London's Slow Slump: The City's Losing its Wealth Creation Machine

Strategic Insights -

London, once a magnet for talent and capital, is suffering its biggest drain since the 1970s. The city's wealthy are fleeing due to the increasing tax burden, with the abolition of non-dom tax status being the final straw. This is having a profound impact on the top end of the capital's property market, with prices in prime London addresses down over 20% from their 2014 peaks.

Key Takeaways:

  • The number of prime London homes for sale has ballooned 48% since 2020, according to figures from analysts LonRes.
  • The tax burden on London's wealthy has grown heavier with virtually every "fiscal event" since the financial crisis, with the abolition of non-dom tax status being the final straw.
  • London has always acted as the wealth creation machine at the heart of UK PLC, contributing a net fiscal surplus of £44 billion in 2023, up from £37.9 billion in 2022.
  • The City's status is under threat, with foreign bidders and private equity hoovering up long-established London-listed businesses on an almost daily basis.
  • The flight of capital is averaging around £13 billion a year since Brexit, with a net outflow of investment in UK equities for 95 out of the 110 quarters.
  • The decision by Wise, the money transfer fintech giant, to switch its primary share listing from London to America is a symbol of the city's declining status.
  • The Government can no longer take London's vote for granted, as Londoners are increasingly disillusioned with the party's lack of support.

Statistics:

  • The number of prime London homes for sale has increased by 48% since 2020, according to LonRes.
  • The tax burden on London's wealthy has grown by over £100 billion since the financial crisis.
  • London contributed a net fiscal surplus of £44 billion in 2023, up from £37.9 billion in 2022.
  • The flight of capital since Brexit is averaging around £13 billion a year.
  • The City's status as the world's pre-eminent financial centre is under threat, with foreign bidders and private equity hoovering up long-established London-listed businesses on an almost daily basis.

Sources:

  • Jonathan Prynn, "London's Slow Slump: The City's Losing its Wealth Creation Machine"
  • LonRes, "Prime London Property Market Trends"
  • Henley & Partners, "The UK's Millionaire Exodus" (figures suggest the UK is losing a millionaire every 45 minutes)
  • Wise, "Decision to switch primary share listing from London to America"
  • Ashtead and Flutter, "Decisions to switch share listings from London to America"
  • UK Government, "Budget and Fiscal Policy" (abolition of non-dom tax status and tax burden on London's wealthy)