Future of UK as a financial center?
Since Brexit it seems that all the news point to the downfall of UK, especially on its financial landscape: Lowest GDP growth among European countries, lower YoY volume of transactions in the LSExchange, current inflation levels, bla bla bla
To what extent those may affect someone considering London for a long-term career in finance? It is even worth to put the effort to move to London considering that its future isn't as optimistic as it was once?
Related to this question, to not open a new thread, to what extent the present and future of UK may affect a middle-upper class guy that is in a high-paying career? I understand that the lower and middle classes are hit the hardest with the energy crisis, inflation, less inflow of capital to consume, etc., but what about those of us that have a good career?
I always considered London as an attractive place to live and work, but now, I'm not so sure about that.
P.S. Just to get it clear, although this discussion went a bit after Brexit, I think that things are more clear now after some years of where UK stands and there is an idea of where it is headed, so I would want to get some updates and informed views.
https://news.cityoflondon.gov.uk/london-top-global-financial-centre-as-….
https://www.reuters.com/world/uk/city-london-remains-top-global-financi…
Stop listening to remoaner propaganda London is thriving
Reuters: City of London remains top global financial centre in own survey
Weak articles, high chances of being biased.
from your source (Reuters): Although London saw a decrease in capital markets activity and assets under management, it ranked top in both sustainable finance and talent and skills
being top in sustainable finance = bullshit
top in talent and skills - what's good for if there is a "decrease in capital markets activity and assets under management". More unemployed people with great resumes? Great.
What would you think to be the "safest" opinion on this controversy – when you're in a job interview?
Someone asks this question once every 6 months and the answer is always the same. London is fine.
Don´t worry. London will be fine.
London has built up their FO capacities and there are still a lot of options like PE and HF.
Frankfurt, Paris, Amsterdam, Luxemburg etc. cannot mess with London. Never ever.
Is there a compelling reason besides inertia why London should remain a financial center?
I think the same thing about NYC sometimes, and NYC has far fewer headwinds facing it than London does when it comes to structural factors. The truth is, aside from the existing infrastructure that surrounds the finance industry (e.g. consultants, lawyers, etc), there aren't many good reasons why any of these firms should remain everywhere in the internet era.
I would think language more than anything
Would you want to deal with a croissant eating frenchmen everyday?
what I like is that there is a common sentiment of hatred towards the french. It's like inborn
I've met many french and have my reasons to dislike them, but what's yours?
The two main competitors would be Frankfurt and Paris. No one wants to live in Frankfurt because it's meh. And French worker's rights are too strict to allow for a cyclical industry to thrive.
Those are the arguments I've heard.
Neither of those two cities is even close to London in scale, diversity, being "global" by pretty much every measure.
Why not literally anywhere else? Why does it even have to be in Europe? You're thinking about this in terms of "established financial centers" and I'm saying that you don't even need a financial "center" anymore - a lot of the structural reasons for that no longer exist. Like, NYC became the center of US finance because of the Erie Canal, and then later the global financial capital because the European financial capitals were in ruins from WWI. But none of those are true, and tracking US banks in the last 20-30 years, you can see that personnel/offices are slowly migrating, to Brooklyn/New Jersey 15-20 years ago and to Miami/Texas in the last five. Is it an overnight process? No, and NYC still has major preeminence... but there is no compelling reason for that to be the case except for inertia.
Any reason you can give me for why London should remain of global importance as a center of finance, you can just as easily find compelling reasons for Paris or a German city. Or, frankly, for NYC or Miami or wherever. After all, if London isn't part of the EU, then it has no real advantage over NYC, which is far bigger, more diverse, more "global" than London is...
French people suck, completely unreliable
No one cares about the market cap of the LSE - this is never what London has been all about in finance.
London is primarily two things: 1. the center of the world for FICC 2. a hub for pan-European banking
1. London is the global centre of the FICC market (especially FX, non-USD rates, derivatives and non-US DCM). The time zone spans all three regions (overlap with Asia in the morning, US in the afternoon), the daily fixings for FX and rates are set there, historically LIBOR was set there (hence the name LIBOR - London Inter-Bank Offered Rate), metals and other commodities. No one focused on IB talks about this as it is a bit far from M&A and ECM, but it is true, the size of the global FX and rates market is enormous, and London has a massive share of the business - which builds on itself as it is a natural place for ANY company to set up their trading desk or treasury function if they want to expand outside their home country.
The EU tried to force a certain amount of EUR swaps to be cleared within the EU - it just won't happen any time soon, the clearing and OTC trading infrastructure in London is well established and sophisticated. Also helps that the majority of derivative contracts worldwide that don't have a US nexus are done under English law.
