Video Transcript: What’s London’s role in driving growth across the UK?

Transcript

Quentin Cole: Hello and thank you for joining us today. I'm Quentin Cole, PwC's London Markets Leader, and I'm really excited to welcome you to this panel discussion, which will explore the crucial role of London in supporting the UK's ambitions for accelerated economic growth.

Last year, PwC launched our Framework for Growth report, a piece of research based on the perspectives of over 1,200 business leaders from across the UK, looking at industrial strategy and the building blocks of a new UK growth strategy. I've been really pleased to see that the government's approach to industrial strategy and other recent interventions aligns with a lot of what we heard from those businesses during the research. I'm also delighted that the government has recognised the role that sectors such as financial services, professional services and technology will play, including in helping to enable growth in other priority sectors in the UK.

As an important global hub and a magnet for international investment, London stands as a crucial engine of growth, well positioned to support the development of regions and economic clusters across the UK. The size of the opportunity is huge. Our most recent survey of nearly 5,000 global CEOs saw the UK surpass Germany, China and India to become the second most important destination for investment after the US.

So now to our panel, and to further explore these themes, I'm absolutely delighted to be joined by a number of guests. Firstly, Sir Charles Bowman, Alderman of the City of London, former Lord Mayor of the City of London, and of course, a former now retired PwC Partner. I'm also delighted to be joined by Muniya Barua, Deputy Chief Executive of Business London and our very own Simon Oates, PwC's UK Economics Leader. Welcome to you.

So turning to the panel discussion and coming to you, Charles. Growth is clearly a major priority for the UK and for the UK government. But what do you see as the role of the City of London, and I guess you'd call it London's world-leading financial services industry in supporting that agenda and the goals of the new industrial strategy?

Sir Charles Bowman: Great question. And thank you, Q. It's a delight to be with you today. But the city of London at the heart of London does play a very critical role in the UK's growth agenda, as it's done for many centuries. Today, as you say, it is the centre of UK's world-leading financial and professional services sector, which, as our Chancellor herself has said, is a crown jewel of our UK economy. And let's not forget that that is a sector that accounts for some 12% of UK GDP. It employs 2.4 million people nationwide, two thirds of whom are based outside of London. And it contributes from financial services alone in excess of £75 billion of tax revenue each and every year. That's 40% of our health and social care budget. So in summary, our city is a financial powerhouse. It facilitates global trade and investment flows. It generates significant economic growth. It's a job creator, not just in the city, but Edinburgh, Cardiff, Belfast, Manchester, Glasgow, Stirling, Chester, Bournemouth, Bristol and many more. It attracts talent, serving as a magnet for skilled professionals both from home and abroad, and it provides significant tax receipts. And quickly, looking at growth itself, I'm really delighted to say that it is a real focus across the city at this time indeed. It is the theme of the current incumbent Lord Mayor, Alastair King, “Growth Unleashed”. And that is not just within the sector, but using the sector, importantly, as a foundation for growth across other sectors.

And I'm also delighted that our Chancellor used her own November 24 Mansion House speech to set out a very growth-focused agenda for financial services, with its four pillars of essentially unlocking private investment, strengthening financial services, reforming regulation, and driving trade and investment, including our ties with, by way of example, US, EU, India, China and of course more. So, in summary, a very important role.

Quentin: Fantastic. Some really powerful insights there, Charles. Muniya, if I might come to you next, your mission at BusinessLDN, which I absolutely love, is to make London the best city in the world in which to do business, working with and for the whole UK. So with this in mind, from your perspective, what role does London currently play in supporting the development of different regions and different economic clusters in the UK? And I guess where do you see that going forward in 2025?

Muniya Barua: So look, I think we're really pleased that we've seen a healthy shift in the attitude towards London. London's off the naughty step and a lot of that anti-London rhetoric that we got used to has been replaced with, you know, as Charles has said, a recognition that the City of London and the capital are really integral to the government's growth mission. And I think, you know, London matters for the UK for a number of reasons. The first one, Charles has touched on some of this, is just the sheer economic heft. And you refer to London as an engine of growth. Well, you know, it contributes about a quarter of the country's GDP, it accounts for a fifth of jobs, and it generates a healthy tax surplus that supports public services. So that's the first reason.

In terms of its role as the UK's capital, there's the interconnectedness of supply chains. So regions, their success is inextricably linked through jobs, investment and supply chains. Charles gave a great example with financial services; another one is Transport for London. So two-thirds of Transport for London's suppliers are outside of London, and that supply chain supports 29,000 jobs, which is as many as TfL employs in London. And then the third point I'd make is around London as a global city. Just the sheer melting pot and melee of sectors, talent, you've got everything from unicorns to university, financial services to FinTech, that makes it a really attractive place to live, work, play and invest.

Quentin: That's fantastic. I hadn't really thought of London on the naughty step that in my new focus on London, what has really struck me is we're very shy talking about London and that's one of the reasons I was so keen to do today's panel. It's such an opportunity for the UK and London plays such an important role. But we sometimes are reticent to talk about it, which has really struck me.

