Written By:

William Matthews, Knight Frank

04 Feb 2025

11 minutes to read

Categories: London Series

In a world shaken by volatility, London stands as a paradox: rooted in history, yet forced relentlessly to adapt.

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12 months ago, we advanced the idea that London’s future as a leading global city would depend on more than time-honoured and well-understood characteristics alone. Under siege–from tech hubs like Singapore, finance capitals like New York, and an era of decentralised work, that for some, undermined the very premise of the city – we highlighted a new, more progressive set of advantages – those necessary to compete and win on what remains a rapidly evolving world stage. These included the continued nurturing and attraction of high-quality talent, leadership in evolving sectors such as finance and new technology such as AI, as well as venture capital funding to fuel the evolution of companies in growth industries. A combination of resilience, renewal, and reinvention.

Like many, we also anticipated uncertain politics, volatile markets, and challenging economics. Suffice to say, fate delivered fulsomely on those dynamics. This affords us a rigorous proving ground for our thesis so far, as well a chance to look ahead to London’s opportunities in the second half of the decade.

Resilience

The headline numbers make a convincing case for London’s resilience. Estimates from the Greater London Authority suggest that GVA rose by a healthy 1.1% in 2024, with forecasts from Oxford Economics accelerating to around 2% for each year until the end of the decade, albeit with significant outperformance in key sectors. 

The number of jobs had risen by 1.8% in the year to mid-2024, outpacing the 1.4% seen across the UK as a whole, and there was a strong 5.4% increase in self-employment. Overall, London’s employment is up almost 10% since the start of the pandemic, vs. 4% for the wider UK. As we’ll explore later in this research series, this growth in employment correlates with a healthy take-up of office space.

The broader global context is that geopolitical risks have spiked across multiple fronts. In Europe, while elections themselves passed largely without drama, uncertainty at the heart of French and German politics has been destabilising. Further afield, the fall of the Assad regime in Syria, an attempted coup in Seoul, and the commencement of a second Trump presidency in the US underscore the volatility of the current environment. In this context, London, which at the end of 2024 had appointed it 696th Lord Mayor, has a permanence and history that few other locations can rival.

Renewal

Heathrow airport’s passenger numbers reached record levels in August 2024, reigniting a long-running debate over the airport’s expansion. At least some of those disembarking were evidently on the hunt for UK corporates to acquire, given the significant spike in takeover attempts seen in 2024, demonstrating how London and UK corporates remain attractive to global investors. According to research from PWC, annual deal values were up 66% in the first half of 2024. The year ended with a $1bn acquisition of Learning Technologies Group, a creator of workplace digital training, by a US private equity group.
Of course, the pool of world- class businesses must be constantly replenished. Thankfully London continues to attract high levels of venture capital (VC) interest, with a deal count third only to San Francisco and New York over the past five years, and over £10bn invested in 2024 alone.

Reinvention

Given London’s reputation as a financial powerhouse, the financial services industry may seem an odd candidate for reinvention. After all, London remains one of the world’s preeminent financial centres, according to Z-Yen’s long running global ranking, where it has held the number two spot since 2020. And despite some strong rivalry, no other European city has been able to build an alternative of scale in the time that has elapsed since the Brexit referendum.

However, some increasingly obvious challenges have emerged. London stock markets have struggled to attract new listings, and the amount of new capital raised has declined in recent years. UK pension funds, once a significant investor in domestic equities, have set their sights on opportunities further afield, meaning that much of their capital is diverted to markets other than London (or the UK). Perhaps more contentiously, there has been a concern amongst some that the regulatory environment has become too restrictive in the wake of the GFC.

