No doubt there was much relief in the Treasury when HSBC announced that it will be keeping its international HQ in London. And the news gave everyone reassurance that London still has what it takes to house the headquarters – European or global – of international companies.
Undoubtedly, centuries of stable, democratic government and the effective rule of law are major pluses for the capital. Doorstep access to world-class legal, accountancy and software services counts too. Then there’s our EU membership, which has helped make us the most popular place for global companies to base a European HQ. And our time zone doesn’t hurt, either. But despite all this, we should never forget that the world is full of other cities that would dearly love to overtake us.
So what are the competitive challenges facing London? Well, HSBC spoke yesterday of London being “home to a large pool of highly skilled, international talent”. That’s one of the capital’s greatest features. Yet anti-immigration rhetoric and policies are already putting this at risk. Companies are now finding it difficult to get visas for high-skilled talent from outside of the EU. That’s a result of an artificially low cap on the number of skilled worker visas. The limit didn’t bite during the financial crisis and its aftermath but, as the economy expands, companies need more staff.
Quite rightly, the government wants to increase the skills of British-born workers. It is attempting to do so, for example, by expanding apprenticeships, funded by an apprenticeship levy. But in a dynamic economy like London’s, there will always be skills that are needed at short notice, and being able to access the very best talent globally means that British employers can stay at the top of their games.
Another big issue for global companies, who need to manage international operations, is the lack of airport capacity – and a lack of routes to emerging cities. Global headquarters need to be linked not just to Western markets but to the fast-growing, emerging economies. Yet decades of dithering in the UK mean that other European cities are edging ahead of us: Paris and Frankfurt have four runways each. Amsterdam has six. Heathrow has just two and has been full for a decade, while Gatwick will be full by 2020. Without urgent action from government, other cities will trade on their better air connections with, say, China and Brazil, and we’re going to be at a serious disadvantage.
In fact, infrastructure is a major factor for global companies deciding where to locate. That’s because it’s a hygiene factor (will our workers be able to get into work reliably and without massive commutes?). And the simple truth is that we need to invest in transport to keep up with our growing city. Giving the green light to Crossrail 2 would not only take pressure off some of the busiest existing lines, but also properly connect up parts of north-east London with the centre, making it economically viable to build another 200,000 homes over time.
That’s important, because rising housing costs are affecting the capital’s competitiveness. What’s more, there’s a danger that talented young people will decide to move out of the city, rather than apply their skills here. To solve the problem, London needs to double housebuilding to 50,000 a year – otherwise, we’re going to face real issues.
One bank’s future as a London-headquartered business has been revealed as safe. But companies are making decisions about where to base their operations all the time – and London needs to keep upping its game if it is to remain the best business city on the planet.