With winter drawing in and the consequences of the UK’s Comprehensive Spending Review being absorbed, I couldn’t help weighing up the advantages of emigration as I queued in the pouring rain to be allowed into a malfunctioning tube system. In the end, the arguments to stay put outweighed those to ship out – a close network of friends and family are here and I’m still addicted to the buzz and vibrancy that’s here. It was a wise man that said “when a man is tired of London, he is tired of life…”. However, it struck me that with a backdrop of increasing regulatory pressure and rising taxes, the folk in our larger banking institutions must be having a similar debate. If the outcome is different for them, what does this mean for London’s standing as a global financial centre, and the future of the British economy overall?
Commercial think tank Z/Yen has published its eighth Global Financial Centres Index, which placed London in the top spot. While undoubtedly good news, there were a couple of findings that raised warning flags:
First was the continuing and rapid rise of Asian centres. Hong Kong is rapidly closing the gap between itself, New York and London, while Shanghai was the highest climber, jumping from 11th to 6th. With London consistently rating poorly on quality of life indicators and given the planned squeeze on higher rate tax payers, it is surely feasible that the next generation of bankers will be lured to Asia. Second was the increasing importance of a stable business environment in determining competitiveness. The rankings of the Far East will clearly be aided by the uncertainty surrounding regulation and tax in the UK. A number of large investment banks have already said that they are prepared to shift their operations if regulation becomes too onerous.
Whatever your thoughts are on banks and bankers they play a critical role in both the UK economy and the London real estate market. With Asia posing a credible threat, the UK cannot afford to be complacent. If institutions decide to “emigrate” to alternative markets, the impact on occupier demand in the City will be significant. I hope that like me, the banks decide that London is still too hard to leave.