London has become increasingly economically dominant within the UK in recent decades, accounting for over 20% of national GDP despite containing only around 12% of the population. This growth has fueled claims that London acts as an economic "suction machine" draining resources from other parts of the country. However, London also contributes greatly to UK tax revenues through industries like finance. Looking ahead, London faces questions around its role as the capital of the UK given it governs England less directly than other capital cities govern constituent regions, and whether it could ever function more independently, similar to how Scotland may gain further autonomy.

1. London as City Nation?
Malcolm Gillies
Published as “Londra ballerà da sola?” [“Will London Dance Alone?] in Limes:
Rivista Italiana di Geopolitica, no. 10 (2014), pp. 35-42 (www.limesonline.com).
1. City, Nation, Union
The notion of nation-states as the building blocks of the international order is
relatively recent. Before the 19th century, city and regional organisations were often
more important, as in what then become Germany and Italy. Indeed, the cradle of
democracy was the Athenian city-state, not some nebulous national construct of
"Ancient Greece", while the succeeding Roman civilization was effectively an
agglomeration of provinces forged into empire. The base words of civis, demos and
polis, however, retain the original civilizing connotations of the city.
The European Union (EU) originated after the Second World War as a collection of
six dissimilar states: three large nations -- West Germany, France, Italy -- and two
smaller ones -- Belgium, The Netherlands -- while Luxembourg was more akin to a
city-state. Not surprisingly, the latter three were popularly packaged up into
"Benelux" to give more comparability with the Big Three. As it has grown and
moved from a trading alliance towards an integrated political entity, the EU has taken
on twenty-two additional members, all technically nation-states, but ranging from the
United Kingdom (UK) and Spain, to Malta, Estonia and Cyprus.
Yet the EU has as many centrifugal as centripetal tendencies within it. Catalonia,
Venezia, and Scotland have strong aspirations to become nation-states, independent
from Madrid, Rome or London. But each of these potential, break-away regions
seeks to remain within the EU Union. Effectively, over the last sixty years, the EU
member states have become "slightly less than sovereign nations".1
Traditional 19th-
century tests of national sovereignty included currency integrity, customs, border
controls, and independent defence forces. The euro, a Single Market, Schengen, and
new rapid-response defence units all attest to some loss of sovereignty on the path
towards the "ever closer union" referred to in the Preamble to the Treaty on European
Union. The Union's inter-linked freedoms of movement of capital, people, goods and
services further restrict an individual nation's initiative. Of course, some (such as the
UK, with currency and border controls) have surrendered less sovereignty than others.
The Scottish referendum over separation from the UK on 18 September has generated
heated debate about a dozen key questions, at the heart of sovereignty: when, how,
constitution, head of state, currency, assets, debts, relative legal standing, defence,
borders, passports, benefits and taxes. Regardless of the outcome of this referendum,
it has led to expectations of greater autonomy for other parts of the UK, including
regions within England. For London, in particular, the key question is whether it --
like Scotland -- might gain its own taxing powers.

2. A second referendum, promised by Prime Minister Cameron for 2016, on the UK's
continued membership of the EU, compounds the questions of autonomy and
sovereignty. Currently, London is strongly committed to the EU, but swathes of
"Middle England" are much less sure. If the UK voted in 2016 to exit the EU, would
London just dutifully follow along? In fact, could a capital city exit from its own
nation? But what would it then be?
Some answers seem to lie amid the rapidly evolving possibilities of power for less-
than-sovereign nations, regions and cities beneath the EU's umbrella.
2. London and The Rest
After half a century of post-war malaise, London has in the last two decades become a
success story of UK development.2
Prime Minister Thatcher's financial "Big Bang" of
1986 led to London regaining its reputation as a financial capital of the world. This
helped also with London's successful reinvention as a global centre for media,
education, creative industries and transport, and much more. While in 1997 its
nominal Gross Value Added (GVA) was 19.4 per cent of the nation's GVA, by 2012 it
was 22.4 per cent, that is, £37,232 per head compared with the UK average of
£21,295 per head.3
Expressed another way, the GVA per hour in London is 131.2 per
cent of the UK average.4
Part of the reason for this is because London is nearing 50
per cent of all employment in graduate-level, often knowledge economy, jobs, a target
established by the Blair Government for 2020, but likely to be realized sooner.
