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Can post-Brexit London survive as Europe’s cultural and financial capital?

The UK capital perhaps felt the greatest shock when Britain voted to leave the EU. In the first in a series on post-Brexit cities, Tom Campbell examines whether the impending split really will be ‘economic self-sabotage’ for London.

On a balmy July evening in 2012, London officially opened the Olympic Games. As with so much else that summer, the opening ceremony projected a city that was full of confidence: open, diverse, prosperous and good humoured. London had shaken off the financial crisis to retain its status as the cultural and commercial capital of Europe.

Since then, it has dominated rankings of international business competitiveness, overseen the construction of the Crossrail high-speed line, attracted capital and labour from across the continent, and enjoyed economic growth far outstripping the rest of the country.

But for many Londoners, the summer of 2012 now feels like a different era. For while the reverberations of last June’s Brexit vote were felt around the world, it was surely the UK capital that felt the greatest shock.

A city with close economic and cultural ties across Europe and home to almost a million European Union nationals, London firmly backed Remain – with parts of the inner city registering the strongest EU support in the country. More than a fifth of Europe’s 500 largest companies have their headquarters in London, and the mayor, Sadiq Khan, subsequently described the prospect of full exit from the EU market as “economic self-sabotage”.

As anyone who has recently spent time in the UK capital can attest, the referendum itself seems to have done little to dent the animal spirits of London’s consumers. Restaurants, shops and bars seem as busy as ever. Tourism numbers have held up and there is evidence that the weakened pound has encouraged more international visitors to stay and spend.

But London is not Barcelona or Rome. It is a city with a population of more than eight million, and an economy the size of Belgium’s. Its prosperity has depended not simply on tourism, but on being a leading centre for business, finance, education, technology and the creative industries. Will such sectors, so essential to London’s economic and cultural identity, maintain their dominance once Britain is outside the world’s largest trading block?

Cultural powerhouse

London’s role as a centre for commerce has gone hand-in-hand with its reputation as a cultural powerhouse. According to Paul Owens, director of the World Cities Cultural Forum, which provides data on more than 30 cities across six continents, the reputation is well deserved. “London’s cultural offer is unique not just for its size but for its diversity and dynamism. It combines renowned museums, art collections and institutions alongside global media and entertainment industries, a substantial base of artists, startups and creative entrepreneurs and a thriving night time economy.”

The latest figures confirm the robust health of London’s creative sector, with a workforce of half a million and a turnover of £34bn that is growing at twice the rate of the economy as a whole. But this pre-dates a referendum result that was almost unanimously opposed by the sector: a survey undertaken by the Creative Industries Federation showed that 96% of its members backed Remain. While there is little evidence of how the result has impacted so far, there are anxieties across London’s creative industries, from Martin Roth citing the referendum as a factor in stepping down as director of the V&A, to Martin Sorrell, chief executive of advertising giant WPP, who has warned of Brexit uncertainties hitting revenues.

Certainly, for Owens, the implications of Brexit would seem to be at odds with many of the factors that have made London’s creative industries such a success: “There’s no doubt the decision to leave the EU poses a threat to London’s creative economy. The sector has prospered on diversity, free movement of artistic talent and international supply chains. London’s cultural assets are considerable, but it is likely to be diminished over the next decade unless there is a suitable policy response.”

While some argue that leaving the EU offers the prospect of new trading opportunities, Owens is not convinced this will bring much benefit to London’s creative businesses. “When it comes to creative industries, the likes of China are still relatively small trading partners,” he says. “The UK’s total exports of creative goods to China were about £200m in 2012 – just 3% of what we export to the rest of Europe.”

Research and education

London is Europe’s undisputed centre for research and learning. There are almost 400,000 students at the capital’s 40 universities and educational institutes, giving a combined turnover of more than £7bn. Its art and design colleges are renowned across the world, while in the area of life sciences, London’s dominance was cemented with the recent opening of the Francis Crick Institute in King’s Cross, which, when fully operational, will employ more than a thousand scientists and become the largest biomedical laboratory in Europe.

Prof Geoffrey Crossick, formerly warden of Goldsmiths College and vice chancellor of the University of London, attributes London’s success as resting on “its ability to benefit from the UK’s global reputation and augment it with very high quality university institutions as well as some world-leading specialist arts institutions. Something special was then added: the fact that London was seen as one of the world’s most culturally exciting, cosmopolitan and multicultural cities.”

For Crossick, the decision to leave the EU is a major blow to London’s higher education sector; 90% of those employed in British universities were thought to have backed Remain. Once again, immigration is a crucial issue. As many as a quarter of students in London are non-British, generating significant revenues for universities, with many research students drawn from EU countries. The regulation of student visas was a fraught political battle when Theresa May was home secretary, which has reached greater intensity as reducing immigration becomes central to government policy.

But the more immediate threat relates to research. Modern academic research is an inherently collaborative activity and increasingly funded through transnational programmes. EU funding is especially important – the Horizon 2020 programme, which covers science and innovation, will allocate some €70bn between 2014 and 2020. The UK has been a substantial net beneficiary of such funding – particularly in London universities, with Imperial and UCL both in the European top 10 in terms of grant revenues, between them delivering well over 300 EU-funded projects at any one time.

Following widespread concerns, the chancellor announced that successful UK applications to current EU programmes will have their grants underwritten by the government. But the future is uncertain, and depending on the UK’s future status in the EU, its leadership role risks being lost. London-based institutes have been at the forefront not only of undertaking research, but also of shaping strategies and determining funding competitions. As Crossick points out, academic colleagues in Europe do not see Brexit as an opportunity for their own institutions – rather they are anxious that “the quality of European research as a whole will suffer from the loss of UK researchers and the UK research environment”.

In the weeks following the referendum, a petition demanding that London declares independence from the UK and remains in the EU received almost 200,000 signatures. While never a serious proposition, it is indicative of the febrile political climate: Sadiq Khan has led a “London is Open” campaign and new policy ideas such as a “London visa”, in which EU nationals are allowed to live and work exclusively in the capital are gaining traction. The Centre for London’s Richard Brown agrees that a “regionalised immigration solution” is needed for the capital, while also insisting that “London government needs more powers over skills, planning and the tax system”. But with a national government that has made reducing immigration a priority, such powers are unlikely to be ceded easily.

Arguments about the economic dominance of London, and its relationship with the rest of the country are almost as old as Britain itself, but they have been hugely exacerbated by the referendum. If 2016 was the year which saw small town conservatism victorious and a resurgence in nationalism, then forthcoming ones are likely to bring a heightened sense of civic identity, and a liberal fight back. Greater political conflict seems inevitable, and London’s status as the commercial and cultural capital of Europe will largely depend on the outcome.


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