Stability is the aim of the game

Why does the short-term outlook feel cautious?

For those of you who know me, I always try to find an optimistic thread in pretty much everything I look at. Honestly, with the global political tensions, in the short-term or medium-term, certainly in the next 12 months, the main word that came to mind was ‘caution’. Long term, I have concerns, but I am far less worried. Despite the recent deeply negative press and domestic political turmoil, the UK has a positive story to tell as its economy (GDP) is moving in line with most other advanced Western economies, except perhaps the United States, which simply works more hours than all the rest of us and doesn’t take as many holidays.

What is happening in London’s West End visitor economy?

When looking at London’s West End visitor economy and its commercial performance, as an economist, the word that comes to mind again is ‘stability’. I encourage you to think of stability not in the sense of stagnation, but rather as a very positive outcome in an otherwise very tumultuous domestic and global environment. The metrics show that the demand for space across Central London is steady (provided it is well located and of top quality).

A return of the great Staycation?

That stability underscores the point that, as a global gateway city, London is always going to do well and attract international visitors. However, even with a dip in figures, Colliers’ Hospitality Teams reminded me that the last big ‘Staycation’ episode boosted the collective hospitality sectors to the tune of around £5 billion pa, and that was over 15 years ago, between 2009 and 2011. In today’s money, it works out at almost £8 billion pa.

What’s coming down the line?

There are three dimensions that I want to delve into that I think are showing signals of stability in the West End. The political, economic and social realms.

The political realm

We've had the local elections, and I wish I could say that the outcome has settled internal government divisions and that greater stability in regulatory and fiscal policies is at hand. Well . . . it hasn’t. Consequently, Bank Rate and Gilt rates will be ‘higher for longer’. By ‘higher’, I mean at levels that mean that the cost of servicing UK government debt will remain near £100 billion per annum. I am worried that the Chancellor’s £23 billion fiscal headroom, assembled by substantial tax rises on businesses and households over the last two budgets, will be eroded both by higher debt costs, weakening tax revenues as the economy slows, and by possible new spending linked to politics. Could the Autumn Budget 2026 include a third annual expansion of the tax base?

The economic realm

This brings me to economics. Household spending is almost two-thirds of the UK economy, and households are not particularly sprightly with their spending, especially as prices rise again. HMT Consensus Forecasts for economic growth in 2026 fell by half from 1.3% in March to 0.6% In April, reflecting the impact of Middle East turmoil, but have since recovered to 0.9% in May, perhaps reflecting the stability mentioned above. At the same time, GfK Consumer Confidence indicators have been falling steadily through April. Retail sales volumes are lacklustre and at the same level as in mid-2019. The household saving ratio is high, and discretionary spending is down, reflecting household insecurity. In H2 2025, household disposable income was also falling in annual terms, despite the national minimum wage uplifts.

And this is only half the story. Businesses, especially SMEs (small & medium-sized enterprises), are struggling too. The business pressures are too well-known and too well-rehearsed to go through again, except to say that domestic politics do not bode well for regulatory stability. Businesses are struggling with margins -- higher costs, weak domestic demand, lack of operating capital for expansion, hiring or investing in new business formats to accommodate changing consumer behaviours. On the upside, London is a global gateway city, supported by a demographic that reaches beyond the domestic economy pressures. London has the flexibility to target consumer groups that are less impacted by these forces.

The social realm

Whether targeting domestic or international consumers, serious questions arise about how to think about maintaining an offer that supports the very creative ecosystem that brought London to great prominence, and in many ways still defines London’s appeal, to both domestic and international visitors. Tried and tested audiences are only one part of a larger, and increasingly disparate, audience reflecting generational change, technological sophistication and new expectations, all requiring creative innovation.

You can find wisdom in the unlikeliest of places…

I once opened a fortune cookie that had been lost in an obscure part of a flat that I lived in for a decade. I laboured for a full week cleaning and packing up the flat. Tired and not in the best of spirits, I discovered the errant fortune cookie under a dresser. I reached down into a pile of dust, picked it up, cracked it open and fully expected, given its provenance, that somehow it would provide great wisdom to guide my next steps, only to find the prophetic words: ‘Hard work does not ensure success.’

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