Such immense disparities caused Prime Minister Cameron recently to claim that the
British economy was "too London-focused" and to pledge government investment to
"tilt the UK economy away from the capital".5
Business Minister, Vincent Cable,
more colourfully described London as "a kind of giant suction machine, draining the
life out of the rest of the country".6
He also sought to rectify that apparent imbalance.
Recent internal migration within the UK tells a similar story of a "brain drain" south,
with 80 per cent of new private sector jobs being created in London and so drawing in
skilled workers from the English cities north of London.7
There is no agreement on whether London's very impressive growth is at the cost of
"the rest". You can point out London's vast expenditure per person on (long overdue)
transport infrastructure,8
notably Europe's biggest infrastructure project called
Crossrail. This expenditure is up to twenty times the per person infrastructure
expenditure in regional areas, but whether such development is, in total, at the
expense of the rest of the country is hotly contested. Much of the consequent
business activity from such expenditure benefits all, not just London. Then, the
massive contribution of the predominantly London-based financial services to UK
taxation revenues, at £65 billion or 11.7 per cent of total UK tax receipts,9
enters the
equation, as well as such matters as the London location of the European headquarters
of some 100 of the world's top-250 companies. Those headquarters are not likely to
relocate within the UK, but if they had to, they would relocate to other major cities in
the EU or Switzerland.
London also differs from the rest of the UK in the national, religious and ethnic mix
of its population. It is truly a "world city", with UK-born workers frequently
2

3. outnumbered both by those born elsewhere in the EU, and by those born elsewhere in
the world, most notably in the 1.5 million high-skill posts in the city.10
While this
migration has some negative effects in social and economic terms (for instance, in
driving down wages for lesser-skilled jobs), and London's unemployment and
underemployment rates are generally a little higher than the UK average, it helps to
reinforce the competitiveness of London as a global services leader. Indeed, London
commands some 44 per cent of the nation's services exports.11
This diversity also
leads to different social attitudes: more pro-EU and more socially liberal. At last
May's European elections London proved highly resistant to the inroads made by the
UK Independence Party (UKIP) in much of the rest of England. By 2035, on current
projections, London will be a city with a "majority of minorities".
If we accept the late 20th-century view of education as the biggest single driver of
opportunity, then London's prospects are bright. An All-Party Parliamentary Group
on Social Mobility reported in December 2013 on the "London premium" in
education. It identified London's increasingly superior school achievement at age
sixteen, compared with the rest of England, and especially among disadvantaged
pupils.12
Londoners had the best participation rate in higher education in the country.
Disadvantaged Londoners, as defined by those who qualified for "free school meals",
were twice as likely to go to university than disadvantaged students from elsewhere in
England, and four times as likely to go to a top UK university. The high ethnic
diversity of the city, and the keen desire of many new Londoners to gain social
mobility through education, were clearly supportive of this increasing performance.
Not unreasonably, the Times Higher Education this May concluded that in matters of
education, "London is another planet".13
Already London commands over 100,000
international students, and a majority of its undergraduates now identify as other than
"white British".14
For centuries London has been the model of a capital city. The question for the
near future is, however, capital of what?
3. London as Capital City
London's has become a diverse "world city". But this does not mean it is to
everyone's liking. While it has most of those characteristics that Richard Florida a
decade ago identified as drawing in creative elites15
-- technology, talent, tolerance --
it sometimes scores very poorly in terms of liveability. This year's Liveability
Ranking saw London only outstripped by Athens and Lisbon for unliveability.
Reasons given for London's low ranking included "higher levels of crime, congestion
and public transport problems".16
Vienna, it appears, is Europe's most liveable city.
