Uncertainty over regulation and the increasing cost of living in London are the biggest threats to London as a global HQ city, not Brexit.
A new report this week from think tank Centre for London shows that while London is overwhelmingly the preferred destination for multinational global HQs in Europe, it should not be complacent.
The report, Head office: London’s rise and future as a corporate centre, found that between 2013 and 2018, London was the top-ranked destination city globally for foreign direct investment into headquarters. During that period, it attracted 591 projects, ahead of Singapore, Dubai, Hong Kong, New York and Paris.
Figures from Deloitte show that of the 201 Fortune Global 500 companies that have a headquarters in Europe, 114 of them are in the UK, with 87 in London and 24 in the wider South East. Two more are in the Midlands and just one in the North.
That means that London and the South East hosts 55% of the world’s biggest companies’ HQs and attracts one-fifth of all foreign direct investment into HQ projects in Western Europe.
However, the capital’s status as a major centre for HQ’s could easily wane.
Since the 2016 EU referendum there has been a slowdown in new jobs in headquarters, falling from 82,000 in 2015 to 68,000 in 2016 and both business visits to and business spend in the capital have fallen, dropping by 5% between 2015 and 2017 to 3.5m and £3.1bn respectively.
Nicolas Bosetti, research manager at Centre for London, said: “The location of multinationals’ offices has featured heavily in Brexit debates, but London must avoid the temptation to interpret every headquarters move as a consequence of Brexit.
“The headquarter economy underpins London’s standing as a global city, and it is vital that local and national decision-makers remain focused on strengthening the city’s offer.
“Maintaining an openness to immigration, dealing with London’s affordability pressures, improving London’s existing infrastructure and improving skills provision for Londoners are key priorities.”
The report found that access to talent was the number one factor for businesses searching for headquarter locations, with taxation being the most overrated factor. It was clarity over regulatory and taxation positions rather than the level of taxation that did influence corporates when they did consider business issues.
Eddie Curzon, CBI London director, said: “This is no time to rest on our laurels. From Brexit to housing and a workable immigration system, there are major challenges that need to be overcome if we are to continue to provide a compelling answer to the question ‘why London?’.
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