Investment banks are planning to move 3,000 jobs from the City of London to other regional centres, which will be mixed news for the City. Past success in London has sustained high salaries and property costs, making moves to other UK centres economically viable. This is historic – property costs are likely to drop as new buildings in the City become available for rent, and as banks downsize their property requirements to fit their smaller labour forces. And salaries will have to fall further to match the new demand for City-type skills. The loss of jobs from the City will diminish its critical mass. But the real bad news is jobs flowing to Asian financial centres. By 2015, Hong Kong is likely to have more City-type jobs than London. Mark Carney will have his work cut out to face this challenge.
Professor Douglas McWilliams is chief executive of the Centre for Economics and Business Research.
The City of London is a unique selling point for the UK. It attracts international business and investment. There is a strong track-record of companies arriving in London and then shifting operations to other parts of the UK (near-shoring). It is true that, as wage differentials between the UK and Asia reduce, areas such as Manchester and Glasgow will provide skilled pools of flexible workers, and near-shoring will grow. Regulatory change will also put pressure on the profit margins of financial services companies, and these cities will increasingly be seen as alternatives. But London will fuel these hubs. Businesses across the UK are dependent on the City of London’s success, with new jobs being created because of success in London. That success trickles down to other parts of the UK, but ultimately feeds back to London.
Chris Cummings is chief executive of TheCityUK.