One reader perceptively commented to London's Financial Times: "London: the best
place to be a student; the worst place to be a Mum."17
Interestingly, while readers
observed London's virtue in having ready access to (continental) Europe, they failed
to mention its ready access to England.
As a capital city London is curious, as it is the capital of the United Kingdom rather
than of England. England, while the dominating constituent part of the UK, does not
have its own dedicated parliament or, in general, bureaucracy. There is no chief
minister of England. In this, it is unlike the largest states of federations of British
3

4. origin, such as the United States (California), Canada (Ontario), or Australia (New
South Wales). The distinctive needs of the English are sometimes just overlooked in
the current political set-up. This leaves capital-city London, however, with a British,
rather than an English, mindset, in stark contrast with its own hinterland, where
repeated surveys show that the majority of the population self-identifies as English.
This distinction is reinforced by the high percentage of immigrants who settle in
London. They consider, upon naturalization, that they have become British rather
than English, and importantly, they have also become European. Technically, this is
correct, as their passport currently reads: "European Union: United Kingdom of
Great Britain and Northern Ireland". There is no mention of England.
London, then, sees itself as a "world capital", as well as top European city, in such
fields as financial services, media and entertainment. It stands to gain hugely from
further EU moves towards a Single Market in services, and will lose dramatically if it
should be excluded from, or restricted in, that EU market. Already some US banks
have started planning to move London-based activities to the favourable environment
of Dublin, should the UK look like leaving the EU.18
Such planning can only be
expected to intensify until a definitive expression of the national will towards the EU
has been achieved.
London also plays a de facto role as the capital of Europe. As its largest city, and
with a GDP of its own that rivals Austria's, it takes a leading role in Europe in such
fields as transport, education and a broader range of the creative industries. EU
moves towards market liberalisation in such fields as energy, telecommunications and
digital have distinctive benefits for London, as also for the UK. Any vote in the 2016
referendum for leaving the EU creates not just the prospect of substantial loss of
business, but also of London losing its strong, sometimes hegemonistic, role in these
industries. The nervousness already generated by the Scottish vote will only be
magnified in 2016.
Since 2010 the British Government's tightening of immigration, both of workers and
students, through commitment to a "net immigration" target of 100,000, as well as
repeated Home Office systems failures,19
have sent a negative message to the world.
That negativity flowed to other members of the EU (particularly newer accession
states), as their citizens are also captured within this statistic, despite the EU's Free
Movement Directive of 2004. London businesses have been at the fore in opposing
this unimplementable target and its challenge to the flow of talent into the capital.
The overall benefits and costs of the UK's continued membership of the EU currently
have no clear answers, as the methodologies are conflicting and the interpretations
confusing. But clearer answers are vital, above all, for London's case within the UK
debate. In 2010, for instance, the UK Independence Party asserted that the cost of EU
membership was effectively £77 billion. In 2013, the Confederation of British
Industry claimed that EU membership was worth around £70 billion per year, that is
around 4-5 per cent of GDP, following a 2010 Department of Business, Innovation
and Skills estimate that suggested a 6 per cent figure.20
London First's "London and
the EU" study commented this May: "Delivering progress on services integration at
the pace and depth that the UK would want, with the UK outside the EU and the UK
then having equal access on the right terms, is difficult to see."
4

5. So, if the UK left the EU, would London also leave? Or, even if the UK reluctantly
stays, would London still be better off on its own?
4. London as City Nation?
This may appear a daft question, but Londoners, like the Scots, do increasingly ask
what the benefits really are of remaining in the UK. London is a highly successful,
diverse global city, but also the capital of a less successful and less than united nation,
with a current obsession with race relations and immigration.21
Increasingly, London
sits at the outer edges of so many British social circumstances and attitudes. The
many questions daily arising in the Scottish debate are relevant to London, where
there has similarly been little recent effort in explaining the benefits of UK
membership. Indeed, the UK Prime Minister seeks to explain how to reduce the
capital's success, rather than how to use it as a springboard for the success of other
regions. This city-versus-nation debate is nothing new, but takes on a new twist at
this time of increasing prominence of London within the national economy as well as
the emergence of "not-so-sovereign" states within the EU. Could London even
emulate that prosperous city nation, Singapore, in its exit from the four-member
federation of Malaysia in 1965?
