London is, by any measure, one of the world’s most successful city economies. It attracts more $1bn plus international subsidiaries, more foreign direct investment projects, and more international visitors than any other city.
By John Dickie
Meanwhile, its success in attracting international students not only contributes to London’s economy while they study, but also helps to give London the most graduates, as a percentage of the population, of any major city. 29
London is one of the world’s most vibrant, creative and cultural cities – driven by, and driving, its openness and diversity. London is where the world comes to do business and where talent comes to find opportunity.
This is, in part, a result of history. London has long occupied a pivotal position at the heart of global trade and commerce historically through its links across the British Empire and, more recently, through its membership of the European Union. Some of London’s competitive advantages have crystallised thanks to this past, such as English being the lingua franca of the world and a global time system conveniently based around Greenwich. Others are well-established cultural values, such as the rule of law and political stability.
But many are hard-won and fragile – the result of good public policy over decades. Current angst over the potential referendum on British membership of the EU neatly illustrates the point.
Still, what need has London for promotion? Surely every chief executive looking to locate an international headquarters in Europe has heard of London and knows its competitive advantages? Surely every tourist, whether long-haul or city-break, appreciates the city’s charms, while every prospective student relishes our city’s combination of great institutions of learning and high – and low – culture? Less blessed cities might need to hawk themselves about, but London? Surely not.
Surely every chief executive looking to locate an international headquarters in Europe has heard of London and knows its competitive advantages?
Such a set of assumptions would be as misplaced as it would be complacent. London is successful today, but its context is changing. Growth post the 2008 financial crisis has been, relative to London’s competitors, less strong than in preceding years. The world’s centre of economic gravity is shifting east at a rapid pace. For example, management consultants McKinsey forecast that of the additional 7,000 companies with revenues of $1 billion-or-more that will be created by 2025, over two-thirds will come from emerging markets, predominantly Asia. As a location for international business, London faces growing competition from rival hubs, such as Singapore or Hong Kong, that are geographically, culturally and linguistically closer to this large emerging market.
And, critically, the familiarity, cultural similarities and attributes that have attracted investment, trade and tourism from developed Western economies are not always as obviously attractive to those from emerging economies. Indeed we are already falling behind in some areas: for example, five times more Chinese visitors choose to go to Paris than London. Why should students, investors or tourists from Shenyang or Hangzhou decide on London when they go abroad, unless we sell them the sizzle?
This is why London First’s recent report for the London Enterprise Panel, London 2036 – an agenda for jobs and growth, identified increasing London’s focus on emerging markets as a critical priority for the city; and why we commissioned benchmarking research from Deloitte to look at London’s promotional performance when compared with some of our peers. 30
The latter research concluded that London has structured its promotional activities well. The recent creation of London & Partners (L&P) as the London’s sole promotional agency, covering inward investment and exports, tourism, and international students, means there is just one body managing the brand. However London sits in a complex national system of promotion which, crucially, means that much funding goes elsewhere. London’s promotion simply lacks the firepower of its rivals.
London’s modest promotional budget of around £19m per annum is dwarfed by cities such as Singapore (£201m) and Hong Kong (£253m), but also lags behind other, perhaps more comparable, cities. Looking just at public funding, London & Partners receives £12m in grant from the Greater London Authority, compared with Berlin’s £22m and Paris’s £34m.
This lack of public funding for promotion is compounded by a lack of access to city assets – such as welcome desks, transport poster sites, or a publicly-owned convention centre – which can enable a promotional agency to raise commercial funding. At £8m, New York’s agency, NYC & Co, receives a smaller public grant than London but manages to generate a further £13m in partnerships and commercial revenue, giving New York a bigger budget overall. This is thanks to NYC & Co’s control of advertising sites in taxis and on bus shelters, plus access to trade fairs and branding opportunities that offer strong benefits to their partners. London, by contrast, was only able to generate around a third of its total income – £6.5m in 2013/14 – from commercial activity and partnerships.
The upshot of this funding gap is that London & Partners has significantly less to spend on its activities, despite having a promotional remit wider than most of its peers. Taking tourism promotion alone, L&P allocates the smallest amount of funding of any of the rival cities studied in the Deloitte report – less than half that of New York and around a third of Paris.
A damaging consequence is that London’s promotional efforts end up focused on existing mature markets, such as the US, which offer the best return on investment in the short term, rather than the growth markets that will bring the biggest returns in the near future, notably in Asia. London government needs to do more to invest in growing London’s future markets: we need a step change in public resourcing – whether funding, allocating more city assets, or both.
One final point: we need to work harder to ensure that the image we project chimes with the experience we offer potential international investors, talent, students and tourists.
The current Government aspires to signal to the world that the UK is open for business: as the posters put it, business is great, culture is great, shopping is great. Yet its policies on immigration and EU membership, designed to play to parts of public opinion inside the UK, undermine this aim. We make it harder for businesses to bring the talent they need from abroad, harder for genuine students to study here, harder for those students to contribute to our economy beyond their studies, and harder for visitors to experience everything London and the UK have to offer.
Unsurprisingly, in our globally connected world, readers of Indian newspapers or Chinese blogs note the dissonance between our spin and our substance. London can’t rest on its laurels. We need to up our game.