The song isn't stating that the chronicled city of Jerusalem is in Great Britain. It is alluding to the "New Jerusalem" which is an analogy for "Paradise" or "The Kingdom." Basically the song, which was composed amid the ascent of the Industrial Age ( think about the somber conditions portrayed in Dickens and comparative writers of the day), is requiring the working of "The Kingdom" through Christian works of benevolence and government changes.

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