As London prestige continues to grow, regional cities are starting to follow suit. With booming housing markets and ambitious transport projects, these cities are starting to withstand London’s leading position as main contributor to the UK’s economy.
Historically, in Britain’s urban hierarchy, London has held a leading position as it enjoyed strong economic advantages due to its strategic location, a large concentration of wealth, a highly developed sector and an advanced transport network.
Whilst London has kept its dominant spot throughout the UK’s deindustrialisation years, outside of the capital, the dynamics of Britain’s urban economy started to shift with growth concentrating in southern cities rather than industrial cities in the north.
In the housing market, this led to a clear disparity between the North and the South. House prices in the South are on average nearly double those in the North – a trend fuelled by Londoners relocating to elsewhere in the South, where accommodation is more affordable and access to the city is easy.
Since the 1990s, however, London’s status as a global hub for business talent has served as a driving force for further economic growth in other parts of the UK, at times contributing to the narrowing of the North/South divide.
By hosting global events, such as the Olympic games of 2012, London has managed to showcase the UK’s business expertise to the world – accelerating growth in the areas where the sporting events were held.
The areas where house prices increased the most as a result of the “Olympic effect” were located in the north-west, in fact, as revealed by estate agency group CBRE. These include Wembley, Cardiff, Old Trafford in Manchester and Newcastle.
As foreign investment in both public and private infrastructure rises outside of London, cities like Manchester, Liverpool, Birmingham, Bristol, Edinburgh and Cardiff have recently embarked in ambitious regenerations and transport projects – attracting more and more residents.
With demand rising exponentially and with supply of housing stock falling more prominently than in the capital, those investing in the UK’s regional cities enjoy high yields for lower priced assets; leading to an interest shift from prime London markets to prime or secondary regional markets.
Whilst many feared London’s housing market would suffer in the wake of April’s Referendum vote, currency fluctuations have proven favourable to overseas investors seeking bargains in British property – resulting in an increase in sales of prime London property in the immediate aftermath of the vote.
As confidence in the market restores, demand for quality accommodation in London as well as in other parts of the UK continues to grow with London’s “halo effect” resulting in Northern Powerhouse cities rising faster than Southern cities.
In fact, the property markets of cities in the Northern Powerhouse are seeing buoyant activity, as indicated by the shrinking of the house price gap between the North and the South of the UK in the wake of Brexit.
Even if Britain’s exit from the European Union has led to uncertainty over the future of the capital’s global status, London’s voice is set to continue resonating strongly across the globe, attracting further buyer interest to the whole of the UK.
The London Legacy
Home to an intercontinental population of circa 8.7 million, London residents speak a range of languages more varied than any other city in the world. By nurturing these multicultural communities, London has established itself as a global hub for business talent, financial and business services as well as top leisure destination for foreign visitors.
Alongside other global cities such as New York, San Francisco and Boston, London’s mixture of districts share an element of dynamism and the ability to breed and commercialise new ideas. Aided by infrastructure and environment that nurtures creativity and entrepreneurship, these districts act as cogs in a wheel to promote open innovation, connectivity and co-production.
This “open for businesses” philosophy paired with flexible employment law, economical legal structure, and capital gains tax relief has made of London the number one destination for various European headquarters; with the proportion of this group now the highest in the capital than other cities.
Buoyant activity in London’s property market is also a key contributor to its leading economic status. With an average house price increase of 15.3% per year, London’s prime market has been an active recipient of investment from both domestic and overseas buyers for decades.
Earning the title of top city in Europe for property investment by the 2016’s City Momentum Index compiled by real-estate provider Jones Lang LaSalle (JLL), London has acquire further momentum through ambitious transport plans, such as the Crossrail project – the largest transport scheme in Europe – and regeneration programmes centred around higher education and infrastructure.
London’s “Halo Effect”
The 2012 Olympics serve as a perfect example of how London’s prestige has fuelled growth to other regional cities. The £8.9 billion spent building the infrastructure needed for this global sporting event is said to have generated a £9.9 billion boost in trade and investment across the whole of the UK.
Although some object the legacy of the 2012 Olympics in London has actually begun, research suggest that hosting the Olympics and Paralympic Games in 2012 resulted in £2.5 billion of inward investment – 58% of which was outside of London.
Furthermore, the games represented an excellent showcase of the UK’s products and way to do business, resulting in an increased trend to source British exports with regional cities benefitting more than the host city.
Transport projects, such as the new High Speed 2 (HS2) rail way to connect north and south England, have also played a stimulating role in London’s halo effect as it prompts those living in the city to move where accommodation is more affordable but with ease of access to the city.
By halving train times from London to cities such as Birmingham, Nottingham, Sheffield, Leeds and Manchester, the proposed HS2 line coupled with a fast rising population will put further pressure on the existing undersupply of housing stock in these cities.
As demand flows to other parts of the country, regional markets are beginning to outperform London with investors in these areas enjoying higher returns. With the disparity in the UK’s urban economy not likely to vanish overnight, London’s reputation will continue to act as dynamo for regional city growth in the foreseeable future.