London has been the top European financial center for many years since Brexit. However, TheCityUK chief executive, Miles Celic, suggests that the government has a lot to do to remain at the top of other competitors.
According to TheCityUK, one of the UK’s leading lobby groups, London's position as the top global financial centre is threatened by a lack of tax reforms and labour rules. Insufficient policies to strengthen international trade links and open new markets are also among the factors that may contribute to the fall of London's financial leadership.
On Tuesday 6th, TheCityUK reported that the UK capital had declined over the decade due to the growing competition from New York and Hong Kong. This stiff competition is experienced in key areas like global market shares such as cross-border bank lending, insurance premium-writing, pension, and hedge fund assets.
As stated by Miles Celic, Europe is filled with big cities that were once the leading international financial centres. However, though the industry has shown an improvement in the last decade, the competitors have also grown at the same rate. This poses a threat to London's position as it fears the rapidly growing cities like New York will soon surpass it.
What Needs to Be Done?
For the UK capital to retain its leadership, it must look beyond its borders and strategize its operations. Of course, the UK government has focused on adapting the EU’s vast financial services rule books for the city. It is also planning to make some changes on stock, bond, and commodity trading, insurance, and bank capital requirements. It also amended some standards over the summer to attract more blank-cheque companies to float on the London Stock Exchange.
Ministers are, however, tasked to ensure these proposed changes are implemented. This includes allowing dual ownership share structures to draw more international initial public offerings and changing listing rules to encourage more alternative assets in UK markets. Besides, TheCityUK emphasized enacting changes on rules with a critical role in senior executive's decision-making. Such changes include reducing the high costs of sponsoring skilled worker visas and shortening processing times.
As many city executives remain concerned about the lack of equivalent financial services deal with the EU, labour movement issues, and recognition of professional qualifications, TheCityUK wants all new trade agreements to cover financial and professional services to improve market access. The group also wants flexibility on work systems so that international staff can freely transfer for up to six months to their employer's home country without a visa.
In its statement, TheCityUK highlighted that the UK financial sector was taxed considerably more than its competitors in other centres like New York, Hong Kong, and Frankfurt. It also described the government's review of the bank surcharge as an encouragement. However, ministers still need to extend the VAT treatment on the management of offshore funds to the comparable UK vehicles management.
The group also urged the government to partner with the financial sector and other countries to open new global markets in areas with future high demands. These include investment in the environment, social, and governance areas, and creating global ESG disclosure standards. Based on the concerns over the National Security and Investment Act, which is set to be effective from next year in giving the government powers to block deals, TheCityUK has called for clarity on its scope. This is after it pointed out that a vast number of transactions risk being submitted for review, which may add significant costs to investors and deter future investment.
The government has, however, defended itself saying it had set a comprehensive plan for an open, greener, and technologically advanced financial services sector to ensure London remains as the top global financial centre.
(Written and edited by The Decision Maker Team)