London Falling

The Gherkin was built in flush times. New buildings are being scrapped

TOM STODDART / REPORTAGE / GETTY FOR TIME

• Share

(5 of 5)

This isn't the first crisis London has lived through, and it won't be the last. At the Guildhall, which is where the City administration is based, policy head Stuart Fraser talks about his 45 years of experience there and says, "You just have to sit it out. It recovers." But he acknowledges that "it's a painful process, and we are only at the beginning." The impact won't be felt across the board. Barring a financial cataclysm, London will retain its position as Europe's preeminent financial center. Some wealth management may migrate to Singapore or Dubai, rapidly emerging regional centers, and some of the back-office jobs that are cut may never return. "As in any business, there will be more pressure to take more support roles out of London, to Asia or just to cheaper places in Britain," says Owen Jelf, who heads the U.K. capital-markets practice at the consulting firm Accenture. But there is no place other than New York that boasts the combination of specially tailored office space and clustered expertise to challenge London's status. And even in the worst-case scenario, the London economy has one crutch that won't be knocked down: huge government spending ahead of the 2012 Olympic Games.

The bigger issue is whether the risk-taking, hard-charging, high-living times will give way to a quieter, duller, less profitable and far more regulated era--not so much a golden age as a golden cage. The debt-fueled days are almost certainly history. Jon Lloyd, joint head of LG's real estate practice, points out that the investment-banking mentality of the past few years--ever bigger fees for ever more complex transactions--has spread to all sorts of businesses, from law to real estate. He wonders if that's all about to change. "Will we as advisers fall back to where we were 10 to 15 years ago?" he asks. "The question is whether we are now entering a more frugal world."

Lloyd already knows the answer, and so do thousands of others who have thrived off the good times. Yes, London is heading for a fall. Yes, it will hurt. But he remains sure of one thing. "We've got a city we are proud of," he says. "There's a feeling that London is a good place, and that hasn't changed." In troubled times like these, a stiff upper lip may be just what's needed.

Capital in Crisis For more of Tom Stoddart's photos of London's woes, go to time.com/london