Long read: can the City of London regain its lost soul?
It’s been almost a year since I set foot in the City of London, my working home for many a decade. Getting off the train at Liverpool Street was always a thrill; the vast Gothic girders high in the sky testimony to the station’s great Victorian engineers while outside, the bronze statues in memory of the children who arrived by Kindertransport, were a constant reminder of the horrors of war.
Amid the McDonald’s litter from the night before, the homeless men and women wandered selling lighters, a sad contrast with the surrounding riches. But then the City has always been one of two halves.
Over the years interviewing the City’s slickest – and the not so slick – I’ve covered both halves and nearly every square inch of the Square Mile, met the good and the not so good.
I’ve trekked through the narrow alleys behind Bishopsgate and Spitalfields, once full of dirty pubs and now transformed into trendy coffee shops, had lunch in the now-closed pre-MeToo City Circle where the waitresses left little to the imagination, whizzed up and down the towering Heron and Gherkin skyscrapers, got lost around the crooked lanes behind the Royal Exchange, met contacts in the bars of Bow Lane that take you back to the 19th century, stumbled across exquisite churches and never failed to admire the beauty of St Paul’s looking down over Cheapside.
Most of all I loved the spirit of the place: seeing the young traders – of every nationality, every creed and every talent – dashing out for their Prets and Itsus, watching the bankers and brokers hanging around the bars in the Broadgate skating rink on a sunny lunchtime or gossiping about the latest deals late into the night on a Thursday. (Thursday was the chosen drinking day so that hang-overs could be during work time.)
It’s a square mile which is more cosmopolitan and meritocratic than any patch on earth, beating even New York for its colourful diversity. And has been so for centuries. Since the Venetian cloth merchants came in medieval times, there has been a steady flow of migrants into the City from the Huguenots, the great Jewish banking families, the Italians with their milky cappuccinos to the Americans with their dollars in the latter part of the last century.
Sure, there was – is – bad stuff too (as the latest TV thriller, Industry, shows so well). Too much alcohol, stories of too much coke-taking in the loos, the horrible late night Friday trains known as the Vomit Comets – and of course far, far too much greed.
Yet like Charlotte Bronte’s heroine, Lucy Snowe, in her great novel, Villette, I find the City’s buzz hard to beat and far more exhilarating than the rest of London. As Snowe says on her visit to the capital: “Since those days, I have seen the West End, the parks, the fine squares; but I love the city far better. The city seems so much more in earnest: its business, its rush, its roar, are such serious things, sights, and sounds.
“The city is getting its living — the West End but enjoying its pleasure. At the West End you may be amused, but in the city you are deeply excited.”
Apart from the dizzy heights of the new buildings, the disappearance of gilt traders in their top hats and of the locals living within the City walls, the fizz which Bronte wrote about in her 1853 novel is not far away. Back then, the City’s brokers and jobbers were raising money to fund the cotton mills of the north, railways and steamships at home and overseas.
Today the whizz-kids and brokers, armed with PHDs in quantitative mathematics or astrophysics, are still oiling the machinery of industry, but now it is to fund the latest chips in your smartphone, raising capital for companies making state-of-the art batteries for electric cars or pharma companies in their research for vital medicines and indeed, vaccines.
Whether you like it or not, every tiniest thing connected to the paraphernalia of modern life is in some way plugged into the Square Mile, or comes from it in some means or other. It’s also where the financial giants that look after your ISA, your life insurance or your pension still hang-out.
Which is why it’s gut-wrenching to see photographs of the City’s hollowed out streets and zombie offices. Just about every bar and restaurant is closed for now. Some, like the Don in St Swithin’s Lane and the underground Bleeding Heart will never open again.
The blinds are down on the boutiques, the tailors and the barbers’ shops and the doors on the guild halls and the glorious churches, which once held moving lunchtime recitals offering respite from the money-machine, are bolted. It’s all the more ghostly because so few people live in the City; around 8,000 residents have homes within the financial district compared to several times that number in the 1960s.
Looking at the latest TV shots of the deserted Square Mile is like stepping into a sci-fi dystopia when the aliens are about to invade and everyone has evacuated or run underground. If only.
The reality is that most of the 522,000 workers who used to travel daily into the City are hiding away in their home-offices, somewhere in the suburbs, and many of them are working harder than ever. It’s only a rough guide but about 10 per cent of the total are believed to be in their offices. It’s a similar tale at Canary Wharf, where 100,000 employees usually work.