These issues are now being addressed through new policy, messaged via a combination of recent consultations, papers, and the November 2024 Mansion House Speech. If implemented successfully, a new collection of measures could both meaningfully reinforce and enhance London’s standing as a financial centre. Some of the key measures and policies to watch in 2025 include:

• Promoting financial services: The government highlighted the importance of financial services in its 2024 manifesto and identified the sector as part of its industrial strategy consultation (Invest 2035: the UK’s Modern Industrial Strategy). It launched a call for evidence in support of a 10-year plan for financial services, to be published in Spring 2025.
• Launching new markets: Pisces is a new share trading market designed to allow private companies to sell their own shares. Part of the intention is for this to pave the way towards future IPOs, helping to rebuild London’s listed sector from the ground up.
• Evolving pensions landscape: The government has been clear in its desire to see more domestic pension fund capital invested in UK equities (and UK investments in general). Further detail and proposals will emerge over the year. More broadly, estimates suggest that UK defined benefits pension pools could triple in size over the next decades, representing a valuable and growing asset management opportunity.
• Refining regulation: The government has asked key regulatory bodies to consider how they promote growth, as well as stability, as part of their mandates. This builds on the 2023 removal of bankers’ bonus caps, which resulted in several banks lifting these restrictions in 2024.

The effectiveness of such measures will take time to assess. Critics may say that such measures represent hopeful tinkering, rather than a coherent strategy. However, perhaps the unifying factor is that, for the first time since the GFC, there is a political willingness to recognise and back the importance of the sector.

Given the scale of the markets in question, a revolution like the 1986 big bang is not necessary to drive a significant increase in business for London’s financial sector. The impact of a rejuvenated financial sector on real estate markets would be felt both directly, for example, through demand for business space as the sector expands, and indirectly, for example, through deepening capital markets.

Voices of reason

To gain a different perspective on London’s appeal, we undertook a number of structured interviews with key clients in the financial services, venture capital, and technology spaces. In many cases, the individuals had the opportunity to locate in a variety of global cities, but had chosen London. We summarise their thoughts here:

• London's unigue business appeal: According to our interviewees, London remains a leading global business destination due to its historical significance, robust financial ecosystem, and exceptional talent pool. Interviewees highlighted the city's role as a historic trade hub that continues to attract international businesses seeking a strategic base. Its sophisticated financial landscape – characterised by strong flows of private equity and credit – ensures access to capital, while its globally respected legal and regulatory framework fosters confidence among investors.
  Additionally, London’s concentration of expertise in banking, finance, legal, and accounting sectors offers businesses a unique competitive advantage. As an operational hub, it serves as a gateway for global firms seeking to access European and international markets.
• Balancing costs and benefits: At a time when our office rental forecasts have been upgraded, we wanted to understand whether London’s comparatively high cost of living and doing business posed challenges. In fact, these are widely viewed as manageable in light of its advantages. Respondents emphasized that cheaper locations often fall at the first hurdle – by not offering direct flights to other global cities, for example. London’s diverse, well-connected environment, supported by its exceptional talent pool and generally reliable infrastructure, ensured that the benefits far outweigh the costs.
• Challenges on the horizon: Key challenges identified include geopolitical risks, international competition, and adapting to evolving work-life expectations. Post-Brexit, London faces the task of redefining its global narrative. Interviewees called for a shift from perceived isolation to positioning London as fiercely independent yet deeply connected to international markets. Enhancing global engagement and promoting new trade opportunities was seen as vital to sustaining its competitive edge.
• Opportunities for growth: Interviewees highlighted several areas for London to strengthen its appeal. Improving transport infrastructure, lowering taxes, and upgrading digital networks – such as expanding high- speed internet – will be essential to fostering innovation and operational efficiency. The city also has an opportunity to lead in ethical and sustainable business practices, aligning with global expectations for responsibility and transparency. Respondents noted London’s commitment to diversity as a defining strength.
• A vision for London's future: Looking ahead, London’s evolution as a global hub depends on effective storytelling. It must emphasize its resilience, adaptability, and innovation while showcasing its inclusivity and quality of life.