2. In the absence of a better place to put a headquarters for the region (see infrastructure above) London beats all other options by a long shot. Paris has taken some trading jobs thanks to regulatory pressure, but it is impossible in the near term to replicate what London has already. English language, English law, the financial infrastructure and the general lack of alternative options to those coming from outside Europe - to be honest I am not worried about London's future at all. Yes it took a hit immediately post-Brexit but now I think people have realised that it still has plenty going for it, and that there is yet to be a real alternative in the region.
One last thing: it is almost worth separating "London" from "the UK", it is a global city that happens to sit in the UK. Not to say what happens in the country doesn't affect London and vice versa but the drivers are not necessarily the same.
Ireland is swiftly becoming a top destination for business, leveraging its competitive corporate tax rates, strong tax treaties with the US, and status as an English-speaking member of the EU.
The shift is evident as numerous financial firms relocate desks and expand operations from London to Dublin, with Ireland emerging as the principal beneficiary of Brexit. This surge is highlighted by significant investments like Citi's new €300 million office, JPMorgan's expansion, and the rapid growth of State Street's workforce.
Ireland is on a steady path to drawing substantial business away from London.
A lot of it is back office. But some tech firms have moved tbf
A lot is uncertain because, despite having shockingly incompetent governments for the last 3-4 centuries, the UK has been incredibly lucky. It has never been a military power (see how they got their asses handed to them any time they faced a minimally competent opposition, or even a resolute one). However, it’s an island nation, so they just had to focus on creating a strong navy, which, as luck would have it, they were, and still are, very good at.
If you take a longer view of British history, you’d find that Britain has consistently bobbed between moving closer to the US, continental Europe and what used to be the British Empire. Currently, the orders from Washington DC, which, let’s be honest, is where the real government of the UK and every NATO member sits, are for the UK to reinvest in its navy after decades of neglect in favour of an army and other apparatus to fight land wars in MENA and South Asia. This is because it’s decided to pick a fight with China and any conflict with them will have a large naval component. It is also something the UK has an advantage in, as mentioned earlier.
It might seem irrelevant but a country’s geopolitical and, especially, military strategy determines its economic prospects. So, a reversion to the UK’s natural / historical strengths in those areas will likely reorient its economy. I expect the UK’s financial sector to have much larger Asian and African component than was previously the case. Depending on the relative strength of its navy vs. those of others, it could develop the ability to coerce economic concessions out of uncooperative states. Any benefits will show up chiefly in the City of London.
There’s also the fact that the EU’s future isn’t secure. It has forces pulling it apart from within (looking at you, Hungary) while the American position is no longer one of benign neglect / support. Then, most concerning, it is now in the interest of Russia and China to support some development in Africa. Ditto the US. That would destroy the common agricultural policy and put a real squeeze on energy security (the US has blocked the EU from using Russian energy freely). The lack of any serious military capability (France can murder unarmed civilians and suppress democratic forces in its African colonies but nothing against a well-armed and trained adversary) might make the UK, with its newly rejuvenated navy, an attractive defence partner with some economic sweeteners thrown in.
The above bodes well for the UK in terms of a generally favourable macroeconomic climate. That said, it still needs to be competent enough to take advantage of it. The EU is still a regulatory superpower and will remain one for the foreseeable future. Trade frictions with such a bloc are NOT helpful - you tend to trade most with your nearest neighbours, after all. Given that free trade agreements are about increasing protection of key markets, no amount of them will replace unfettered access to a ~$10t market. There’s also the historical stodginess of the UK regulatory environment and an economic and asset ownership structure that exacerbates regional and social inequalities, making any advantages tenuous.
Taxes are both very high and not enough to pay for spending. The health system, like pretty much every one in Europe, is dysfunctional. Infrastructure is crap and expensive to build.
Basically, to take advantage of its amazing (and infuriating) good luck, it would have to take blasphemous measures at home. End free at the point of service for the NHS, introduce conscription for all areas of government spending (education, health and social care, police, military etc.), introduce a land value tax and cut income taxes, cut state pensions for seniors, maintain a liberal attitude towards economic migration and on and on. None of the measures above are popular but they’d put the UK on a good footing.
So, the UK COULD be a fantastic place for those with good careers in the future. I think it will almost always be a GOOD place for people with a good career. It’s gotten a few basics right (no civil war, little to no violent crime, functional courts and basic infrastructure) and that’s all you need. Then again, that’s true in dozens of countries in Asia, Africa, Latin America and Eastern Europe. So, they are good places for those with good careers too. I’ve been to enough of them to see proof. My $0.02.
This.
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