The example of Singapore is helpful as it now regularly ranks in the top four financial
centres of the world, normally alongside the quasi city-state of Hong Kong.22
What is
more, Luxembourg comes in 13th in this ranking, with Monaco 23rd, Doha/Qatar
24th, Dubai 25th, Shenzhen 27th and Jersey 28th. London currently comes first and
New York second, but both with downward trajectories. Clearly, with eight of the top
thirty financial centres being city nations, city-states or quasi city-states, there are
some definite benefits to that condition, above all, in eliminating one layer of political
intervention or regulatory impasse. Cities also breed different types of leaders from
the larger nation-states.
In his book If Mayors Ruled the World: Dysfunctional Nations, Rising Cities,
Benjamin R. Barber explores the political changes coming about as the majority of the
world's populations now live in cities. City government, in his analysis, gets things
done. Cities tend to secularism, tolerance and liberalism. Mayors tend to be
pragmatic, can-do, even charismatic people who just have to solve problems in
relatively unideological and collaborative ways. The trains have to run, the streets
have to be maintained, the garbage has to be collected. Cities take on both local and
global characteristics, and are increasingly interdependent, with local nodes and
global synapses, Barber explains.23
He sees cities, not nations, as the building blocks
of cross-border democratic world order, specifically networked, multicultural
metropolises. Traditional nation-states are caught in between the local and the global,
satisfying neither. Their leaders dither, amid intense ideological wars that only hinder
the benefits of globalization. These existing nation-states have become dysfunctional.
Indeed, he concludes, "Cities should rule the world for a good reason: nation-states
haven't, and can't".24
Two of Barber's model mayors are Michael Bloomberg and Boris Johnson.25
To him,
Boris Johnson in London is "the efficient jester", a contrast with Prime Minister
Cameron, caught upon "the lugubrious national stage". It is not by chance that both
5

6. Bloomberg and Johnson have considered themselves for national office, although
being a mayor is not necessarily a guarantee of national success. François Hollande
was, after all, the mayor of the small French town of Tulle for seven years.
While Barber sticks rather too tenaciously to his eulogy of cities, his simple thesis
does well recognize that nation-states are not what they used to be. And nor can they
achieve what they once did. The tight sovereignty of the 19th-century nation-state,
and even of the fragile series of nations created in the aftermath of the First World
War, has come under irreversible challenge. New tests of national identity and
viability have been introduced across the 20th century, addressing necessary questions
of economic dependency (Canada upon the United States), defensibility (Malta or
New Zealand), ownership of critical resources (Japan with oil, Singapore with water,
China even with air), and linguistic, ethnic and religious relations (summarized
powerfully in the disintegration of Yugoslavia). In the 21st century, with so many
nations having surrendered key aspects of their own sovereignty through trading or
defensive pacts, federations and unions, the old nation-state is only one of several
viable types of state.
Multi-level national relationships abound. Many Britons will be unsure, especially if
they follow sports, whether the UK is really a kingdom of four nations, or rather a
nation of four kingdoms. If the EU ever moves away from its Treaty obligation to
"ever closer" union, towards a goal of a stable federation of reasonably autonomous
nation-states, then the prospect of "cascading, multi-level federations" emerges,
perhaps involving major cities as well as nation-states. We could end up, for instance,
with a constitutionally federal Britain, including a London city-state, within a reborn
federal EU. This would be a compromise solution, preserving London's current
capital city role.
