Conference Presentation, Panel
Britain's EU Exit: What's Next for London?
Milken InstituteAdrian Wooldridge, Nicholas Candy, Peter Flint, Howard Shore, Julian Skan, Carmen Zechner
- Financial services face a protracted loss of passporting rights if a hard Brexit occurs, requiring the recreation of UK regulatory structures and potentially forcing some businesses and linked FinTech operations to relocate to Europe, though employers may rely on visa provisions to retain talent.
- While a Supreme Court ruling may necessitate a vote, the exit is expected to proceed regardless, with a potential for a "softer" deal driven by EU internal instability and European business pressure to maintain market access, contrasting with political incentives for border control.
- UK Fintech investment has recently decreased locally while flattening in the US and rising in China, which possesses a massive consumer base advantage for front-end fintech that London lacks; however, the UK is expected to see increased diverse European applications and retain leadership in innovation due to post-2007 banking stress.
- Economic restructuring is projected to be driven more by factors outside Brexit than the exit itself, yet the diversion of focus toward Brexit hampers productivity growth, with deep liquidity markets in London expected to remain dominant as they require only one or two players.
- The housing crisis is anticipated to become a more significant challenge than Brexit, characterized by construction inflation exceeding 8%, mortgage-to-salary ratios reaching 11:1 in London, and an oversupply correction followed by demand increases driven by a low pound.
- To address housing shortages and retain young talent, experts recommend modular construction solutions, greater mayoral authority over planning to solve borough-level fragmentation, and infrastructure development like Crossrail 2, while warning against compromising quality or creating "rotten boroughs."
- Immigration policy risks restricting high-skilled talent flows if the UK reduces non-EU visas, countering the historical "brain gain" from US restrictions, necessitating tax breaks and US-style visa regulations to encourage wealth creation in sectors like medical research, software, and media.
- Government strategy should focus on growing the economic "cake" through deregulation, subsidies for life sciences, and support for SMEs (90% of whom do not trade with Europe), rather than redistribution, to leverage the low pound for sectors such as tourism and legal services.
- London's status as a global city is expected to persist for the next five to ten years due to deep infrastructure and cultural capital, despite risks of developers shelving projects due to political uncertainty, bank relocations to New York or Dublin, and a "cold" housing market.
- European political volatility is expected in 2017 with potential instability in France, Germany, Italy, and Spain, though Austria's pro-EU election outcome offers a stabilizing barometer; conversely, long-term risks include the potential unraveling of the EU or Euro due to conflicts between centralization and populist demands.
- Regional development strategies suggest "pumping full of money" into the top five scientific institutions outside London (Oxford, Cambridge, Imperial, UCL, Edinburgh) to translate research into medical innovations and distributing financial services strength to areas like Birmingham and Bournemouth to alleviate London concentration.