With an exodus of millionaires, businesses and workers, has London lost its spark?

CNBC

6 hours ago

London, the jewel in the crown of the U.K.'s economy and national culture, has taken a bit of a battering lately, with big business looking to expand elsewhere, workers looking for more affordable places to live and a flock of millionaires fleeing the city.
A new tax regime targeting the "non-dom" status of the London-based super rich prompted an estimated 10,000 millionaires to flee the city in 2024 in search of safer havens for their cash. For the have-nots, high living costs — and a post-pandemic reevaluation of what makes for quality of life — have prompted many people of working age to leave the city, data shows, as it becomes prohibitively expensive to stay.
London's pride as a business hub has also been dented in recent years as homegrown firms have looked elsewhere to base themselves or expand, increasingly looking to IPO abroad or moving their primary listing away from the U.K.
So, is it all doom and gloom for the Big Smoke? Not necessarily.
While the streets might not be paved with gold, London still has an irresistible pull for millions of people looking for work, study and play, with an estimated 20 million tourists visiting the city in 2023.
CNBC asked several U.K.-based analysts for their thoughts on whether the city is on downward trajectory, or just experiencing some bumps in the road. Here's what they had to say.
London's crown has been slipping "for years" when it comes to its business appeal and affordability for ordinary folk, Bill Blain, market strategist, former investment banker and author of the "Blain's Morning porridge" newsletter, told CNBC.
He said doing business in the capital is "just not nice anymore," and the atmosphere in the affluent City of London and Canary Wharf, the capital's financial districts, is even worse.
"There is not the buzz that we used to have in the City, in Canary Wharf," Blain said, lamenting "how quickly London is becoming relevant."
"You name me a single significant U.K. investment bank? You name me a single significant U.K. private capital market firm? They're all big American firms," Blain said.
"When it comes to the banks, you've got the Europeans, the French and the Germans, who are there just by the skin of their teeth. But there's nothing left for the U.K. You go into the City today and take a look around, and it's dire. There's lots of people there, but they're all insurance clerks, or whatever. They're not the investment bankers of a previous generation. My generation were the last who got it good," he said.
Blain blamed over-regulation for the City's demise, believing that "the number of people who are involved in compliance and regulation and form filling vastly outnumbers the number who are on the front line of finance."
Blain said he believes it lost its global reputation for having a relatively stable political establishment, with six prime ministers in the last 10 years, and that it was also tarnished in the wake of the tumultuous departure from the European Union five years ago.
After a landslide election win last year, the current Labour government, and Finance Minister Rachel Reeves, find themselves under heightened pressure to stick to self-imposed rules on debt and borrowing, while trying to increase public spending and to promote much-needed growth.
"In the past, you could look at the U.K. and say, yes, it's no longer the biggest economy in the world, but it's generally stable in [terms of] competence, so you invest in it. But these things are now beginning to be questioned, and that's the big risk for the U.K.," Blain said.
Barret Kupelian, chief U.K. economist at PwC was keen to point out it's not all gloom and doom for the capital in the long term.
"If I focus on the fundamentals that make London, London the first thing is the rule of law, and then you've got all the intangibles like history, culture, diversity, talent, innovation, regulation, time zone, probity, infrastructure, etc. These things haven't changed in a massive manner in the past few years," Kupelian told CNBC Wednesday.
"We see London actually having a quiet, stable, soft infrastructure, and businesses are still here, large businesses that are in London, because of the quality of regulation," he said. Kupelian defended London's status as a hub for financial services but said it's also adapting and evolving.
"One of the things that's happening quite in the background is that our goods exports are stagnating, partly because of the trading environment we're in right now, tariffs and what have you ... but services exports are growing quite strongly and a lot of it is being driven by business services," he said.
"We always thought FS [financial services] was the crown jewel in London, and it is, but actually, in terms of growth rates, if you take a look at the export side of the ledger, a lot of it is being driven by business services," he noted.
PwC, in conjunction with pollster Demos, produces an annual "Good Growth for Cities Index" which measures the economic well-being of British cities and looks beyond economic output, considering factors like jobs, income, health, skills and work-life balance.
It found in 2024 that while London was expected to see strong economic growth in 2025, it compared much less favorably with other British cities in terms of livability factors. That includes the lack of affordable housing and creaking transport infrastructure — as anyone on a hot, dirty and cramped Central Line tube on their morning commute to work will attest.
"This is the story relative to the rest of the country, but then what about relative to the rest of the world?" Kupelian remarked, noting that "there's always been intense competition between the large metropolises of the world," such as New York, Paris, Singapore, Beijing and Tokyo.
"I think London is feeling that competition on a much more intense level now," Kupelian said, with the city needing to look at its counterparts, and itself, with a more critical eye to see what it could do better.
Prescribing "targeted interventions" rather than a "complete reinvention," he said London is well placed to keep attracting a talented, skilled workforce, businesses and growth.
"Businesses are still here, large businesses that are in London, because of the quality of regulation. I think that that's one of the main appeals of London. [Policymakers should] re-emphasize those points and just keep at it. I don't think there's one thing that would flick the switch leading to fortune and success, but I think there's these smaller things that probably need tweaking rather than complete reinvention — that London can do."