The starker alternative of London as a city nation within the EU hangs on accepting
21st-century tests of national identity and viability, with their growing emphasis upon
interlinked local and global embrace. Barber ends his cameo of Boris Johnson by
referring to pragmatism as London's best chance for survival. That pragmatism "is
also why cities are more likely than all those principled sovereign states to figure out
how to govern the world together."26
After all, through this softer form of
governance, through those cross-border collaborations between cities and their
citizens, the growing confusions and limitations of sovereignty might be more
practically addressed.
London does need the rest of the UK, but not with its current legal and political
relationships. A constitutional settlement is required. The two referendums, growing
xenophobia, diverging economic trajectories, still growing national debt -- all suggest
that London will flex its muscles in the coming years to seek and gain greater powers
for itself, in particular to secure its own taxing powers. Whether that is sufficient to
keep the Kingdom united, or whether, like Scotland, London needs to seek a more
formal and irrevocable autonomy, remains to be seen. Much is at stake. As Bridget
Rosewell concludes in Reinventing London, "If London fails, it will be because
civilization has failed."27
6

7. 1
Endnotes:
B.R. BARBER, If Mayors Ruled the World, New Haven-London, 2013, Yale University Press, p.
161.
2
B. ROSEWELL, Reinventing London, London, London Publishing Partnership, 2013.
3
M. BIRD, "Cameron Pledges to End City Domination", London, City A.M., 8.7.2014.
4
OFFICE OF NATIONAL STATISTICS, 27 Feb 2014 figures, www.ons.gov.uk.
5
M. BIRD, op. cit.
6
H. SAUL, "Vince Cable: London 'is Sucking the Life Out of The Rest of The Country'", London,
Independent, 19.12.2013.
7
L. ELLIOTT, "The Great Migration South", London, Guardian, 27.1.2014.
8
E. COX and P. LETTS, "Is London's Impressive Growth at the Expense of the Rest of Britain?",
London, Director, April 2014, p. 31.
9
Total Tax Contribution of UK Financial Services, sixth edition, London, City of London,
December 2013.
10
LONDON FIRST, "London and the EU", report, May 2014, with statistics from Q1 of 2011,
www.londonfirst.co.uk.
11
ibid, note 19.
12
ALL-PARTY PARLIAMENTARY GROUP ON SOCIAL MOBILITY, Social Mobility
Goldspots: Capital Mobility, London, December 2013, www.appg-socialmobility.org.
13
J. GROVE, "London is Another Planet", Times Higher Education, 29.5.2014; also, "London: The
Education Powerhouse", London, BBC, 4.7.2014, www.bbc.co.uk/news.education-28003851.
14
M.GILLIES, "Capital Gains and Pains", London, Times Higher Education, 18.7.2013.
15
R. FLORIDA, The Rise of the Creative Class, New York, Basic Books, 2002.
16
THE ECONOMIST INTELLIGENCE UNIT, A Summary of the Liveability Ranking and
Overview, London, August 2014, www.eiu.com.
17
M. SKAPINKER, "More to Life than Liveable Cities", Financial Times, 10 September 2014.
18
S. FLEMING, "US Banks Draw Up Early Plans for Move to Ireland if UK Leaves EU", Dublin,
Irish Times, 18 August 2014.
19
See T. MCTAGUE, "37 Years to Clear Migrant Logjam", London, Daily Mirror, 13.7.2013.
20
LONDON FIRST, op. cit., Appendix.
21
THE ECONOMIST / IPSOS MORI, Issues Index, July 2014, www.ipsos-mori.com; 36 per cent
of respondents named "race relations and immigration" as "most important issue facing Britain

8. today".
22
QATAR FINANCIAL CENTRE AUTHORITY, The Global Financial Centres Index 14,
September 2013, www.qfc.com.qa.
23
B.R. BARBER, op. cit., Chapter 5.
24
ibid, p. 74.
25
ibid., pp. 25-28, 79-82, respectively.
26
ibid, p. 82.
27
B. ROSEWELL, op. cit., Chapter 6 (Conclusions).