Brexit is probably the most dramatic event in London’s history in a generation, possibly since World War II. It creates opportunity and risk for a city that has, since the 1970s, capitalised on its position between continental Europe and the USA, sharing proximity with the first and language with the second, to become a world-leading business capital.
London suffered from depopulation after the war, but began to bounce back in terms of population and economic growth from the late 1980s, fuelled by the expansion of the deregulated financial service sector and a re-emergent cultural confidence driven by inward migration and increased diversity. This trajectory has faced setbacks, including the recessions of the early 1990s and the late 2000s, but London has proved remarkably resilient. However, London’s long boom has placed severe pressure on its infrastructure, particularly its housing stock, and its growth has been accompanied by a rise in inequality and stubbornly high levels of relative poverty, caused in part by high housing costs.
With Brexit impending, London is facing a major change in its relationship to Europe, and with it, to the rest of the world. The capital has an international stature as a global city, and voted to remain by a margin of 60:40 (though some areas of London voted heavily in favour of leaving). Furthermore London’s economic and social structures make it particularly vulnerable to changes in international trading and migration.
This report considers the challenges Brexit poses for London’s position as a global city and proposes ways of addressing these challenges. It was written in the period between the EU Referendum of June 2016, and the initiation of negotiations a year later. It therefore reflects the atmosphere of uncertainty and possibility that has accompanied discussions of ‘Brexit before Brexit’, with the June 2017 general election result compounding uncertainty.
The report is not comprehensive but seeks to set out the most urgent areas for action. Some of these are about influencing the Brexit negotiations, to ensure the best possible outcome for London and the rest of the UK; others are about using Brexit as an opportunity for London to develop innovative solutions to its long-term problems.
In particular, the report argues that increased devolution of power and resources has become imperative if London is to continue to thrive as a dynamic, inclusive global city after Brexit:
Chapter One looks at the evolution of the global city concept, at London’s success factors and at the growing pains that have accompanied that success;
Chapter Two examines the principal threats posed to London’s economy by Brexit, particularly restrictions on freedom of movement and withdrawal from the EU’s Single Market;
Chapter Three considers policy responses to the specific and urgent skills challenges facing London, from devolved skills funding to regionally managed immigration;
Chapter Four asks how London can be empowered to meet its housing and infrastructure needs, addressing which will be crucial to retaining global talent and serving its expanding population;
Chapter Five argues that radical reform to London’s system of property tax could create a fairer city, a more stable market, and more money to invest in services and infrastructure.
In considering how London can maintain and enhance its existing economic model this report sets to one side bigger questions about London’s future, which have been brought into sharp focus by Brexit. What trajectory should the city choose? Should we, for example, seek to become an offshore entrepot, semi-detached from both the UK and mainland Europe, offering a low tax, high-skills base for trading and business services? Or should we pay more attention to repairing our fractious relationships with the rest of the UK, while other cities in Europe and beyond take on the mantle of global city functions? Should London double down on tech, on cultural industries, or should it seek to preserve its current balance of economic sectors and trading relationships while tackling the chronic problems that have dogged its recent success? Or can these be combined?
The point of raising these questions is that London is entering uncharted and choppy waters, and it needs to consider the course it wants to set. Brexit offers an opportunity to address these big issues, but the arguments made in this report underline the extent to which talent, trade and infrastructure will be needed to underpin any future success.
This report does not argue that London needs ‘special treatment’, but rather, rests on the assumption that different economic and social models operate in London (and its south-eastern hinterland) to the rest of the UK. If, after Brexit, London is to continue to play a leading role in the UK economy, we need a devolution settlement that will allow innovation and responsiveness in terms of skills, migration, housing and tax regimes. One size governance fits fewer and fewer parts of the UK.