impacts on global consumption, production and supply chains, geopolitics, exchange rates, world culture, climate and far more besides.
Our final megatrend is that we, as a species, are getting older. Today nine per cent of the global population is over 65. By 2050 that figure will have grown to 17 per cent. This is a trend that has been accelerating in recent decades.
This change is driven by two principal factors – low (and declining) birth rates, and longer life expectancy. The rule of thumb replacement birth rate for a population is around 2.1 births per woman. Any lower than this and a population will shrink, unless the shortfall is made up in net inward migration. In Italy and Spain the birth rate stands at 1.34 today, and could drop further. In the UK it is 1.79.
Rising prosperity, advances in disease prevention and treatment, and other improvements in healthcare have led to life expectancies rising across the world (though with some notable exceptions in sub-Saharan Africa in the decade from 1988, 135 and more recently in the USA). 136 Combine these two broad trends, and the causes of acceleration in ageing across entire populations are clear. Though there is much to celebrate here for individuals, families and communities, the wider implications give pause for thought.
An older population will challenge the very fabric of our physical environment, as the demand for homes and public spaces adjusts. The world of work will adapt too. Older workers will expect more opportunities as well as safeguards – though the quid pro quo is likely to be later retirements. Demand for healthcare, and care in general, will grow as more people have prolonged final chapters of their lives. This will impact the labour market: it could create new and rewarding opportunities, or draw skills and resources from other sectors. New markets in products and services targeted at the elderly will emerge – from financial instruments such as equity release mortgages, to assisted mobility vehicles and technologies. Politics, already hugely shaped by generational interests (especially in the UK), could evolve to see specific representation for the retired or elderly. In cities, where the contest for space is already sharp, older people could become an influential and perhaps even dominant force. If – and it is a big if – they prove to be more socially conservative than younger voters, this could affect how social policy change and the use of space evolves.
Overall, the rising elderly population should be welcomed as a sign of improved life expectancies. But adapting to its consequences should be at the centre of our considerations about the future. Meeting the needs of older populations will have consequences for how we meet the interests of the young – for whom, it could be said, the future counts more.
The impact on London
Having surveyed the landscape of major global forces shaping tomorrow’s world, here we start to consider their impact on London. With the possible exception of COVID-19, none of the factors identified have an unambiguously positive or negative effect, though several challenge any assumption that London can continue with “business as usual”.
It looks likely that coronavirus crisis will amplify London’s challenges, and so slow or reverse its development. In London, the virus arrived early, and hit hard. At the time of writing, over 7,000 Londoners have died. London has the highest proportion of deaths from COVID-19 (compared to other deaths) of all UK regions. 137 The London NHS could take years to return to a normal footing as it copes with its backlog. Yet the economic impact has been no less severe. London, in some ways, locked down harder than other areas, partly because of its high level of service economy jobs, and its extensive public transport network, from which all but essential workers were effectively barred. This, in turn, shut down swathes of London’s economy.
Central London was particularly badly hit as domestic and international visitors all but disappeared. What sort of city will emerge from this trauma is hard to predict, but some of its contours are appearing. Rapid and massive government spending looks likely to have ameliorated the worst of the supplyside and demand-side impacts. Nevertheless, the UK economy looks likely to suffer amongst the worst contractions in the G7. Unemployment is still set to rise sharply as some business sectors continue to implode. Incomes may follow the pattern of the previous crisis and take a generation to recover. Some sectors are suffering severe convulsions, even complete collapse. The persistence of these disruptions sector by sector remains hard to discern. But those that depend on visitors, on nightlife, on air travel, or even on central London being busy could suffer the most.
The crisis has exacerbated human fragilities in London, laying bare and even heightening some social tensions. The political consequences of the pandemic look likely to be profound and far-reaching – on unemployment, on central London’s visitor economy, and on climate action. The disproportionate effect of the pandemic on BAME Londoners was one of many issues raised in London’s Black Lives Matter protests: other social movements may go on to make related points.
London has been resilient to other economic shocks, but the long-term impacts of COVID-19 – both as a trigger for and an accelerator of change – could strike deeper at the foundations of the city’s success. How will the global city model of economic development change in terms of international migration, travel and trade? And how will a highly globalised city like London adapt to a changing paradigm?
As we highlighted earlier, the overall level of GHG emissions in London today, and their current trajectory, are incompatible with declared targets (see Figure 28). Although the energy production sector, largely outside London yet serving it, has made great strides in decarbonisation, the same cannot be said of many other key components of the London economy. As we have seen, transport and heating are among the worst performing aspects of the city. London’s current mayor has committed London to a target of net-zero by 2030, and most boroughs have joined him in declaring a climate emergency. But to get anywhere close to netzero by 2030, radical measures are rapidly needed.
Efforts to decarbonise can appear at odds with efforts to reflate the economy, at least in the short-to-medium term. But opportunities in the wider energy transition abound. While London strives to meet this extremely challenging schedule, the rest of the world will also be responding to climate change. There are opportunities here for London and its businesses, from financial services to urban engineering and tech. London has an imperative not just to decarbonise, but also to facilitate and prosper from global efforts to transform in the teeth of the climate emergency.
The impact of nationalism and populism on global prosperity, incomes and wellbeing may be negative. This is more likely in a globally connected city like London. It has been a pole of attraction, culturally liberal, with good universities, English-speaking, and free of the many constraints other countries place on incoming talent and wealth. Many migrants chose London as their target destination, despite the UK being outside the EU’s Schengen free movement zone. Despite firmly rejecting leaving the EU itself, London now looks set to suffer a double economic hit 138 from the impacts of COVID-19 and a nationalism-inflected exit from the EU.
