* Regulators plan rules revamp to beat COVID, Brexit double
hit
* Standing still not an option for London as rival hubs
expand
* City landlords and businesses court new tenants and
customers
By Sinead Cruise and Huw Jones
LONDON, Dec 9 (Reuters) - For fintech entrepreneur Lewis
Liu, no other city on earth could compare to London.
Chinese-born and New York-bred, the CEO and co-founder of
Eigen Technologies had always dreamed of setting up business in
the Square Mile, the historic heart of European finance and home
to a global talent pool vital to companies like his.
But less than a year after opening his office within yards
of the Bank of England, Liu's happy-ever-after is under threat.
The City, as London's financial district is known, has
survived the Great Fire, the Black Death and other upheavals
down the centuries. This time though, it faces a double hit to
its future.
COVID-19 is draining life and prosperity from almost every
major global city, but London also faces a second, unique
reckoning after Britain parts ways with the European Union on
January 1.
"I came to London because it was truly global and Brexit
certainly took a bite out of that rosy, futuristic vision I
had," said Liu, whose firm is backed by Goldman Sachs and
Singaporean wealth fund Temasek.
"In the medium term, I have confidence in the City, in the
long term I don't know," he said, citing fears of a brain drain
that could scupper his young company's growth.
Before the pandemic struck, London was war-gaming how it
could remain one of the world's leading financial centres, with
Paris and Milan already offering sweeteners to poach talent.
While the jobs "Brexodus" has been lighter than predicted,
that challenge is now an existential battle as a new
remote-working culture spawned by COVID-19 leaves London's
skyscrapers largely empty and a thriving office scene in
tatters.
"We are more worried about the place, the damage caused by
lack of footfall," said Catherine McGuinness, leader of the City
of London Corporation, which has presided over the finance
district since 1191.
GHOST CITY FEELS HEAT
Public transport use in the City was still only 17% of
pre-COVID levels on Dec. 4, just after the end of a second
lockdown, with office visits down by 54%, according to Google
Mobility Report.
Moreover, almost half of UK workers intend to split their
working weeks between office and home over the next six months,
a September survey by the British Council for Offices found.
British and EU negotiators have been making last-ditch
efforts to hammer out a post-Brexit trade deal. But even if a
deal is struck, the City won't keep the same access to the EU,
the bloc's financial services chief has warned.
And with the British economy taking its most damaging hit in
300 years due to the pandemic, there couldn't be a worse time
for turmoil in financial services, its biggest cash cow. The
sector is worth 130 billion pounds ($173 billion) a year and
contributed 76 billion pounds to the Treasury in 2019.
The Bank of England estimates a third - or 10 billion pounds
- of financial services exports to the EU will be lost because
of Brexit. Another 10 billion pounds are at risk if EU access is
limited from January.
Pressure is piling on the City to adapt, and find
alternative international markets, as competition intensifies.
"On the international front, it is up to the City to show,
if they can, that there is a good reason for their success,"
said Sharon Bowles, a former EU lawmaker and now a member of
Britain's House of Lords.
'LONDON CHECKS EVERY BOX'
Some have an optimistic view of the future.
Adam Goldin, head of UK development at Hong Kong-listed CC
Land, owner of the City's 52-storey Leadenhall
Building, says London's appeal to blue-chip companies transcends
Brexit, thanks to business-friendly employment laws, world-class
education system, history and culture.
Nevertheless, after two lockdowns, landlords will have to
work harder to coax staff back to offices and the drudgery of
one of Europe's longest commutes.
"The novelty of rolling out of bed to turn the laptop on is
waning now, but expectations on what workplaces deliver will be
even higher," Goldin said.
Real-estate consultant Knight Frank said take-up of office
space in the City fell by 68% in the third quarter,
year-on-year, triggering a push by City officials to step up a
strategy of diversifying tenancies towards tech, media and law.
Since its 1.15-billion-pound purchase of the City's second
tallest skyscraper in June 2017, CC Land has launched a raft of
tenant perks more akin to a five-star hotel, Goldin said.
Six out of the 45 floors at the fully-occupied property are
let to non-financial tenants from sectors including IT services,
events, architecture and design, and energy distribution. The
average lease still has around 10 years to run.
Workers can attend educational programmes, mental-health
workshops and fitness bootcamps as well as social events
on-site.
"If people want to be in London, businesses will have to be
there too," Goldin said. "The other European alternatives just
don't deliver on the bucket list of city-centre attributes.
London checks every box. Except maybe the weather."
WOOING THE WORLD
If London can shrug off the two-fold threat posed by Brexit
and COVID, the prize is continued prosperity.
"We're going to need to look very carefully at what people
want and ensure planning rules will meet coming needs," said
McGuinness. "I'm sure we're going to remain a financial and
professional services centre."
Officials are also rewriting rulebooks to make London's
markets more attractive to tech firms and companies from
countries beyond the EU.
Britain has already signed a trade deal with Japan that
includes regulatory cooperation to cut red tape for
international banks, and avoid lenders having to store financial
data locally. Britain and Switzerland have said they will accept
each other's rules to deepen ties in financial services.
John Glen, Britain's financial services minister, has said
the new Financial Services Bill will create a modern, flexible
and robust system of regulation.
Former EU financial services commissioner Jonathan Hill has
launched a review of London's listings rules, looking at free
floats and dual-class share structures, to ensure London can
continue to compete with archrival New York after it loses
unfettered access to the EU, its biggest customer.
"UK financial services has long had a reputation for high
standards and reliability, innovation and thought leadership,"
James Bardrick, UK head of global bank Citi, told Reuters.
"As long as this continues, there's no reason we can't do a lot
more of the world's business."
SWEATSHIRTS AND SUITS
The ecosystem of businesses that trade off London's magnetic
pull are also embracing the need for change.
City Social, a Michelin-starred eaterie perched at the top
of the Tower 42 skyscraper, has revamped its offerings to cater
for a new breed of clientele, who want business meals to be less
formal and more affordable.
"The City has become more casual, with an increase in
flexible working and casual attire," General Manager Tim Smith
said, flagging a 30% rise in covers at the restaurant's Social
24 bar, which has doubled up as a work-hub for busy patrons.
The three-course set bar menu features grilled baby plaice
and white onion risotto and costs 21 pounds, compared with more
than 50 pounds for the lowest-price three courses offered "a la
carte" in the restaurant.
So far, the jobs hit to the City has been lower than feared,
with the EY Brexit Tracker in October indicating London has lost
under 8,000 finance jobs to the EU since the 2016 referendum.
Initial estimates had ranged from about 30,000 roles within
a year of leaving the EU to up to 75,000 by 2025.
For Liu, the fear is that London's unique financial flavour,
historic and cutting edge, could still be lost.
Before the pandemic, he enjoyed seeing sweatshirt-wearing
fintech types jostling for bartender service alongside suited
bankers during the ritual of Friday night post-work drinks.
"The space we occupy used to be a back-office operation for
HSBC. It's quite symbolic, like banks and traditional companies
in the City are making space for firms like ours," he said.
"We've woven ourselves into the fabric of the City. I
sincerely hope that when the lockdowns are over, that's still
the case."
($1 = 0.7517 pounds)
(Additional reporting by Lawrence White; Editing by Rachel
Armstrong and Pravin Char)
