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The Future of the City of London Part Three

The Future of the City of London part two

London pre-Covid was the No. 1 City in which to do business. Is this where we want to stay?

This was the first of several questions posed by Paul Drechsler, CBE, the Chairman of London First, when he opened our third, roundtable discussion on The Future of the City of London in September.  

What you treasure you must nurture”

A self-confessed enthusiast for the mantra ‘what you treasure you must nurture’ Paul stimulated the debate with a handful of examples of London’s many assets, pre-Covid. These assets include 6 million jobs, 8 million trees, 40 Universities, 380,000 students and 3,500 pubs – all helping to make London great.

People invest in London for many reasons, including our reputation in Finance, Regulation, Fin-Tech, Cyber Security and AI. With 230 languages spoken within the M25 there is no better place to hire diverse talent. London has attracted the corporate headquarters, the disrupters, the innovators and entrepreneurs. London generates 23% of the UK’s GDP and has 13% of the UK’s population. 72% of the population have received at least one vaccination and many businesses have found a way not just to survive but to outperform in the pandemic.

But London’s in a global competition for No. 1 capital city. The competition is intensified by the fact that the populations of New York, Beijing and Tokyo, have a high proportion of their workforce living within a 20-minute walk to work. In this respect, London’s success is much more dependent on  public transport. Something not fully taken into consideration by business leaders when deciding agile working policies.

Will society divide between those who can work from home and those who cannot?

In Paul’s regular discussions with business leaders, hybrid working is the topic that keeps coming up. Yet hospitality thrives in London at the weekend and in the evenings. You can eat, drink and dance but for all these social activities, London’s behind many of the UK’s regional cities in the return to the office. In a recent survey, 54% of workers in Bristol have returned in comparison to 43% in London. The question is, does continuing to work from home, matter? There must surely be consequences if public transport, is sustained at the current 30% reduction. What is becoming of the small independent businesses who has supported the City worker over the last 30 years? They have not invested over the years to trade a 2-3 day week. Walking down Cannon Street in September 2021 it feels very different from September 2019. How will it affect the essential workers, for example in healthcare and education, unable to work from home? Has anybody asked those essential workers who can’t work from home how they feel about the “new elite” who can work from home?

50% of the West End’s income comes from international tourists. This is despite Paris, New York and the other competing capitals exceeding London’s marketing/PR spend by a factor of 10 – and even the removal of VAT free shopping still has people visiting London to spend. In politics and the ‘levelling up’, London’s the wrong political colour. Paul also asked who is responsible for the pace and the scale of London’s recovery and does it matter if the regions or other global cities benefit? There are of course other consequences if the City loses its leading position including for the disadvantaged – another area in which London, sadly, outperforms.

Is corporate culture suffering or benefitting from the slow return to the office?

Our City of London CEOs and NEDs responded by accepting they recognised the picture. Hybrid working has been a discussion point and whilst some people like to work from home others do not, due to their partner, kids, or animals etc.. but the corporate culture’s suffering, as are training and development and mental wellbeing. Innovation and creativity need the ‘water cooler’ moment.

There’s a disconnect between the collective and the individual. Firms face talent competition, with the result an individual’s preferences are pampered to. Organizations have, so far, been reluctant to expect any more than 2-3 days a week return although some tasks are recognised as suited to remote working.

One of our contributors, a CEO of a leading sandwich retailer who was unable to attend, relayed the message, that whilst they have seen an increase in footfall in September, hybrid working is here to stay and they predict, it is unlikely they will repeat their 2019 sales in the City, again.

So how are businesses responding? Leadership continues to be important in managing the Covid experience says the CEO of a housing association with 2000 employees all working in frontline housing roles. Early in the pandemic they mandated for an enforced 2 days a week in the office and, from the off, were prepared to challenge staff and to explain why.