Conversely, the potential of disruptive technologies and services looks largely positive, despite the “techlash” that has grown in some quarters. Overall, new technologies and services continue to benefit London. A keen understanding of the risks and perils – alongside effective democratic structures – is helping keep at bay some of the less desirable innovations, such as public AI-driven facial recognition as seen in some Chinese cities. Even in a COVID-19-dampened environment, the competition for global talent remains vigorous: London needs to continue to attract the brightest and best, including the innovators themselves.
The upsides of Asia’s rising prominence in world affairs and the global economy may well outweigh its threats. The potential benefits include a wide-ranging set of opportunities for new cultural links, trade, knowledge exchange and innovation, and a growing demand for some of the financial, business and leisure services that London offers. London, with its global reach, soft power, internationally respected legal frameworks and strategic location, could be well placed to take advantage – though global and national politics may complicate relationships.
Projections show that the proportion of over-65s in the UK will rise from less than one-fifth today to a quarter of the population by 2050. 139 Despite its youthful zest, London will not be immune to ageing: the number of Londoners aged 65 and over is forecast to rise by 30 per cent by 2030. 140 This growth of life experience and wisdom amongst the capital’s citizens will have many positive features. But care must be taken to ensure sufficient and appropriate housing, make public spaces work, improve London’s care and healthcare services, safeguard against growing generational gaps in wealth, and foster democratic engagement among Londoners of every age.
Case study 3: Tokyo: Tackling housing shortages
Despite the housing crisis facing many cities, Japan has a strong record for delivering affordable housing, even in cities with high levels of economic growth. 141 But unlike many countries that are successfully delivering affordable housing, Japan does not have a large social housing sector. Indeed, fewer than five per cent of homes across Japan are social rented, compared to 17 per cent in the UK. 142
Instead, the supply of housing in Japanese cities is highly responsive to local demand. For instance, Tokyo has added roughly 62,000 homes a year since 2013, compared to 30-40,000 a year in London over the same period. While these homes tend to be smaller, new supply in Tokyo is responsive to higher demand for smaller one-bedroom flats for single people, meaning that per person, the average Tokyo resident is likely to have more space. 142
Underpinning this responsive supply of affordable housing is a simple planning system that allows by-right development (rather than requiring planning permission for every individual site). There are 12 zones defined according to maximum nuisance level, and within these bounds nearly anything can be built: for instance, a hotel can be converted into housing quite easily.
However, the UK and Japan have some fundamental differences in how they think about the value and purpose of home ownership. Unlike the UK, property is not viewed as a store of wealth for the Japanese middle classes; Japanese homes tend to have a shorter shelf life (due to earthquake proofing) 144 and most fall in value year by year. 141 This removes some of the opposition to housebuilding by those who own homes in a given area. While there are differences in the relationship between people and their homes, there are still lessons to be learned from the way that Japanese cities approach affordable housing.
Case study 4: Medellin: Leading the way in public ownership of utilities
Empresas Públicas de Medellín (EPM) is a Colombian utility provider (water, gas, electricity and telecommunications) operating in the Medellín and the Aburrá Valle. 146 What is notable about this company is that it is owned by the Municipality of Medellin. While this type of corporatisation (the conversion of government-operated utilities to arm’s-length corporations of public or mixed public-private ownership) is often viewed as improving efficiency, there are debates about how far this model has a positive impact on access to (and quality of) services.
However, EPM has received wide recognition for its efficiency and quality of operations, with good financial results, high quality of services, a high credit rating and a commitment to improving quality of life for those it serves. 146 Established in 1955, EPM seeks to understand the local population and tailor its services to groups with different needs. For instance, there are programs to offer long-term credit at low rates for those with no access to it, as well as long-term repayment and reconnection plans for those who have had their contracts terminated. 148
Ultimately, the success of EPM has contributed to Medellin’s renowned urban renewal, going from the world’s murder capital in 1991 to what some now call a “model city”. 149 This profitable energy company hands over some $450 million a year for development projects, 150 which have (alongside other factors) helped improve quality of life for the very poorest Medellin. Of course, the city has not eradicated all its problems – but quality of life and access to essential services have been drastically improved for the most disadvantaged residents.
A one-bedroom apartment in Shibuya, Tokyo
Case study 5: Wales: Wellbeing at the heart of policy
The Well-being of Future Generations (Wales) Act 2015 gives all public organisations in Wales the legal obligation to put sustainable development at the heart of policy. The aim is to ensure that all public organisations take into account the long-term effects of any decisions they make, enabling them to tackle the biggest issues (like poverty and air pollution) in a way that goes beyond party politics and electoral cycles.
Local authorities must now make a wellbeing plan and work towards the seven wellbeing goals laid out by the Welsh government: prosperity, resilience, greater equality, health, community cohesion, vibrant culture and language, and global responsibility. In practice this means that if, for example, a public body is working to attract a new company to an area, they must take into account how this will affect factors like health and the environment – not just job creation.
Despite these ambitions, there have been critiques of the Act’s effectiveness. In a 2018 review of its progress, the Wales Audit Office (Audit Wales) noted that, although there were examples of public bodies working differently, there was a need to match enthusiasm with action and to ensure that actions were being taken in a systematic way. 151 Others have also argued that the Act “lacks teeth”: for instance, the Future Generations Commissioner (who monitors this work) can review decisions made under the Act, but has no power to overturn them. 151However, the Act has established some clear wins. For instance, controversial plans to build a new M4 Relief Road were rejected in 2019 153 after the evidence on the economic and environmental impacts of the project demonstrated that it was at odds with the principles of the Act.
Senedd Cymru in Cardiff, Wales