My London

The capital's appeal through the eyes of Kerensa Jennings, non-executive director and technology specialist

Kerensa Jennings is a Non-Executive Adviser on the Executive Board at Knight Frank, with extensive experience in governance, technology, and digital transformation. Having held senior roles, including Director of Data Platforms at BT Group and CEO of a digital social enterprise for the Royal Household, she brings valuable insights into London’s role as a global business hub. Emi Demaliaj, an analyst in Knight Frank’s London research team, sat down with Kerensa to uncover a personal take on London's success.

As a leader and advisor, why do you feel London remains a preferred business destination?

KJ: London’s status as a premier business destination is rooted in its progressive ethos, cultural vibrancy, and dedication to inclusivity. The city’s commitment to empowering women is exemplified by initiatives such as
Edwina Dunn’s The Female Lead, which celebrates the achievements of women across industries and provides vital
role models for aspiring entrepreneurs. Eleanor Mills' Noon platform further enhances this reputation by supporting midlife women in pivoting their careers, fostering a resurgence of talent.

London’s deep cultural history, which goes back two millennia, matches this progressive spirit. From iconic
attractions like the Crown Jewels to the revitalized Battersea Power Station, the city balances heritage and modernity seamlessly. Alongside this, London offers world-class theatre, exceptional dining experiences (a significant transformation over the past 15–20 years), renowned sporting venues, and vibrant nightlife, all of which contribute to its unique character. This blend of diversity, innovation, and tourism establishes London as an unparalleled global business and leisure destination.

How would you describe London’s current role and standing within the global business landscape?

KJ: London continues to assert itself as a preeminent global business hub, offering a strategic balance between cost-efficiency and extraordinary opportunity. What truly sets London apart is its unparalleled convergence of assets: a diverse, highly skilled workforce, world- class infrastructure, one of the largest financial markets globally, the seat of the UK  Government, a hub for world- renowned investors, and some of the best universities in the world. While many cities excel in one or two of these areas, London stands out by thriving across all of them. Having all of these in close proximity, with great linkages to every business hub across every continent, helps make London unique.

Moreover, London’s dedication to ethical and sustainable practices – evident in its transparent supply chains and environmental stewardship - aligns with the values of modern enterprises. Together, these qualities make London an irresistible destination for businesses aiming to succeed on the global stage.  

How significant is the high cost of doing business and living in London compared to its benefits?

KJ: Although London's costs are relatively high, they are more than offset by the its advantages. London offers unmatched access to a diverse, world-class talent pool, superior global connectivity, and a favourable time zone for international business. Companies increasingly mitigate expenses through technological innovation and hybrid working models, retaining London as their strategic nexus.

What are the main challenges London will face as a business destination in the near future?

KJ: London’s challenge lies in redefining its post-Brexit narrative to remain a compelling business destination. While opportunities for establishing independent trade agreements abound, effectively
communicating these advantages is paramount. The city must counter any perceptions of isolation by emphasising its fierce independence and unwavering commitment to global collaboration.

How do you see London evolving as a global hub for business and innovation?

KJ: London’s evolution as a global hub for business and innovation lies in its ability to effectively communicate its strengths and unique value proposition.

Key factors include empowering female investment, fostering global connections through tourism, promoting ethical and sustainable business practices, maintaining stability amidst change, and embracing its fierce independence while staying deeply connected to international markets. 

By telling this story effectively, London can continue to attract forward-thinking businesses, talent, and investors, reinforcing its position as a leader in innovation, inclusivity, and opportunity.

Outlook

London began the first half of this decade with a disproportionate share of challenges – some of a domestic making, some global in nature. Having weathered this turbulence, and emerged not only intact, but with a stronger and more diverse business make up, the second half of the decade sees the capital on the cusp of a periodic upswing. But London’s long term relevance isn’t guaranteed – it must be earned. Real estate’s role within this growth story is vital – at it’s best, the enabler of collaboration, at a human scale, in a city that has made that it’s USP.

View the London Series