So coming to you, Simon, next. Last year we published, as I mentioned earlier, our Framework for Growth research, which we were both heavily involved in. What did that tell us about the economic benefits to the UK of growing the sectors that I guess are dominant in London?

Simon Oates: Yeah, absolutely. I mean, great question. And first, taking a bit of a step back and looking at that Framework for Growth research. It really put a spotlight on how important investment is to explaining the productivity conundrum and the kind of sluggish growth that we've been experiencing in the UK. And it identified that we lag behind our OECD and G7 peers, and therefore we really need to drive up levels of investment in our economy. It then went on to identify that the areas that we really want to be focusing that investment uptick is in areas that are the big building blocks of the economy and we've just heard very clearly from Charles and Muniya that that is almost the exact description of London; it's a huge powerhouse of economic activity.

So if we take that research and we look what would happen if we caught up with our G7 and OECD peers in terms of the investment going into our economy – what would that do to London's share of economic output? And we estimate that by 2035, we'd be seeing an additional £220 billion of economic output driven by London. So a staggering figure coming just from our capital city. Now, that's the direct effect but I think we also need to think about the indirect effects of having a really successful and vibrant capital city.

And we've touched on financial services. Obviously, London is a real cluster for banks, infrastructure funds, our private equity venture capital ecosystem. And they are critical to deploying, both attracting and then deploying productively into our economy, that international investment. So we often say within the firm that a prospering London, because of its spillover benefits, is absolutely critical for a prospering UK economy.

Quentin: Fantastic. That's great, great expression. Thanks, Simon. Muniya, just coming back to you and thinking BusinessLDN. You've got very much a cross-sector membership. What are you hearing from your members about what they feel they need to boost growth in London and perhaps more broadly the UK as well?

Muniya: I think a lot of business leaders and firms will be heartened and encouraged by some of the recent announcements from government on things like planning, aviation and infrastructure investment and that follows what was a difficult budget with the employer NIC's rise. But I think what I really want to get across is that although some of these investments are brilliant for the long term, they're not going to deliver in the short term so what we want to see is momentum in the economy. And there's some low hanging fruit here for Government so, some quick wins might be restoring VAT free shopping, which would help the hospitality, arts and culture and it's relatively low cost or acts in something like stamp duty on share transactions.

So the second thing that we hear a lot is that every sector has got their own regulatory gripes. And what the frustration is that you often get mixed messages from different government departments. So there's a real opportunity with industrial strategy to try and just join the dots a bit and move to this sort of systems thinking approach. So one example, which is particularly topical given the aviation announcements, is around sustainable aviation fuels. So on the one hand, Department for Transport is championing sustainable aviation fuels but on the other hand, DEFRA hasn't put in the mechanism to prioritise the right feedstock to make that a reality. So what we want to really focus on is getting the kind of confidence, the whole big picture really working.

And I'd say the final thing that we'd want to do is see some of those big sort of systems points that affect London, the sort of plumbing. So can you afford to house your staff here? Can they get around the city? We'd like to see those addressed. So in the spending review, we'll be looking for investment in transport, but also affordable housing.

Quentin: Fantastic, thank you.

Charles, you know, as former Lord Mayor, you know this only too well, but London has been famed for financial services. But it is, as we've been hearing, it's a lot more than that. There's enormous breadth, there's enormous depth. A couple of thoughts. Firstly, how do we preserve, that breadth and depth and I guess what is it in your view that makes London special more broadly than just the financial services hub?

Sir Charles: Well, that's a great question and London, the City of London and London much more widely has well really since Roman times always been a commercial powerhouse and a centre of free trade and today notwithstanding perhaps the challenges that we've faced and we faced COVID, Brexit, geopolitics and more. That status and reputation building off what Muniya has said still exists and it's well beyond financial and professional services. London is a centre of excellence for creative sectors, technology, wider services and very much more.

And I asked myself through the course of my time as Lord Mayor, why is that the case? Why is that the case? And travelling as I did for a third of my year to some 29 different countries, it gave me a fascinating insight internationally into why people really envy what we possess in London. And I developed from that what I refer to as my 18 fundamentals as to why London is one of the greatest cities on Earth. And without any sense of apologies, I'm going to repeat them now. The top three are rule of law, rule of law, and rule of law. And then I go to history, culture, diversity, access to talent, education innovation, regulation, taxation, time zone, language, infrastructure, security, probity, great place to live and a great place to work. And what I did realise is that these fundamentals are rarities across the world. They are very difficult to replicate hitherto they have not been replicated so well by other cities and so long as we are not complacent then they will not, thereby enabling our great city, London, to remain that commercial powerhouse and well beyond just simply financial and professional services.

