Cicero Policy Briefer

Issue 16, September 2007

Recognising the importance of diversity to the City of London

By Stephanie Fraser

Two factors underlie the drive for diversity in the City: the need to broaden the scope of business focuses into culturally unfamiliar areas, and recognition of the value of a multicultural workforce with a profitable variety of training and skills.

Both the Government and the City of London Corporation are backing initiatives to broaden the scope of financial services facilities that can be used to draw in business from emerging global markets, most crucially in India and China.

The City of London has this year established its own representation in Beijing and Shanghai, in order to further the interests of the City in China’s business capitals. The City also has a proactive diplomatic program, which involves entertaining Heads of State and other guests of the Government, giving an annual banquet for the Diplomatic Corps, and less formal briefing events for Heads of Mission in London. Within the last year, City officials have made diplomatic visits to Lebanon, Kuwait, Ghana, Qatar, Pakistan and the UAE.

Beyond China, therefore, the key targets of this assertive commercial diplomacy are clear: prominent Islamic states. Findings of research published by the City of London Corporation, in October 2006, announced that:

“The potential growth of alternative financial centres, such as Dubai, could be addressed through such initiatives as the City being more proactive in offering Islamic banking schemes, perhaps also supporting centres such as Dubai.” 1

The drive to be the foremost centre for Islamic finance is being fronted by the City, but with substantial support from central government. Economic Secretary to the Treasury Kitty Ussher, and her predecessor Ed Balls, have made Islamic Finance a high priority on the City competitiveness agenda being pursued by the Chancellor’s High Level Group. The aim is to “entrench London’s position as a global gateway for Islamic Finance”.

While global economic trends are creating demand for London businesses to branch out into new financial streams, global migration networks are dictating that City employers also embrace diversity on the supply side.

In its latest commissioned research, the City of London addressed the effect which an unprecedented period of sustained high levels of immigration has had on London. Twenty years of strong inward migration, with net gains totalling some 800 thousand people since 1998, have produced both overall population growth and a much more cosmopolitan mix in London. The foreign-born population has grown from 1 to 2 million over in just 20 years. 2

Immigrants are also of more diverse origins than previously: whereas in 1986, just six countries of origin accounted for half of the immigrant population, it now takes 15 to do so. However, in spite of their diverse origins, new migrants do tend to share characteristics of relative youth, above average qualifications, and positive ratings by employers. Consequently, there are two distinct positive effects for the City:

• a qualitative impact on the London labour force and economy, through diversity, flexibility, international experience and skill sets (where there would otherwise be a skills shortage);
• and a quantitative contribution, through expanding labour supply, enabling employment growth and reducing upward wage pressure.

The reaction of Londoners to the continued immigration has also been broadly positive; social cohesion within London has remained strong during the recent period of rapid in-migration. This is a feature that must be retained by taking steps to avoid a long-term mismatch between available resources and additional spending needs, which would place untenable strain on housing and infrastructure requirements.

From both angles, therefore, diversity has the potential to provide an enormous boost to the prosperity and development of the City. Government and industry must work together to ensure that the opportunities provided by multicultural market forces are sensitively incorporated into sustainable business practices.

1. Scenarios for “India and China 2015: Implications for the City of London, Executive Summary”, p.9
2. Figures from “The Impact of Recent Immigration on the London Economy, July 2007, Executive Summary”

Stephanie Fraser can be contacted on +44 (0)20 7665 9531 or click here to email.

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