London keeps up appearances, for now

LONDON (Fortune) -- Well, at least The City looks good.

No matter what the mood in the financial capital of Europe (and based on the conversations and chatter at a Fortune event here Wednesday night, the mood is pretty grim) the city has a nice glow about it.

Perhaps it's the sunny weather, or the capital improvements in preparation for the 2012 Olympic games, but London doesn't appear to be crumbling - not yet, at least.

A Starbucks store near Oxford Circus was full at 11 a.m. on a weekday, packed with a few tourists but mostly locals holding business meetings or taking quick coffee breaks. Ditto a nearby Pret a Manger sandwich shop.

Any worries about Gordon Brown's hastily announced plan to help prop up British banks via injections of capital weren't evident on the faces of the would-be fashionistas at retailer Topshop's flagship store.

In recent years London has been riding high. Just a year ago, its civic leaders made the case to Fortune's Peter Gumbel that London, not New York, was the financial capital of the world. (See "London vs. New York smack-down")

The city was full of free-spending folks from the Middle East, Russia and India, who bought up townhouses and cut swaths through the city's social scene. Russian oligarchs seemed to be particularly conspicuous. Travel Web site Gridskipper earlier this year assembled "The Russian Billionaire's Guide to London," offering advice on the priciest hotels and best caviar in town.

Now the Russian economy is sputtering, and it turns out a few of those Moscow rich guys were pretty leveraged. Will they economize by cutting out their expensive London jaunts?

Some London residents suggest the summer Olympics will offset some of the effects of a financial slowdown. The city has committed to build a new Olympic Village and other projects. Those projects, one optimist suggested, are providing construction jobs that would have been lost when the housing bubble burst here. (Housing bubbles are most definitely not a U.S.-only phenomenon.)

It seems unlikely that the Olympics alone can sustain London, or even keep consumer sentiment buoyant. But one thing is for sure: The success of the Beijing Olympic games means London will be under pressure to put on a good show. That means no matter how bad London feels, the city certainly will keep up appearances.