March 25, 2023

London has lost its top position in a closely watched global index of cities compiled by asset manager Schroders.

In the latest Schroders Global Cities Index, San Francisco secured the top spot, amid the introduction of a new venture capital score to the index.

The American city of Boston was in second place, London fell to third in the ranking, and other cities in the United Kingdom also fell.

The index is based on four metrics: economic, environmental, innovation and transport.

Top 10: Top 10 cities in the Schroders Global Cities Index released today

The innovation measure, which previously assessed the strength of universities in a city, now also monitors the amount of venture capital funding directed at companies in a specific location.

While San Francisco ranked first as a center for technology innovation and Boston surpassed many in the spot due to its advances in biomedical innovation, many cities fared worse than usual.

Schroders said this was because many cities saw their economic prospects deteriorate as the year progressed.

London fell from first to third in the rankings, while Manchester dropped 10 places to 28th, amid a bleaker outlook for gross domestic product, declining household incomes and currency tightening. London’s venture capital score was also lower than its higher-ranking counterparts.

Speaking to This is Money, Andrew Williamson, Chairman of the BVCA’s Venture Capital Committee, said: “The UK venture capital industry has been going from strength to strength, with almost £3bn raised in 2021.

“This is partly due to the UK’s ability to attract and retain some of the world’s best talent, its large capital pools and its business-friendly rules.

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“To maintain its crown as one of the best places to invest in Europe, the government will need to ensure it remains competitive, especially if we are to see even more investment in innovative UK fintech or cutting-edge science.”

First Place: The US city of San Francisco was ranked first in the latest Schroders Global Cities Index.

First Place: The US city of San Francisco was ranked first in the latest Schroders Global Cities Index.

First Place: The US city of San Francisco was ranked first in the latest Schroders Global Cities Index.

New York and Melbourne retained their 2021 spots of fourth and fifth, respectively. Toronto, San Jose, Singapore, Hong Kong, and Paris ranked sixth, seventh, eighth, ninth, and 10th, respectively.

San Diageo and Berlin were, according to the data, the only two cities to enjoy a ‘significant’ rise up the ranking, coming 22nd and 30th respectively. Both scored well when it came to levels of venture capital funding and environmental policy.

Three Chinese cities, Shenzhen, Beijing and Shanghai, and Hong Kong reached the top 30, despite the restrictions in place due to covid-19 in 2022.

Certain cities in India and Indonesia also moved up the rankings considerably. Cities like Mumbai, Kuala Lumpur and Jakarta benefited from a greater focus on technology and innovation, as well as a highly educated workforce, according to the Schroders Global Cities Index.

Hugo Machin, Portfolio Manager at Schroders Global Cities, said: “San Francisco’s rise to first place, as well as the strong performance of several US West Coast cities such as Seattle and Los Angeles, may be a surprise given the widely reported net migration to US “Sunbelt” cities.

“However, the introduction of a VC score has boosted their positions significantly.”

He added: ‘Today’s index shows that despite the impact of the pandemic and remote work, cities remain the economic engines of the global economy. Its ability to provide collaborative spaces for work and offer fantastic dining, theater and retail experiences that cannot be replicated online.

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‘In this context, cities will need to have excellent transport links, affordable housing, green space and strong educational institutions to remain relevant. In addition, government policy should support the development of buildings that have excellent sustainability credentials.’

What is venture capital?

Venture capital is a form of private equity focused on investments in smaller, early-stage companies.

It is an alternative form of small business financing to debt and has grown significantly in popularity in recent decades.

Typically, in a venture capital deal, large chunks of ownership of a company are created and sold to a few investors through separate limited partnerships set up by venture capital firms.

Venture capital usually comes from wealthy investors, investment banks, and any other financial institution. But it can also be provided in the form of technical or managerial expertise.

Aimed at startups and companies looking to expand quickly, venture capital investment can have the potential to generate significant capital growth, but it can also be risky.

> How to invest in a VCT: the tax advantages offered and the risk involved

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