This is a nuanced, yet grimly realistic piece of work, backed up by YouGov polling. Not everybody is planning to quit. London won’t collapse. But its findings are nevertheless chilling – at least a tenth of the City is directly under threat, and that is not even including the massive missed opportunities as centres around the world build staff and scale that could have been based here.
Of financial services professionals polled, 43 per cent have considered or are considering whether to leave the UK. Over a quarter of those (11 per cent of the total) are either definitely departing or are likely to do so soon, a huge proportion. For individuals, the most important reasons are living costs (86 per cent of respondents), poor quality of life (69 per cent), a weak economic outlook in Britain (67 per cent) and tax (63 per cent). So much for London being some kind of paradise of great restaurants, social life, tolerance and vibrancy – young professionals are much more likely to wish to relocate than their elders, who are more tied down by family.
There is an even bigger threat: 25 per cent of senior managers polled thought it likely that over the next few years their organisation would move operational teams out of the UK, with just two per cent believing that their firm would boost UK operations.
Slightly more reassuringly, only two per cent of firms are planning or likely to relocate entirely, with another eight per cent unsure – but that still means the loss of thousands of jobs minimum. So far, there have been two kinds of departures: the report highlights the 20 or so major firms that have already relocated their global or European headquarters, often for tax reasons; in some cases, they have retained the majority of operations here but not always. The second kind has seen firms move completely, led by an exodus of hedge funds to Switzerland. During 2009 at least 498 directors of UK companies changed their addresses to one of Jersey, Guernsey or the Isle of Man with an additional 91 UK companies moving their registered address there.
London’s financial and business services industries are essentially a labour market agglomeration. While the UK’s time zone is useful, as is the English language, other locations share these advantages (and everybody now operates in English in many multinationals, regardless of country). London’s real selling point is the depth of its markets, especially the labour market for financial professionals. There is no obvious reason why this agglomeration should take place in the UK: there used to be other such clusters across Britain (for example, steel-making or ship-building) which subsequently moved to other countries, such as China. History is not actually that important (Silicon Valley isn’t steeped in medieval heritage) and no guide to an economy’s future (or else Canary Wharf would still be full of dockers). Agglomerations are self-reinforcing: success sucks in ever more business, but a loss of momentum can easily turn into a rout. If the City goes out, it will be with a whimper, not a bang.