Across the two financial districts, transport services are down by more than 70 per cent and footfall in shops and bars is down by more than 80 per cent. Sightings of rats on the streets are up.
Will these workers ever come back? Can the City be the same again as it was a year ago? Douglas McWilliams, deputy chairman and founder of Centre for Economics and Business Research, has been working in and around the City for more than 25 years.
He’s been back to check on his office in Bath Street, EC1, a couple of times since the lockdown, and is devastated by what he saw. He fears the City is unlikely to return to what it was before the pandemic struck. “It will recover but it will not be the same place we remember.”
While McWilliams doesn’t mind working from home – he let go of his Barbican flat and has a nice study to work from in the country – he fears for younger staff on the cusp of their careers.
“It’s alright for me and others who are towards the end of their careers. But youngsters starting out need to be close to their managers, to talk to their peers and to learn from them. What I fear for most is the loss of creativity, and how people will miss out from chance encounters, like the night when I learnt how Chinese companies really operate in a bar in Beijng.”
In the jargon, it’s the serendipity of the ‘water-cooler moment’ that is so much part of our working lives, and what gives them spontaneity.
To those on the outside, working from home may sound like a picnic for the privileged few: the professional middle-classes who can afford the luxury of a home-office compared to those who are out on the front line in the services or working for the supermarkets.
Yet that’s not how the majority of City workers see their situation. Nor is it the full picture. One recent survey showed that 90 per cent of those under 35 wanted to be back in the office, and fear the trend towards WFH is here to stay, at least for much of the working week.
If that does turn out to the be case, there are going to be many disappointed youngsters: 61 per cent of City employees are aged between 22 and 39.
Until now, the pandemic has shown the big banks and financial institutions that they can run their operations smoothly without their employees being physically present. They have also realised that if they can keep many workers WFH, they could cut down drastically on office space and save themselves millions.
As one corporate financier says, employers have seen how productivity has actually increased during the lockdowns, and that the flow of deals has continued.
She added: “It’s all very well for senior bosses and partners, who love being at home, having breakfast with their kids for the first time in years, to say they will WFH. It’s a novelty for them, and they are secure in their jobs. But not for us. It’s not WFH anymore but ‘LAW’ – Living at Work.”
And bedroom working is not healthy. Another survey showed the average professional worker is slogging it for nine or more hours of overtime in a given week. This adds up to more than one working day – more than the average three hours overtime pre-pandemic.
What happens when and if we get back to normal? Will the City’s 350 or so banks and financial institutions carry on as before? Or are we about to see the biggest shift in the use of office space since modern office buildings were created in the post-war period?
Business is divided. Several American firms such as JP Morgan, BlackRock and Bloomberg have indicated that, post-pandemic, they want to see staff back in the office once it’s safe to do so. They cite the loss of corporate culture and long-term creativity if staff stay away from base camp. Maybe control, too?
In contrast, European banks such as Deutsche, already struggling with poor profitability, have been quick to say they will arrange new hot-desking areas for staff coming in fewer days per week, and will prune office space. The Dutch are leading the way with both Rabobank and ING predicting employees will work from home about half of the time once the pandemic eases up.
Italy’s UniCredit reckons 40 per cent of work can be done remotely after the crisis, while Switzerland’s UBS is looking at letting staff work from home about a third of the time.
Even if these crystal ball projections are exaggerated, there is little doubt that most firms will reduce their space and re-organise their working patterns with hybrid arrangements: two days in the office and three WFH.
Such a shift will take a chunk out of the commercial property sector and take an axe to the smaller businesses that feed into the ecosystem.
The City may be dominated by the banking behemoths but there are more than 24,000 businesses within its walls. If the big employers do downsize, many of these businesses will close for good. Or, if they are quick, move out to the commuting belt to pursue their businesses.
Such a seismic shift will have other explosive impacts; on how TfL runs the tubes and how the train companies bringing millions of commuters into the City each day configure their transport links. They will also have to rethink the type of rolling stock that is used if the 14-coach 17.40 from Liverpool Street to Cambridge doesn’t need to be so long or so full. Timetables and pricing structures will have to adapt too.
Concepts like peak pricing will have to change if workers are only travelling in a couple of times a week – and can do so anytime of the day – and so will car parks.