“Encouraging the return to the office as well as dealing with reluctance to return”

One of our guests incentivized their employees return in August, a £25 voucher available on one day, to encourage employees and teams to meet and by spending on hospitality within a walking distance of the office, assist local hospitality businesses. It resulted in a +50% attendance in comparison to 33% peak, previously. Employee centric, they have found confidence building initiatives helpful, but some staff do need to be reminded of what they are missing. Managers are challenged to report to the CEO on how they are encouraging, particularly the most reluctant, staff to return. Determined to avoid the Tuesday, Wednesday and Thursday attendance or otherwise known as the ‘TWAT’- they are insisting on a Monday or Friday. From September, all teams are directed to work together for at least 2-3 days per week.

But not all businesses have been in this position. A convenience food start-up struggled to accommodate all the staff who wanted to be in the office rather than remote. They found decision making was faster with fewer interruptions on their personal time. 

The CEO of a leading brewer and pub chain says Thursday’s definitely the new Friday and they are more optimistic than they expected after seeing a noticeable improvement since the second week of September. Their City pubs traded in September at 80% with the spend up, undoubtedly helped by the improvement in the weather. In August, the City locations were tracking 30-40% where Mayfair and Soho were in the 80% and 90%. The business is working on how to incentivize the footfall throughout the week and how to grow the weekend business.

Alex Williams, Director, City Planning, TfL, reports public transport is getting busier. TfL are seeing, in comparison to the usual flows, 56% of tube, 73% of bus and 98% of road and the weekends and evenings are back to a near normal. The offices in the City and Canary Wharf are improving but slowly. For example, this Tuesday saw a 6% improvement on the previous Tuesday. Outer London has fared much better with the result, local economies are doing well.

Making the City of London more attractive

This is an opportunity. Questions need to be asked as to what can be adjusted to make London more attractive? More pedestrianised, more communal, make it as comfortable as the home. What other ways can be used to attract workers back to the City? What can we learn from other cities particularly on how to increase the blended living, commercial with residential?

Over the years, we have seen a donut effect in London. Wealth concentrated in the centre with the outer areas and suburbs being poorer. Now those who can move, are moving further out and commute in for 2-3 days. We need to think about how London’s reformulated to, ideally, a situation where people live within 15 minutes of work.

If the Government halves the money in transport to reflect half the passengers travelling, services will be cut. The Train Operating Companies need to rethink and be realistic on the cost of the season ticket, for a 2–3 day travel, as the current 8 day reduction is not great. And employers need to look at the quality of their estate and make it attractive to work in the office. In the same way the domestic tourist was successfully engaged, the office worker needs the same focus.

It’s in all our personal economic interests to be in the office 2-3 days per week and it will take encouragement, leadership and finding the right words to achieve. As John Neal CEO of Lloyd’s recently stated in a BBC interview, ‘we can operate digitally but we are at our best in person’.

If the City of London loses, the UK loses and the UK employee, whether working at home or in the office, may suffer

Of course, when employing professionals mainly home based raises the question of why do these employees need to be UK based? Is there the possibility that businesses will seek to employ experts based outside the UK, if these individuals do not need to come into the office?

In conclusion, it would seem London’s recovery is dependent in the short term on business leaders’ ability to entice their staff back to the office and in far greater numbers. And by finding a way to flex public transport in and around London, to cope with 3 days a week. In the longer term, a reimagined city scape with more residential and more flexibility on the where and how, we live and work, is required.

To achieve the longer-term changes requires employers, transport, infrastructure services, such as retail and leisure & hospitality, all to work together alongside government and the City of London. There is much discussion needed and much of this is already taking place but for the City of London to remain at the top there also needs to be substantial and urgent action.

Hoggett Bowers are very grateful to all our guests and a special thank you to:

Paul Drechsler CBEChairmanLondon First
Keith DaviesHead of Strategic Risk & ComplianceHermes
Bronek MasojadaCEOHiscox Insurance
Geeta NandaCEOMetropolitan Thames Valley
Jonathan NeameChief ExecutiveShepherd Neame Ltd
Turancan SalurGeneral ManagerGetir UK
Johan SlabbertCEOMS Amlin
Alex WilliamsDirector of PlanningTransport for London