London’s dominance in the UK is often presented as something of a whirlpool, greedily sucking in talent from other regions. But London’s growth doesn’t hinder, it aids Manchester, Birmingham, Leeds and beyond, writes Sebastian Charleton

With devolution back on the agenda, the message from the new government could not be clearer: London has had its turn. The capital is overheated and monopolistic, hoarding prosperity that should rightly be shared. Just look at the new funding formula that has forced inner London boroughs like Wandsworth to hike council tax by an eye-watering 94 per cent.  

London’s dominance is often presented as something of a whirlpool, greedily sucking in talent from other regions. But this misunderstands the economic reality. London and Manchester – or London and any other British city, for that matter – are not rival combatants in a Hobbesian struggle for scarce resources. They share a symbiotic, mutually reinforcing relationship.

With a population far larger than Scotland’s, London is a truly global city unlike anywhere else in the United Kingdom. It is an uber-connected epicentre of finance, culture and talent. As the London Chamber of Commerce continually highlights, its rivals are not Birmingham and Leeds, but New York and Dubai.

So when London loses out on investment, that capital does not trundle up the M1 to Sheffield. It heads to another global hub entirely. On the other hand, if a multinational sets up shop in the capital, it generally seeds offices and factories across the land. 

This is why blaming Britain’s stagnation on a decade of London-centric neoliberalism (whatever that means) gets things entirely back to front. Whether you live in Shoreditch, Scunthorpe or the Shetland Islands, London’s competitive edge is something that helps all of us.

The UK is getting poorer and poorer

In some ways, I wish this caricature of London as a free-wheeling Singapore-on-Thames was real. The truth is that the capital, like most of the UK, is struggling. After years of overregulation and taxation, much of which can be traced back to disastrous reforms to the financial sector following the 2008 Financial Crash, London is losing its standing as a pre-eminent global city. 

Importantly, this slow decline is not rebalancing our economy, it is compounding the nationwide cost of living crisis. (The cost of living crisis, by the way, is just a euphemism for the fact that the UK is getting poorer and is now, in many ways, a developing country.) Scratch the surface of a London-centric problem and you discover consequences for Brits, wherever they might live. 

London’s dwindling financial prowess is a good example of this. Listings on the London Stock Exchange have declined by 40 per cent since 2007, hurting investment not simply just in London but across the whole country. Similarly, the millionaire exodus ripples outwards in ways the chatterati misunderstand. Whilst millionaires are overwhelmingly based in London, when they depart the capital, the fallout extends far beyond tanking the valuation of a Kensington townhouse. 

Thanks to the UK’s highly progressive tax system, the top one per cent of earners generate roughly 30 per cent of all income tax receipts. Chris Rokos, Britain’s third largest tax-payer who announced his move to Greece earlier this month, paid £330m to the Treasury in a single year – enough to fund over 7,300 NHS nurses.

To plug this fiscal gap, a tax-and-spend government must either ramp up borrowing or shift an even heavier burden onto taxpayers. It could also cut spending, but I won’t hold my breath! In short, less London-based millionaires means weaker public services and higher taxes.   

The zero sum game of devolution

Then there is Heathrow. The airport wisely markets itself as Heathrow, not London Heathrow, and for good reason. It is not merely a pipeline for funnelling tourists to the London Eye. In fact, it functions as the international gateway that draws capital to the UK.

Yet in July, Istanbul Airport leapfrogged Heathrow as Europe’s busiest, handling 8.15m passengers to Heathrow’s 7.86m. Istanbul boasts three 24-hour operational runways and is building a fourth. By contract, Heathrow’s two runways have been choked at 98 per cent capacity for years. 

Without approval for a third runway (which, unlike headlines would have you believe, is entirely privately funded), Britain cannot keep pace with its international competitors. Unfortunately, it’s unclear whether our Prime Minister has grasped this. So far, he has been rather ambiguous on the project, worrying that a third runway could siphon investment from the North. In truth , it would have the opposite effect – siphoning investment into the UK!

Creating opportunities across our regions is vital, but the remedy is not to attack London. Our capital does not need to be diminished for the North to succeed. To return to the well-worn metaphor, we don’t need to reallocate a larger slice of the economic pie to other regions – as if such a feat were even possible – we must grow the pie. And for that to happen, we need a London that can compete with other global cities. 

Sebastian Charleton is head of programmes and partnerships at the Adam Smith Institute