London learns to share the spotlight
First published in the 2007 launch edition, we’re revisiting our Wealth Report predictions 20 years on.
If the mid-2000s marked the start of the plutonomy era, the UK capital was where it took shape.
A mix of pre-financial crisis confidence, free-flowing capital, and light-touch regulation led the 2007 edition of The Wealth Report to describe London as the “de facto capital of the new plutonomy”.
The first stress test for London was the 2008 financial crisis, followed by Brexit, the pandemic, and a prolonged period of political instability. Each episode sparked predictions of decline that ultimately proved unfounded, but the city has had to shift to make space for emerging competitors.
London remains the third-largest city economy in the world, and the sheer scale and multifaceted nature of activity taking place across the capital is exceptionally hard to replicate elsewhere.
Dominance under threat
The prevailing anxiety about London’s role in the world has crept up slowly.
Fluctuating taxes and the rise of low-tax competitors have contributed, and changes to the non-dom regime prompted a flurry of high-profile wealthy individuals to announce they were relocating.
But Professor Tony Travers of the Department of Government at the London School of Economics remains sanguine about the city’s role, saying “predictions of decline go well beyond any rational interpretation of change.”
Instability erodes confidence
London now needs a period of stability to preserve its advantages.
Travers argues the risk of continued political and fiscal uncertainty slowly erode confidence. “You do not want a perception that your tax system is always just about to be reformed in a way that makes it even less attractive than it is already,” he says.
Globally, sales of homes worth US$10 million+ are rising, but London is moving backwards, Knight Frank data shows. However, while fewer people are buying, owners aren’t selling in large numbers either.
London leads opportunity and culture
Wealthy Londoners who do leave often find the grass isn’t always greener.
The UAE, Italy and Switzerland may now be stiffer competition, but there’s a sense that none yet offer the same breadth of opportunity, institutions, and culture. Neither is the UK unique in asking the wealthy to pay more post-pandemic, nor is London alone in its left-leaning governance.
Ultimately, there has been a thinning of demand rather than an exodus. Alasdair Pritchard, a partner in Knight Frank’s Private Office, confirms: “London’s had competition for the last five years, but the non-dom moment... pushed some people who were on the margin to leave. But they’re not selling their houses. That’s the point.”
Image: London’s cultural scene exerts a powerful draw
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