Thursday 11 July 2013

Investors into London: don't be deterred by those stuck in the past

Investment into real estate within the Capital is flooding in. Recently we have seen several major deals signed with foreign buyers including Chinese property company Wanda in the Nine Elms quarter on the South Bank, Peninsula Hotels taking Derwent London’s stake in Grosvenor Place and UBS completing the sale of its Broadgate site to Malaysian investors. This is in addition to Boris Johnson signing a £1 billion deal in May for Chinese developers to create a business park in the Docklands. In fact Chinese property investment in London leapt from £21 million in 2011 to over half a billion in 2012. Overall foreign investment in the capital has more than doubled to almost £11 billion.

These figures are a superb boost for the Capital and the investments themselves will bring enormous growth and prosperity to the City. It demonstrates the global confidence in London as the pre-eminent financial hub and that for foreign investors; London is an attractive place to do business. The city is attractive for many reasons, in particular, because of its flexible regulatory and tax systems. Its mother tongue is the business language of the world and it is in a time zone where it possible to conduct business with both the US and Asia during regular working hours.

It should be no surprise that London was the fourth largest recipient of foreign direct investment (FDI) in the world in 2012 and the largest recipient of FDI in Europe, according to UN data. Moreover, having been a large recipient of foreign investment over many years, the accumulated stock of FDI in the UK is just short of £1 trillion.

In the global era, in order for the City to remain relevant and not lose its international status, it has to continue to be a magnet for foreign investors and they must be embraced and encouraged. Japan in contrast, retains its historically introverted outlook and has failed to embrace foreign investment, instead displaying strong resistance to it. As a result Tokyo has lost its position as an international financial centre. London cannot afford to follow suit.

However, there are those trying to slow down this great pace of foreign direct investment; councils and UNESCO. UNESCO has urged for a halt in high rise developments in run down parts of south London because it will block views of Big Ben and other heritage sights. Similarly Tower Hamlets Council deferred an application to build the UK’s tallest residential tower in Canary Wharf recently. There is in fact a strong desire for the City to embrace globalisation and modernity but at the same time retain its strong historical Medieval past. But for too long UNESCO and others have championed the latter at the cost of the former, opposing important developments such as the new headquarters for UBS on the Broadgate estate in 2011 and now it’s against the redevelopment project on the Southbank.

Councils, heritage organisations and others need to ask themselves whether preservation of views and heritage sites trump this crucial investment, particularly when they might jeopardise the future and the imperative of London remaining competitive and attractive in the global era.

Alistair de Kare-Silver

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