The opening of the Elizabeth Line, Britain’s latest engineering marvel, prompted reflections on how much there is to gain from better physical connections into and between London’s two biggest financial hubs – Canary Wharf and the Square Mile.
London’s many strengths can be bound together and renewed by public transport
The Square Mile is home to London’s insurance market, preeminent in the world and writing about £90bn of premium income. Meanwhile Canary Wharf is London’s banking and professional services hub, together contributing over 10 per cent of the UK’s total economic output.
These powerhouses now come within two stops of each other via Liverpool Street station. The proximity signals – and will support – the fusing of ties between the two hubs and the industries they represent. All this comes just at the right time for London’s financial services sector, which is responding to the back-to-back impacts of Brexit, Covid-19 and the war in Ukraine.
Joining existing dots on the system and cutting journey times into and across the city could be a catalyst to reinvigorate London’s unique ecosystem of talent and ideas, enhancing the flow of people and information between two of the city’s leading industries: banking and insurance, as well as the professional services firms that support them.
Better mobility between these hubs will complement the cross-sector cooperation we’ve seen in recent years, whilst strengthening the UK’s competitiveness and capacity for innovation.
At Lloyd’s, for example, historically about 90 per cent of the capital invested came from individuals – called “Names”. Today, the percentages have flipped and only about 10 per cent of capital invested at Lloyd’s enters the market this way. The lion’s share is from institutional capital – like pension and investment funds, facilitated by bankers and corporate brokers.
Examples of this include, when the Canadian Pension Fund, Ontario Teachers, with approximately $228bn in net assets, became the first investor to provide capital through the Lloyd’s London Bridge Protected Cell Company in November. And last December investment manager Nephila launched a new syndicate at Lloyd’s with a diverse group of investors, including four pension funds.
Closer ties and cross-sector collaboration can also spawn innovation. One of the fastest growing innovations in insurance in recent years is the introduction of new parametric triggers. These new insurance contracts – which resemble a derivatives or securities transaction – can indemnify the policyholder immediately after a predefined event occurs. Rather than waiting for the policyholder to complete paperwork to show a loss, a parametric policy can pay a claim within hours.
However, the benefits of connecting and regenerating London’s unique ecosystem of talent can only be fully realised if professionals in each of the city’s financial hubs are physically present during the working week.
These types of innovation in financial services – particularly the ones sparked by serendipitous connections between colleagues from different fields – are more likely when you are connected in person.
I believe both staff and management see the value to personal wellbeing, and to business, to being in the office.
But hours on a busy tube might deter London’s best and brightest from making the journey to the workplace. Reducing that friction might allow reluctant returnees to remember what the physical environment offers that the virtual world cannot. I expect a revamped transport system to lure more and more professionals back to the workplace for bigger shares of their working week.
Many minds in one place – and now, more closely connected than ever before – can only be a boon for London’s vibrant financial ecosystem.
This op-ed first appeared in CityAM on 01 Jun 2022.
CityAMBruce Carnegie-Brown, Chairman, Lloyd's
01 Jun 2022