“It’s going to be crash, bang, wallop,” says Anthony Lorenz, commercial property consultant, who has worked in and around the City for 54 years, and traded through three recessions and the Lehmans crash.
“You are going to see tenants that have had a moratorium on paying rent getting into real trouble when they have to start repaying in April. Unless the government extends the moratorium or landlords find a way of helping companies pay over time, you are going to see many insolvencies. They will fall like skittles.”
More devastating still is that Lorenz predicts up to 30 per cent of office space will simply disappear over the next year as banks and financial institutions slice back on space and downsize staff. “This shift has been happening for years because technology has allowed people to work from anywhere. The pandemic has put the shift on steroids.”
In the future, he predicts firms will be like octopuses: a smaller HQ with tentacles to places outside London like Guildford or Tring. “We are going to see big change. But some firms will still want quality space and will pay over the top. Look at the record prices being paid for The Cheesegrater.”
And then there is Brexit, another shadow looming over this hollowed out City landscape. So far, there have been the run of the mill scare stories: how billions of pounds-worth of EU share trading has fled across the Channel and gone to Paris, Amsterdam and other Euronext exchanges. One press report estimates that €6 billion of trading volumes in EU-27 stocks has vanished overnight.
That may sound chunky but it’s a minuscule amount which everyone knew would go if there was no agreement on equivalence.
Yet the UK is already balancing the scales by resuming trading in Swiss shares, marking the first big split from EU policy on financial services since the deal went through.
This split goes back to when Brussels prevented EU countries from trading with Swiss stock exchanges last year because of a row over trade. It hurt the UK badly – around €1.2 billion of lost daily trades – because trading in the two most active shares, Nestle and Roche, had to stop.
As part of the EU, we had to comply. No more. The UK government will soon pass new laws to allow Swiss trading to start up again. And it’s the ability to make our own decisions – outside the EU – that leads so many in the City, the Bank of England and indeed at No 11, to be relieved there was no complex agreement on financial services in the latest EU deal.
Quite the reverse. The ability to diverge is just what the UK wants although the Treasury is now working with the EU on a memorandum of understanding on areas such as insurance which need more clarification.
What is astonishing to appreciate is that, despite the City’s physical shell having been put on ice for the last year, the wheeling and dealing has gone on regardless. The London Stock Exchange – whose £22 billion merger with Refinitiv has just been cleared by the EU – is still clocking up trillions of share trades each day, and will now have an even bigger slice of the global trading pie.
The giant US and European houses are still in derivatives each day – even if it is from a bedroom office. Companies are still being funded and the lawyers and bankers are all working flat out on M&A deals and new capital raises despite the virus crisis. They are sanguine for the future, despite the lockdown or Brexit. Some – like the chancellor, Rishi Sunak – are even calling the potential ahead a Big Bang 2.0.
Yet what happens to the empty offices and the shuttered shops if the banks do chop back on space? Lorenz reckons the City should get ready to reposition itself to allow property companies and landlords to convert space into homes and for office blocks to be converted into leisure and retail areas.
“The devastation of the bombing raids on London in the Second World War triggered new office developments in the 1960s and 1970s. The lockdown could act as a similar catalyst for change – for the better.”
The City, he says, now has the chance to create thousands of new homes bang in the heart of the financial district, particularly in areas around Bank where the top floors of many buildings are underused.
Some property developers are ahead of the game. Lorenz has clients who are talking to planners about change of use, something which will be made so much easier by the government’s proposals introduced last year to increase house-building and revive town centres.
“Now is the chance for people to live, work and play in the same place and bring the City to life with new shops and bars. Canary Wharf could be developed into more of a village, with more leisure and sports facilities being introduced. People could travel from there into the City.
“Just imagine. Workers would only have to commute for 10 minutes or so. It would save them thousands of pounds a year, save many hours a day and cheaper council taxes as well. If the City Corporation has the nous, it will help property companies convert offices into homes,” he says.
Now that would be smart. There are not many silver linings amid the virus clouds but an enlivened, vibrant City with more residents and families living there would be one. And think of all the new haunts – nurseries, schools, gyms, markets, bakeries and restaurants – and the new jobs as nannies, cleaners or chefs – that such a renaissance would bring.
As Villette’s Lucy Snowe also says: “I like the spirit of this great London which I feel around me. Who but a coward would pass his whole life in hamlets; and for ever abandon his faculties to the eating rust of obscurity?”
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