A global strategist for one of the leading international asset management companies has refuted the observations of some other observers who suggest London’s days atop the world financial league tables may be numbered.
Investec Asset Management’s Michael Power noted that whatever the outcome of a request last week by a UK business body for government help in remaining competitive, “far from seeing its position impaired, London is arguably using the current crisis to reinforce its primary position in world finance”.
It has also been given a boost by the recent fall in the value of sterling, which has made other such other centres as Dublin, Zurich and Geneva more expensive.
Although UK Chancellor Alistair Darling may have made the UK less competitive when he hiked taxes on businesses and individuals in his most recent budget, and other jurisdictions continue efforts to lure businesses and individuals away, Power said London continues “outwitting its pretenders one by one”.
Powers’s observations came within days of news that the recent tax rise had prompted a number of prominent UK business figures, including private equity boss Guy Hands, of Terra Firma Capital Partners and Odey Asset Management’s Crispin Odey, to reveal plans to relocate abroad – in Hands’s case, to Guernsey.
In March, before Darling unveiled his budget, London held its place at the top of a competitiveness ranking compiled twice a year by the Z/Yen Group think-tank and published by the City of London. It has been in the top slot, ahead of New York, since the survey began 2 ½ years ago.
Below, an excerpt from Power’s financial centre-by-financial-centre rebuttal — which did not mention by name such offshore centres as Guernsey, Jersey, the Isle of Man, Bermuda or the Cayman Islands — of the London-is-doomed argument:
• Dublin: “Originally undercut London due to its much lower back office costs [but] is now by some estimates 40% more expensive than London due to Eire being in the Euro Zone… Frankfurt and Paris are facing similar competitive pressures.”
• Zurich and Geneva: “Both…have lost ground to London in the private banking sphere recently. The compromise of Swiss banking secrecy in the wake of the virtual capitulation by the Swiss authorities to the demands of the US tax office has been a major contributing factor in this shift”.
• Dubai: “At least for the time being, seems temporarily hamstrung due to widespread problems in its overheated property market, concerns about some of its leading real estate developers and tight liquidity conditions…”
• New York: “will likely feel the hand of legislation far more heavily than London in the wake of financial problems in the US. Already reeling from the fall-out of Sarbannes-Oxley, New York most likely faces even tighter controls at both State (courtesy of Governor Cuomo) and Federal (courtesy of President Obama) levels.”
