Structural failures see London facing Millennial exodus
While its markets continue to perform well, and the city is talked about as a potential global tech hub in the near future, London faces a multitude of conundrums as it plans for a future outside of the EU. Should a number of structural issues fail to be addressed in the capital, over 500,000 Londoners could exit the city, with many millennials among them, costing its economy around £60 billion in Gross Value Added.
In line with the rest of the UK, the future of London’s economy remains uncertain, as the conclusion of negotiations with Brussels in 2019 rapidly approaches. One thing is for sure, Britain, and its capital city, are both dependent on access to top talent in order to make a success of the coming period. A major example of this is the focus of London on technology investment, as the city works to become a global hub for innovation as a buffer from economic turbulence – but a study from EY and Tech Nation found that what was majorly holding back this ambition was a shortage of skilled labour in comparison to other key tech-hubs.
The problem facing the capital now is that, while it still hosts the greatest diversity of employment and most of the highest paid work, its flagging reputation for transport and rising house prices are cancelling out the appeal of the city. Now, a study consisting of a survey of 2,000 London residents and another of 1,300 or so 16-18 year olds and university students nationwide has revealed that the capital may be facing a major exodus in the coming period. The Grant Thornton study found that around one in six residents plan to leave the capital – something which could lead to an estimated loss of £60 billion from London’s Gross Value Added.
According to Grant Thornton’s analysis, pay and career development were far from the top priorities for those weighing up life in London, at just 15% and 17% of respondents respectively. The top draws for the UK workforce to choose a place to live and work are, in fact, time spent travelling, at 41%, the possibility of living near to family and friends at 40%, and work-life balance, at the same percentage. This places London at a particular disadvantage, as despite its privileged position in terms of jobs creation and wealth, the price and standard of the UK’s rail network, particularly leading into London, are among some of the worst in Europe – making a daily commute a nightmare for many workers. Travellers between Luton and London for example are projected to spend 14% of an average wage on rail fares – while similar commutes across a number of European capitals sampled would cost less than 8% of an average worker’s earnings.
Meanwhile, quality of life in the UK capital has also fallen below the standards of many locations on the continent. A recent life quality poll by Mercer was dominated by EU cities – but London failed to break into the top 50, as a negative work-life balance and rising levels of social alienation saw the city well behind top locales including Vienna, Zurich and Munich.
As a result, 6.2% of those surveyed by Grant Thornton, which the researchers say represents a possible 545,000 Londoners, intend to exit in the next 12 months. The largest number of these being older millennials aged between 24-35, who are mostly in full-time employment, so potentially a big impact on business – while 51% of young people elsewhere in the UK have no desire to move to the city to live or work, suggesting a talent crisis could fast be approaching, particularly as Brexit begins to impact on movement of skilled workers from the EU to London. Illustrating this approaching issue, a recent KPMG report suggested that London and Scotland were likely to be hit hard by a post-EU brain drain, as 46% of those surveyed in the areas were leaving or considering it.
Cost of living
Of those who told Grant Thornton’s study they intended to leave, a large majority cited housing affordability as a key concern. When comparing the city to elsewhere in the UK, 72% of 'Leavers’ said the pricing of London’s lucrative housing market was worse. This was further stressed by 54% of individuals who said that the affordability of essentials for life, including food, was worse in London than elsewhere. Other top problems for Leavers were living somewhere green, with London’s ailing air quality considered worse than the rest of the country by 62% of respondents, and a healthy/stress free life and work-life balance, which 58% and 49% respectively saw as worse in the capital.
Again, pay and career development opportunities did little to assuage the willingness of the sample to exit the city. 46% of Leavers believe pay is better in London, and 44% agree the same on career development, closely followed by 42% who feel it has heightened job availability. However the price in terms of health, happiness and affordable housing seems to have driven them to quit the region.
It is, of course, wrong to view the capital as an amorphous blob, as the city is so large that every district has its own unique local economy and demographic makeup. This often manifests itself as an extreme disparity, with London hosting some of the richest and poorest communities in one city. Grant Thornton subsequently paired its findings with the firm’s Vibrant Economy Index, which measures 324 English local authority areas against key indicators including ‘Prosperity’ and ‘Health, Wellbeing & Happiness’.
This yielded the perhaps unsurprising result that London boroughs which perform poorly on the Vibrant Economy Index, which are also typically the most economically deprived, usually see the highest proportions of people planning to leave. Barking & Dagenham, for example, which ranks second to last in the country for ‘Health, Wellbeing & Happiness’, has the second highest proportion of ‘Leavers’, with more than a quarter of people planning to move away from London. Motivating these people to remain in London and support its economy subsequently depends on lifting their quality of life and access to economic and social support.
Future talent
To better gauge how future talent views London, as the city looks to replenish its workforce amid an ageing population and Brexit migration pressures, Grant Thornton polled 1,080 university or college students and 315 young people aged 16-18 from across the whole of the UK. A majority of 51% of all young people surveyed said they have no desire to come to the capital to live or work, again citing work-life balance, housing affordability and being near to family and friends as the biggest factors influencing their decision. While this figure understandably dropped among those already studying at a London university or college, who would typically hope to find employment near their place of study, a large minority of 29% are planning to leave as soon as they graduate.
Once more, financial aid was found to be a key matter in order to retain these future members of the workforce. As wages stagnate across the UK, even for skilled workers, the next crop of London graduates said that financial help with paying for the capital’s exorbitant housing prices was a key factor in helping them to remain, at 37%. Help finding and paying for rented accommodation also ranked highly with 32% of respondents, lending further credence to calls from campaigners for a rent cap in the city, among other measures. Financial help with daily life essentials, including paid-for home broadband was also a top factor, at 29%.
Commenting on the results of the study, Sacha Romanovitch, CEO, Grant Thornton UK stated she believed that London is an “amazing city”, which benefits a huge number of diverse and talented people, however, the future is less than assured if key structural issues are not addressed. “The shortage of affordable housing, overcrowded transport systems, air pollution all add to the daily stress of living and working in London. We know that these challenges won’t be solved by any one agent alone. In the midst of the uncertainty around Brexit the imperative for business, government and community leaders to work together to address these important issues has never been higher.”
She added, “Devita Davison, a community leader at the heart of regeneration in Detroit said ‘nothing about us, for us can happen without us’. We must follow her lead and design solutions informed by views from across London’s rich cultural, commercial, political and social spectrum. Together we can shape the future of our vibrant capital city – such that it continues to thrive as a trusted global centre and a growth generator for the UK as a whole.”
