Summary

Headquarters (HQs) and related functions have been a fast-expanding source of employment and economic output in London (and the UK) for the last decade.
Between 2003 and 2018, London was the top ranked destination city globally for foreign direct investment into headquarters measured by number of projects.
While the geographic focus of global headquarters is shifting, the biggest multinationals have overwhelmingly chosen London as their European HQ: London and the Wider South East host 55 per cent of the world’s largest 500 companies’ European HQs, and attract a fifth of all foreign direct investment into HQ projects in Western Europe.

Most sectors are seeing a “slimming down” and “scattering” of their head office functions. Retailers, business services and other non-tech companies are reducing city centre footprints to cut costs, and teams with global responsibilities can be distributed between different cities.
In some sectors – particularly the largest multinational tech and digital companies – there is a tendency toward larger, more multifunctional HQs

…concentrating value in global cities, but also bringing challenges:

HQs create highly paid jobs and tax revenue, forming the nuclei of professional and business service clusters.
However, they also put pressure on local infrastructure and are accused of or ‘can
play a role in’ increasing inequality.

The most influential element in HQ location decisions is access to talent – the majority of location factors relate directly to talent.
Taxation and business regulation are also important, but stability and certainty are often more important than exact levels of taxation in themselves, and the influence of both on HQ location decisions is often overstated.
Whilst attracting and sustaining a large and diverse talent pool is the most important factor, there are many other interrelated factors that can make a city attractive or unappealing as a location for HQs.

London has a particularly strong offering as an ‘HQ city’, with a wide variety of factors that make it an appealing location.
London’s access to talent is heavily reliant on the city’s openness to international migration.
Housing affordability and strained transport infrastructure also serve to make the capital less appealing to talented workers.

The Mayor of London should continue to project an international image that welcomes overseas business investment and migration.
London government should also continue to lobby for an immigration policy that supports London’s HQ economy alongside other sectors, and should seek more regional control of immigration policy if this cannot be achieved across the country.
London and national government should work together to spearhead improvements in skills provision and education for Londoners, particularly in the area of digital literacy.
National government should preserve the UK’s business climate, providing as stable and predictable a tax environment as possible; ensuring that visas are as easy as possible to obtain, at all skill levels.

As implied by London & Partners’ name, investment promotion needs high level political and corporate leadership.

National government should help to promote its capital to the rest of the world, working with London & Partners to champion London’s role as
an HQ City as a strategic asset.
On top of providing support to businesses that consider setting up strategic teams in London, London & Partners and the Department for International Trade may also have to grow their teams dedicated to helping retain existing HQ functions.
National government should set an objective of increasing investment in the rest of the country by businesses that have HQs in London.
Businesses should work more closely with London government to ensure that the HQ economy’s needs are understood; London & Partners should also seek to work better with private sector partners – in particular real estate agents, developers, and providers of professional services.

Cost of living and the quality of infrastructure are not only major issues for Londoners; they also underpin HQ decision-making.

Local government and the Mayor of London should continue to lobby national government for investment in public transport and housing. National government should maintain and enhance international transport infrastructure.
Businesses should also improve efforts to ‘give back’ to the cities in which they settle, from charitable giving to supporting local employment and businesses.

To avoid complacency and overreaction, the Mayor of London and national government should be looking out for: