London slips from top smart centre spot
London has lost its place as the world’s top hub for science and tech innovation after a sobering report warned of the City’s slipping global status.
The UK’s capital fell behind San Francisco and Zurich which stormed ahead with a gain of 16 and 6 points respectively. Meanwhile, London’s rating shed three points as it tumbled to third place.
The 11th iteration of the Smart Centre Index, seen exclusively by City PM, judges top global cities on their innovation, high performing university sector across STEM subjects and well-developed regulatory, commercial and financial services sector.
Regulatory environments were flagged as a top issue with calls for clear and consistent regulation that moves at the same pace as technology. Taxation was also viewed as a key factor affecting centres’ development.
Respondents said that innovation should be rewarded with tax incentives, highlighting the UK’s R&D tax allowance and credits, which allows firms to deduct a larger amount of their eligible research and development costs from their taxable profits.
But they also highlighted the need for “clear and transparent tax policies”.
The report, produced by consultancy Z/Yen, said confidence was not “strongly affected” by the rising geopolitical tensions triggered by President Donald Trump’s erratic trade agenda.
This latest blow to London’s standing as an innovation centre follows previous reports from City PM that Paris had overtaken London as Europe’s tech capital.
Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves have promised to “cut the red tape” to unleash economic growth across the UK.
Their efforts so far have included the scrapping of the Payment System Regulator (PSR) with further reforms expected in the Treasury’s inaugural Financial Services Growth and Competitiveness Strategy in July.
But after Z/Yen revealed London’s global standing had tumbled, the government may have to swing big to claw back its competitive edge.
AI predicted to dominate
Finance bosses slammed Reeves’ tax policy earlier this month, as she faced pressure to provide “a clearer, more stable tax environment” and avoid “knee-jerk” reactions.
A leaked memo from Deputy Prime Minister Angela Rayner lobbying for new taxes mounted speculation about further hikes driving fresh financial anxieties.
Despite London’s woes, Oxford climbed up the rankings to fourth place after a six point jump. Its fiercest rival Cambridge lost three points, falling to tenth place.
Just under a quarter of respondents said they expected AI to have the most impact on industry over the next five years.
Energy and environment and electronics, photonics and quantum ranked second and third at 17 per cent and 13 per cent.
Professor Michael Mainelli, chairman of Z/Yen and former Lord Mayor, said: “With heightened global tensions and rivalries, tech spending is spread across a broad font – from saving lives to defence to the environment.
“Z/Yen expects yet more volatility among Smart Centre ratings as perturbations change which technologies are favoured and which centres are best placed to develop them.”