Quentin: It's interesting. I guess they become the competitive advantage, don't they? Absolutely. Having those 18 working together. I guess slightly on that theme, Simon, I mean, we've talked about a number of sectors already, but I guess sort of bigger picture, what else matters for London from your perspective to, I guess, maintain that competitive advantage? Perhaps even more excitingly, how do we build on it for the benefit of the UK as well?

Simon: Well, I love Charles's list. And if I was to hone in on maybe just a couple of those, I think I would identify housing and then the transport infrastructure. And the reason I go to those two features is to, again, to Charles's list, they make it possible for people to live well and move effectively around our city and then be productive in our London workforce. Within PwC, we do a Good Growth for Cities index every year and we look at the features in the cities all across the UK that make them good places to do business and we look at the kind of different facets of that. Surprise, surprise, London does very well as a place to do business, which is why it's such a powerhouse. but in the area of affordable housing and in the area of our transport infrastructure, it does lag behind some of the other cities and it's an area, to Charles's point, that we shouldn't be complacent. They are areas where I think targeted intervention through government policy can keep maintaining London's brilliant position.

Quentin: Fantastic. I mean, the good news is we could talk all day about this because there is so much, the bad news is we don't have time to do it. I'm really struck by everything that's been said so far, but in particular the notion of London is that kind of engine for growth, but also an engine for growth that's not just about London and the South East, but it's to help the UK prosper more broadly and I think that is really important. And for me, it's why we shouldn't be shy talking about London because actually it isn't just about London, it's about the UK and supporting all regions through the powerhouse of being a global hub.

And I was going to say, you know, we should sort of finish on a high note, but actually it's all been high notes because I think there is just so much potential and possibility ahead. But this question to all three of you. What in a nutshell would be some of the reasons for you to feel really optimistic, not just about London, but also about the role London plays in the future growth and productivity of the UK. And I'm going to come to you first, Muniya on that one.

Muniya: Well, I think there are a couple of reasons to be cheerful. I think, you know, increasingly for international investors, we're looking like a pretty safe bet. You know, even our nearest neighbours are entering a period of political turbulence so I think that's a really big plus point for us. And then we also have a government with a long-term commitment to growth and, you know, really that's got added urgency because of the necessity to fix the public finances and raise productivity. And I'm also hopeful that there might be some upsides of political alignment between the mayoralty and central government. So we may see a slightly less adversarial relationship than we've previously seen. And we might be able to get things done at a quicker pace. So we're hopeful in the spending review that Transport for London might get a multi-year settlement. And that, you know, there are interesting prospects around further devolution, which really would give London and other city regions more of the power and means to really chart their own course.

Quentin: Fabulous. Simon, you're always optimistic, but let's hear your summary.

Simon: Yeah, so, I mean, I would reflect upon the recent speech by the Chancellor on the 29th of January. And the reason that gives me reason for optimism is I think we've heard the narrative now really shift and focus on the need for supply-side reforms. And I think that is what our economy needs to kickstart the growth. We need to make it easier for businesses to trade, to build, and to deploy investment. And I heard a lot in that recent speech about those factors. We need London and we need the UK to be an attractive place. And all of those things will make it a better business environment. What I would encourage the government to do as it runs into the spending review and it crystallises its policies as we move to spring, is to focus not just on making us better, but having a real eye to ensuring that we are internationally attractive. So it's not just making us better, but it's making us better than our peers, and that's what's going to keep our pre-eminent position.

Quentin: Very powerful. Thank you.

And Charles, your reasons to be optimistic looking forward?

Sir Charles: Well, many. But let me start by saying often the British psyche is to be a little bit downbeated and look to the downside. And I think we really can afford to be much more confident of our own position. I mentioned earlier the 18 fundamentals that the world looks at London from afar with huge envy because of those. And itself, the world is, as Simon and Muniya have said, it is at a point of inflection with the rules of the game being somewhat redrawn. So I for one, would be very keen to make sure the narrative is extremely positive and confident.

And perhaps I will end by echoing what you said Quentin right at the very beginning. It's the wonderful stat from this year's PwC CEO Survey. And for the first time in that survey's 28-year history, the UK has secured that position as the second most attractive destination for international investment, trailing only the US. Let's capitalise on that.

Quentin: That's a great point. And really exciting.

And I kind of, as we bring it to a close, I think that there are a lot of reasons to be optimistic, but to your point, we sometimes love to kind of find the negative. And I think Muniya you used the word momentum earlier. You know, momentum drives optimism, but also optimism underpins momentum as well. And I think there is something cross sector, cross industry, more broadly, that is really powerful for us to kind of hone, not just kind of drive the kind of about London success story, but to make sure by London growing, the UK grows and prospers. And I think that's such a fantastic thing and a powerful thing and something we should all be feeling very optimistic about.

So just final words, really. Can I firstly thank the panel members and bringing your insights, it's been really great to get your perspectives. Clearly, there's more to come, more to follow, more government announcements to come. But we will be staying very close to the role that London plays and you'll be hearing more about it from me and no doubt my guests over the coming weeks and months. But thank you for listening and thanks once again to the panel.