Covid-19 may be accelerating London’s decline, but the warning signs have been visible for a long time
blown off course by covid-19, Boris Johnson’s government had big plans to reshape the economic geography of Britain. Poor parts of the Midlands and north of England would get lots of infrastructure investment, helping them to close the productivity gap with London. The country would be “levelled up”.
After the Big Bang deregulated financial services in 1986, the logic of agglomeration reasserted itself and London took off. The creative industries and, in recent years, a thriving tech centre have joined the staples of banking, asset management and business services. Schools, policing and transport have all been transformed. People have flooded in from all continents, making London the world’s most global city.
The London office-cost premium is even higher than the housing-cost one. Prime square footage in the capital costs three times as much as space in other southern cities and seven to nine times as much as elsewhere in Britain. According to a legal recruitment firm, a company can save about £20,000 a year by moving a lawyer out of central London, after office costs and salary are taken into account.
It is hard to have a flat white economy when you have to maintain two-metre distancing while queuing for your caffeine. Restaurateurs fear that being forced to operate at a lower capacity will drive many of them out of business. Theatres are facing disaster. As a hedge-fund manager puts it, “London without the culture and the restaurants is just a more expensive Frankfurt with more congestion.”
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