London has established itself as the capital of Europe's financial services industry, and it intends to stay that way. But with Frankfurt, home of the new European Central Bank, preparing to offer planning approval to a multitude of new skyscrapers, it is clear London cannot be complacent about its future. Moreover, the City of London - the square mile which arguably houses its soul - is no longer the automatic first choice of financial institutions. Canary Wharf, some three miles to the east, has taken the lion's share of new bank headquarters' buildings, while the London borough of Southwark is working hard to encourage another massive development just across the Thames.
Thus, it should come as no surprise that the Corporation of London, the body which oversees City affairs, is taking some dramatic steps to ensure that the financial institutions - which are its life's blood - do not stray too far outside its borders.
Last week, it emerged the corporation had agreed to consider "buying in" leaseholds and freeholds it owns around the City to make it easier for developers to acquire the type of sites which increasingly are only available outside the City's fringes.
Moreover, it has agreed in principle that tall buildings which do not obstruct protected views of St Paul's Cathedral are also appropriate.
"The health and vitality of this vital asset will be threatened unless we are prepared to encourage development," said Judith Mayhew, head of the corporation's policy and resources committee, addressing a group of London developers at the annual MIPIM real estate conference in Cannes. Stuart Lipton, chairman of Stanhope Properties and one of the City's most prolific developers, says the move to assist in site assembly is a significant step forward for the City. "What the City needs is sites. Most corporates don't want to be in the business of real estate. They don't want to get into planning or archaeological issues." It is precisely this, along with considerations of cost and speed of development, that has propelled its traditional occupiers to new sites, particularly Canary Wharf. Arguably, London could have slipped from its undisputed position as the heart of Europe's financial services industry had Canary Wharf not been built.
A 1985 report on London's future, entitled "All Change in the City", noted that demand for City space was spurred by the nature of its financial services industry and depended on physical proximity to one's customers and competitors. "The physical concentration of financial institutions in a small area affords possibilities of easy personal meetings between different representatives. These advantages result in a high premium being set on City locations."
But even then, financial services firms were drifting towards the City fringes, where rentals were lower. The report cited a Richard Ellis study naming the City as the world's most expensive office market. By 1988, rents were as much as £80 sterling per sq ft, and, with the spectre of Canary Wharf looming over it, the City had begun a wholesale relaxation of its planning regime. Since Big Bang, in 1986, a third of the City has been rebuilt and prime rents are around £45 per sq ft.
Meanwhile, technological innovation means that physical proximity counts for less and many of the City's grand old names of banking have been gobbled up by foreign competitors.
Some corporation officials heartily espouse the view that Canary Wharf has helped cement Europe's financial services industry to the City, rather than detach it. "It's the environment of the City which is important to us," a spokesman says. "It is right that the financial services industry is in London and has critical mass. The key thing is that it exists under the brand name of the City."
But Bill Hillier, chairman of Bartlett School of Graduate Studies at University College, London, argues that the types of physical spaces the City creates affect its role as a business magnet. Open spaces encourage people to congregate, providing the buzz of City life. Meanwhile, he says, the entire planning process for new development in the City has been hamstrung by the authority which architectural traditionalists have had over development. The buildings which are today regarded as sacrosanct are products of the constant process of redevelopment which has occurred over centuries in the City.
"What we want to preserve is the product of a process of replacement . . . the essence of culture and vitality."
Ms Mayhew insists that although the corporation wants to encourage redevelopment, "we wouldn't want to be allowed to level the City".
BUT Mr Lipton argues there is still far more the corporation can do to ensure that the City remains a magnet for financial services firms. Projects with open spaces, art, shopping leisure and other activities should be encouraged. Greater consideration should be given to mixed-use development and the creation of shopping arcades, rather than a scatter gun approach to retail development. "In terms of fun life, the City is nothing," Mr Lipton says. "It's clean and it's safe, but it's drab. Its restaurants are few and expensive. Downtown New York fell apart because it became a daytime-only area."
