Whether you are traveling to London or thinking of moving there, you may be surprised at the cost.
London can be quite an expensive place to live, and some people are confused by this.
If you have been wondering why London is so expensive, there are some very strong reasons behind this.
We have come up with ten of the top reasons London is so expensive.
Reading this list will have you thinking a bit differently about the area, and it may help you understand why the costs are what they are.
Why Is London So Expensive? (Top 10 Reasons)
1. Higher Wages
People in London tend to make more money than those who are living in the United States.
When business owners need to pay people more money to work for them, the cost of the goods and services must also go up.
This, of course, has some positives and negatives.
People can make a living and survive in London because of the money they make at their jobs, yet it costs everyone else a bit more in the checkout line.
Labor is one of the highest costs that any business can have, and the labor costs in London are quite high.
Some businesses will outsource their work in order to help make sure that their pricing can remain in check at their London shops.
The higher wages will be a starting point for higher overall costs all around the London area.
The good news is that you can usually go a little lighter on the tips since the employees are already making a good amount of money.
2. High Sales Tax
In addition to paying more for products because the wages are high, you will also pay a lot of taxes in the London area.
The tax in London is called the VAT, or the Value Added Tax.
This is part of the European Union, and it applies to goods and services that are purchased in the European Union.
The problem with the value-added tax is that it is a little over 15%.
This is considerably higher than the sales tax that people pay in certain states in the country.
Sometimes you may see items for sale broken down with the VAT added to the total price, but there are other times when you will not even know it is there.
You will simply notice that the pricing of everything in London seems inflated, and therefore, there must be some kind of a reason behind it.
Overall, the tax is a problem that cuts into those wages people are making.
It’s difficult for those living in London to deal with, but it’s also something that is equal across the board.
In some countries, the currency is much stronger than the dollar that is used in the United States.
This is good for the people from those countries when they come to visit the US, but for those trying to visit London, it’s very difficult.
Essentially, the economy in the UK is quite strong, and it remains stronger than the United States at many times.
For every one dollar, you are going to get the equivalent of .72 pounds.
This will make things seem even more expensive for the Americans who are moving to or visiting the London area.
When your money does not go as far, and the pricing for things in that country is already higher, the country may get a bit too expensive.
The exchange rate is something that is worth considering anytime you travel.
If you want your money to go further, you are going to need to choose a country to visit that is weaker when compared with the American dollar.
When planning a vacation or a move, this is a crucial thing to consider.
Make sure that you calculate this into the cost of your trip to London.
Use an online tool to convert the prices of everything to the American dollar.
This will ensure that you aren’t preparing for an amount of money that will increase by more than 25% at the time of your travel.
4. Smaller Market Share
London is not nearly as large as the United States.
This means that there is a much smaller market for the retail stores to go after.
They will have to compete harder to win the customers, and unfortunately, this competition can drive up prices.
There is usually quite a bit of advertising and promotion that goes into getting the business to increase in size and attract more customers.
With countries that have larger populations, retailers have an easier time surviving because their customer base is quite a bit stronger.
This larger market share would help London to decrease its overall costs, but there is just no room to expand.
The margins on the products sold, even in grocery stores, need to be higher because of the volume of product that is sold.
Some residents of London are going to purchase their goods elsewhere when possible to try and save money on the retail prices in the area.
For those who are visiting the area, it is harder to avoid these higher prices.
5. Inexperience with the Area
Many people take a trip to London and come back and state that it was much more expensive than they had thought it would be.
This is very common, and part of it has to do with the inexperience of the tourists.
Locals know their way around the city, and they know where they can get fair pricing for food, goods, and services.
Inexperience with the area causes people to go after chains and products and hotels that they recognize and know from their time in the United States.
These areas usually have higher prices because they are essentially tourist traps.
If you want to avoid falling victim to this issue, then you will need to develop a bit of an understanding of the London area before you head there.
Talk to locals and ask them where the great deals are.
They will tell you that there are some local businesses that are going to be much fairer in pricing than you may have imagined.
In addition, there are ways to get around London using the bus system, which is considerably cheaper than cabs.
Tourists don’t think they can pick up or learn this system, yet it is not at all difficult.
This is just another reason to spend some time researching the areas you travel to prior to getting there.
