London: vexed in the City
Cities, like footballers and bankers, set store by league tables. Top-ranked London, which leads several tables of global conurbations and is seldom outside the first three, frets that its position is under threat. Now an all-party parliamentary group committee has put together a plan for keeping London’s prime position.
London’s heft as a global city is undoubtedly tenuous. Brexit fractured its reach. The supposed slashing of red tape, low taxes and flourishing entrepreneurialism never did quite pan out. Covid-19 slashed tourist revenues.
One area where London has slipped is finance. Despite holding on to the number two slot behind New York, London took the biggest tumble in this year’s Global Financial Centres Index. The drop sharply narrows the gap between it and third and fourth-ranked Hong Kong and Shanghai. That is embarrassing given the draconian Covid lockdowns both suffered.
The drop reflects some dwindling attributes that once shone brightly. The UK’s global share of cross-border bank lending fell almost 3 percentage points over the decade to 15.2 per cent in 2020. Also down: insurance premiums, plus pension and hedge fund assets (the latter by a third over the decade). The number of international companies listing in London is down by a third, partly explaining the arm-twisting with Japan’s SoftBank over the listing of UK chip designer Arm.
These are not matters easily rectified by prescription. The plan’s authors revive calls for Britain to become a Singapore-style free trade hub, with low taxes and light-touch regulations. But they miss a bigger point. Issuers choose exchanges based on valuations and liquidity.
True, Singapore’s low-tax regime has helped lift its status as a home for regional corporate headquarters, but probably not as much as its rule of law and English fluency. Both of these are rarer in Asia than in western Europe, where access to markets — damped for the UK by Brexit — matters more.
