A British financial growth lagging behind in London is not any growth in any respect


(Bloomberg) – At London’s Globe Theater, the past is certainly the prologue.

The famous stage along the Thames, the third iteration of the thatched arena since 1599, has withstood the plague, great fire and violent objections of the Puritans. Sadiq Khan, who took up his second term as Mayor of London there in May, along with a campaign to promote the arts, a key cog in restarting the British capital – the nation’s undisputed economic engine – persisted.

London accounted for nearly 40% of the UK’s pre-pandemic annual growth and contributed twice the production of Scotland and Wales combined, so failure there means dire fate for the entire nation.

Without a thriving London, the overall economy could resemble something like Italy, another faded imperial power grappling with excessive debt, too anemic economic growth, and a vicious circle that keeps it falling further behind its main rivals Independent Dissolution Foundation.

“Wasting the UK’s economic benefits while not addressing its weaknesses – such as low productivity and high inequality – could lead the UK to end the 2020s with an economy more like Italy than Germany,” said Torsten Bell , the head of the think tank managing director.

It is more than an economic challenge for Prime Minister Boris Johnson, who owes his landslide victory in 2019 to a promise to “straighten up” the hinterland to close the gap with London after Brexit. But overlooking the capital now would be like trying to restart the US without New York and California.

“Without a recovery in London, there can be no national recovery,” said Andrew Carter, CEO of the non-partisan research group Center for Cities.

There are few signs of one.

Of the nine regions in England, London had the lowest growth in the third quarter of 2020, according to the Office for National Statistics. The Center for Cities found that while small and medium-sized cities are nearing full recovery, larger ones are lagging behind.

According to ONS data, London suffered the largest drop in salaries of any UK region during the Covid slump. When the government’s program to subsidize jobs through the crisis ends in September, “there are many jobs in London that are not coming back,” said Adrian Pabst, deputy director of the National Institute for Economic and Social Research. She expects unemployment in the capital to rise from 4.5% before the pandemic to 7.9% in 2022-23.

There is little reason for optimism in the crown jewel of the British economy. London’s financial services industry, nearly excluded from the Brexit trade deal, has shifted hundreds of billions of dollars in assets and thousands of jobs to European hubs.

None of this is good news for Globe, which lost 95% of its income, put 250 employees on leave and laid off 20 more during the pandemic.

Globe CEO Neil Constable believes the art industry will be “first in and last out of the recession,” the worst in Britain in 300 years.

The Globe’s tale of woe is widespread in London’s creative industries and a magnet for talented and ambitious people from around the world who make the city a global travel destination. But art is about much more than just setting the next trend.

They contribute £ 58.4 billion ($ 82 billion) annually, almost as much as financial services, and prop up the rest of the economy. “If you go out to see a play, go to dinner too,” said Claire Harding, research director at the Center for London. For every pound that the arts and culture sector pays in wages, another two are earned in the economy as a whole, according to the Arts Council of England.

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After a 429-day hiatus, the Globe reopened to screenings of “A Midsummer Night’s Dream” – albeit with quarter capacity due to social distancing restrictions – but is in a radically different economy.

Constable, already concerned about another winter lockdown, doesn’t expect revenue to recover until at least 2024, as international tourists are only flowing back.

This shows how Brexit changed the landscape for an economy that thrives on foreign trade and workers.

European students, who made up 38% of theater workshops prior to the pandemic, now need a passport – not just ID cards – to visit. “The cost and effort of applying for a visa is a serious competitive disadvantage today,” said Josie Dent, senior economist at the Center for Economics and Business Research.

For the domestic audience, Harding is proposing cultural vouchers, similar to the government’s Eat Out to Help Out program last summer, which enticed guests with half-price meals in restaurants. “It’s about what we can do to attract people to our wonderful inner city instead of forcing them there,” she says.

Likewise, Luke Johnson, a hospitality entrepreneur, is calling for a government campaign urging people to “go to the theater, ride the subway, work in the office, spend money in the West End, eat out, Doing and Attracting Business in London ”. People. “Nevertheless, he is convinced that the young people will return, because starting a career, socializing and having fun is” the essence of cities “.

Ultimately, a return to the status quo is not an option. Even if London recovers with the easing of restrictions, the high cost of living, the investment-hungry public transport system and the troubled visa system will eventually hold it back, according to Carter. “We have to go beyond where we have been,” he said.

That means addressing the real estate market. Neighborhoods need to be diversified, says Yolande Barnes, chair of the Bartlett Real Estate Institute at University College London. “Some areas of central London are just too work- or even tourist-oriented and too dependent on this influx of people that you may no longer be able to take for granted,” she said.

Deputy Governor of the Bank of England, Jon Cunliffe, highlighted in a speech in May that first time buyers’ deposits in London typically represent 121% of their income, compared with an average of 48% in the north.

The regional focus of support is politically difficult. City Hall may have been a stepping stone for Johnson to get to Downing Street, but he has done little to advance the London Finance Commission’s 2013 and 2017 recommendations for more fiscal decentralization in the capital and regions. Gerard Lyons, economic advisor to then Mayor Johnson, accused the ministers of a “policy of benevolent neglect” towards London in a paper for the Think Tank Policy Exchange.

Khan wants the central government to allow Transport for London to diversify its revenue – by granting control over more tax revenues – to reduce the dependency on the fare that cratered when ex-commuters worked from home. He argues that for every pound invested in the London Underground, more than half is paid out to workers outside the capital.

With government aid unlikely, there is even less hope of a hand from the BOE, says Carter. “When the economy in London and the South East is already hot, especially with housing bubbles, it becomes a problem for national decision-makers.”

BOE chief economist Andy Haldane sees the future of the capital as “fantastically optimistic”. “I’ve read the history books and they tell me that London always finds a way to relax,” he said in an interview with the Center for the Study of Financial Innovation. “Whatever the adversity, it is ultimately a very malleable, flexible, dynamic place – always was and always will be.”

Like London, the Globe has used the pandemic grace period for self-reflection, focusing on digital offerings that Constable says have “given creatives greater opportunities to get work in ways that may not have existed before.” At least for now, it’s not a curtain on the globe – or the city.

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