6. Property Prices
Just as we see in major metropolitan areas in the United States, people that are in London want to be focused on the very center of the city.
This area will have quite a bit of action and tourists will enjoy all that is going on.
The problem with this area is that this is where the property prices are going to be the highest.
When property prices are high, hotel prices are also higher.
In addition to the popularity of vacation rental properties, you will notice that they are also higher in the main part of the city.
This comes down to a difficult decision about where exactly you want to stay when you visit London.
Do you want to be in the heart of it all and enjoy everything there is to offer within walking distance, or are you fine with having to spend some time getting to the locations?
This really comes down to budget, but you can imagine that certain property prices throughout the country are going to make the area more or less expensive.
Overall prices for property in London are quite high, and they will likely not drop anytime soon.
This area is known for being high-end and impressive, and people simply expect that it will cost them more.
We all have transportation costs in our lives.
Having to commute to work and school ends up costing quite a bit of money.
In London, the costs seem to be even higher than in other areas.
One of the reasons is that getting around London is a bit harder to do than getting around other areas in Europe.
Essentially, there are fewer roads, so you will be stuck in traffic a bit longer.
If you want to avoid this traffic by using the train rail system, you are going to deal with some very high fares.
The prices of the trains in London are quite a bit higher than in other areas, and it sometimes feels as though they are charging these rates because there are no other options.
People in London will talk about how difficult it is to get around and how expensive it is to try to afford these high transportation prices.
Between the VAT and the higher prices for retail and commuting to work, London becomes one of the hardest places to try and make it.
If you can afford to live in the heart of the city, you may be able to get away with walking from place to place.
Clearly, this will save you a lot of money, but it won’t be enough to make London a cheap place to live.
You will still have times when you need to travel, and that will end up costing you quite a bit of money.
8. Consumer Law
When you are selling retail products in the United States, there are very strict rules and laws about the products and the way a customer must be treated.
You cannot misrepresent what you are selling, and you must sell only high-quality goods.
These same types of rules and regulations are not the norm in London.
In this area, you are not able to file class-action lawsuits, and that makes it much less difficult for consumers to get taken advantage of.
The people in London are used to this concept, and they have become very careful about what they buy and who they buy it from.
When it comes to tourists and new residents from out of the country, this can be a bit more difficult to manage.
It takes some time to work out these issues in the market, and you may find that you are overcharged several times before you can decipher a good and bad deal.
The bottom line is that, with no protection, prices can go higher and higher, and people don’t even understand that they are getting a bad deal.
In all areas of the world, there are some instances of inequality.
There are people who make a lot of money and those who hardly make any.
However, in the London area, the population is mostly wealthy.
Some of the wealthiest people in the world live in the London area, and they seem to continue to keep getting wealthier.
This makes the London area very popular for luxury goods and services.
The area is well known to those who have high-paying jobs and like to travel and spend their money.
There is a bit of an uppity feeling to London.
You can tell that the people there have money, and they are not afraid to spend more and more to get the services that they want.
This makes the city more expensive as a whole.
If the people in London were made up of more middle class, then the pricing would likely drop quite a bit.
10. Food Costs
Last but certainly not least on our list is the high price of food.
Whether you are going out to eat or eating at home, the price you pay for food is high in London.
In some grocery stores, you can pay close to $6.00 for a gallon of milk.
Trying to feed an entire family with prices like this will undoubtedly make you feel a bit broke.
Food costs in London are high because people make more money and are willing to pay for them.
The high pricing has quite a bit to do with the fact that London can be difficult to get in and around as well.
These restaurants and grocery stores have to go through quite a bit of work to be able to stock their shelves.
As soon as the food is in the store, then you are going to have to pay the high labor costs to have the shelves stocked for you.
Overall, the food costs are going to make London an expensive place to live and to visit.
The London area is known for being quite expensive.
There are things about living, traveling, eating, and entertainment that will make the London area one of your most expensive vacations.
If you are planning to go to the London area, make sure that you take into consideration the amount of money the dollar is worth against the pound.
This will likely have a significant impact on your travel budget, and it needs to be considered.
Ask locals about great places to enjoy in London and see if you can figure out ways to save money by asking around for the best deals.
Sometimes the local spots with the best products are going to end up saving you money in London.
Stay away from big brand names, and you may have a bit of money left over when your trip is done.