For fintech entrepreneur Lewis Liu, no other city in the world can be compared to London.
The Chinese-born, New York-raised CEO and co-founder of Eigen Technologies had always dreamed of starting a business on Square Mile, the historic heart of European finance and home to a global talent pool that is vital to companies like him .
But less than a year after opening his office near the Bank of England, Liu’s Happy-Ever-After is in danger.
The city, as London’s financial district is called, has survived the Great Fire, Black Death and other upheavals over the centuries. This time, however, it faces a double success for its future.
COVID-19 is stealing the life and prosperity of almost every major cosmopolitan city, but London is also facing a second, unique reckoning after the UK split from the European Union on Jan.
“I came to London because it was truly global and Brexit certainly took a bite of my rosy, futuristic vision that I had,” said Liu, whose firm is backed by Goldman Sachs and the Singaporean wealth fund Temasek.
“In the medium term I have confidence in the city, in the long term I don’t know,” he said, citing fears of a brain drain that could slow the growth of his young company.
Before the pandemic broke out, London was a war game of how it could remain one of the world’s leading financial centers. Paris and Milan already offer sweeteners to attract talent.
While the “Brexodus” jobs were easier than predicted, the challenge is now an existential struggle as a new culture of remote work spawned by COVID-19 leaves London’s skyscrapers largely empty and a thriving office scene in ruins.
“We’re more concerned about the place, the damage caused by poor pedestrian traffic,” said Catherine McGuinness, director of the City of London Corporation, which has chaired the financial district since 1191.
Ghost town feels heat
Public transport use in the city was just 17% of pre-COVID levels on December 4, shortly after a second lockdown ended. Office visits decreased by 54%, according to the Google Mobility Report.
In addition, almost half of UK workers intend to split their working weeks between office and home over the next six months, according to a September survey by the British Council for Offices.
UK and EU negotiators have made final efforts to work out a post-Brexit trade deal. But even if an agreement is reached, the city will not retain equal access to the EU, the bloc’s financial services chief has warned.
And with the UK economy suffering the worst damage in 300 years from the pandemic, there couldn’t be a worse time for turmoil in financial services, their biggest cash cow. The sector is valued at £ 130 billion ($ 173 billion) a year and contributed £ 76 billion to the Treasury Department in 2019.
The Bank of England estimates that a third – or £ 10 billion – of financial services exports to the EU will be lost to Brexit. Another £ 10 billion are at risk if EU access is restricted from January onwards.
Pressure increases on the city to adapt and find alternative international markets as competition intensifies.
“At the international level, it is up to the city to show that there is a good reason for it to succeed, if it can,” said Sharon Bowles, a former EU lawmaker and now a member of the House of Lords.
“London checks every box”
Some are optimistic about the future.
Adam Goldin, UK development director at CC Land in Hong Kong, owner of the city’s 52-story Leadenhall building, says London’s appeal to blue-chip businesses is beyond Brexit thanks to business-friendly labor laws and a world-class education system. History and culture.
Even so, after two bans, landlords have to work harder to lure employees back into the offices and the drudgery of one of Europe’s longest commuters.
“The novelty of rolling out of bed to turn on the laptop is waning now, but job expectations will be even higher,” Goldin said.
Real estate consultant Knight Frank said office take-up in the city decreased 68% year over year in the third quarter, creating pressure from city officials to pursue a strategy to diversify leases towards technology, media and law.
Since purchasing the city’s second tallest skyscraper in June 2017, valued at £ 1.15 billion, CC Land has launched a range of tenant perks more akin to a five-star hotel, Goldin said.
Six of the 45 floors of the fully occupied property are rented to non-financial tenants from areas such as IT services, events, architecture and design as well as energy distribution. The average lease has a term of around 10 years.
Employees can attend on-site educational programs, mental health workshops, and fitness bootcamps, as well as social events.
“If people want to be in London, companies have to be there,” said Goldin. “The other European alternatives just don’t provide the list of city center attributes. London checks every box. Except maybe the weather.”
Courting the world
If London can fend off the dual threat of Brexit and COVID, the price is still prosperity.
“We have to look very carefully at what people want and make sure the planning rules match what is coming,” said McGuinness. “I am sure we will remain a financial and professional service center.”
Officials are also rewriting rulebooks to make London’s markets more attractive to technology firms and companies from outside the EU.
The UK has already signed a trade agreement with Japan that includes regulatory cooperation to cut red tape for international banks and avoid lenders having to store financial data locally. The UK and Switzerland have announced that they will accept each other’s rules in order to deepen relationships with financial services.
John Glen, the UK’s financial services minister, said the new financial services bill will create a modern, flexible and robust regulatory system.
Former EU Financial Services Commissioner Jonathan Hill has launched a review of London’s listing rules, which deals with free float and two-tier equity structures, to ensure London can continue to compete with arch-rival New York after gaining unrestricted access to the EU, its largest Customer who has lost.
“UK financial services have a longstanding reputation for high standards and reliability, innovation and thought leadership,” James Bardrick, UK head of global bank Citi, told Reuters. “As long as it stays that way, there is no reason why we can’t do much more of the global business.”
Sweatshirts and suits
The ecosystem of businesses grappling with London’s magnetic pull also takes into account the need for change.
City Social, a Michelin-starred restaurant on top of Tower 42 skyscraper, has revamped its offering to appeal to a new generation of customers who want less formal and affordable business lunches.
“The city has loosened up with an increase in flexible work and casual wear,” said General Manager Tim Smith, pointing to a 30% increase in coverage in the restaurant’s Social 24 bar, which doubles as a hub for busy people Patrons have doubled their workforce.
The three course bar menu features grilled baby clod and white onion risotto and costs £ 21, compared to over £ 50 for the lowest price three courses a la carte in the restaurant.
So far, jobs in the city have been fewer than feared. October’s EY Brexit Tracker said London has lost less than 8,000 financial jobs to the EU since the 2016 referendum.
Initial estimates ranged from around 30,000 roles within a year of leaving the EU to 75,000 by 2025.
Liu fears that London’s unique financial flair, historic and innovative, may still be lost.
Before the pandemic, he enjoyed seeing fintech guys in sweatshirts huddle around the bartender service along with suitable bankers during the post-work drink ritual on Friday night.
“The space we occupy used to be a back office operation for HSBC. It’s pretty symbolic as banks and traditional businesses in the city make room for companies like ours,” he said.
“We are woven into the fabric of the city. I sincerely hope that this will still be the case when the lockdowns are over.”