London is one of the most successful cities in the world and consistently the first port of call for global investors.
Underpinning this success is the depth and professionalism of London’s commercial markets, as well as the strength of its transport infrastructure, and its retail, cultural and leisure offer. And of course, London continues to benefit from characteristics that make the UK as a whole attractive; a stable tax regime, as well as the rule of law.
While most of the reasons for London’s attractiveness are well rehearsed, such as its outward-facing economy, it is important that political and commercial leaders, when banging the drum for London, also consider some of the other less obvious drivers behind its success.
First though, it is important to address a more well-trodden argument around London’s openness to global markets. How much of London’s iconic skyline would not exist today were it not for overseas investment? As regions and communities across the country, including London, are increasingly calling for, and being granted, more of a say in the future of their area, we have to ensure that the UK continues to remain open to, and can attract, productive investment from global markets, whatever the result of the EU referendum.
It is, however, often forgotten that London’s economic success is also predicated on having communities which can accommodate the needs and aspirations of people of all ages, from all wealth brackets, with a broad range of cultural, economic and social backgrounds. This diversity encourages people to pool their knowledge, skills and experience. It creates space for the range of businesses needed to drive long-term sustainable growth, from big listed companies and financial institutions, through to the start-ups and creative industries and the suburban light industrial and warehouse operations we need to service the capital.
To ensure the continuation of diverse and cohesive communities, key societal issues around housing and wage growth must be addressed. The question of how to tackle insufficient security of tenure for the growing number of people renting, or how to ensure low wage jobs pay enough to ensure a decent standard of living are issues that were not decided once and for all by the election of a majority Conservative government. If we set aside for a moment the debate between commentators about the net impact on personal income as a result of the most recent budget, it was remarkable to see a Conservative chancellor accepting the importance of the issue and announcing a national living wage.
However, that will not be enough to help middle and lower income Londoners remain in the city. If we are to avoid central London becoming a sterile location that only accommodates the wealthy, more will need to be done to encourage a high innovation, high skill and high wage growth economy for all in the capital.
Similarly, on housing we saw calls during the general election for controls on rent and tenure in the private rented sector. The sector should not consider these policies to be dead in the water. Such controls are not uncommon in European countries which still manage to support institutional investment in private rented housing. With private renting often the only option for many given the undersupply of new housing at affordable prices or adequate social housing, calls for security of tenure and rent controls are likely to increase. It would not be surprising, therefore, to see political consensus move towards more regulation of the PRS and if this happens then investors will have to learn to adapt.
London and the wider UK must focus on how to mobilise housebuilding en masse, especially in London. However, the reality is that the private sector should not be expected to meet the nation’s housing needs.
Investment is required from both the private and public sectors, as private companies are quite rightly focused on their primary objective; delivering strong returns for shareholders.
In the end, only the provision of significant amounts of new social and genuinely affordable housing will alleviate housing shortages and take the issue out of the political arena.
Paul Clark is director of investment and asset management, Crown Estate
