I’ve written a couple of pieces before about our obsession with London being the world’s pre-eminent financial centre. It’s a useful shroud for the financial services industry to wave and it plays well in the British press.
We used to have the world’s greatest empire and we imposed our culture and language on the rest of the planet so successfully that other nations now regularly beat us at all the games we invented. The empire is long gone but at least we’re still number one at something – banking and finance. Wouldn’t want to let Johnny Foreigner beat us at that would we? So say the bosses of increasingly globalised financial services firms as they try to scare governments away from stricter regulation.
It’s all rubbish of course because, as Gillian Tett said last year, in the end bankers will follow the money.
There are good reasons to think that London’s role in global finance is being undermined. But that reflects more fundamental, structural factors that go well beyond the bonus news.
What is likely to happen in the coming decades is that financial business will move closer to where capital sits, be that Hong Kong, São Paulo or Shanghai.
This emphatically does not mean London will die as a global financial centre. A large part of its business still comes from western markets, such as mainland Europe, and in the debt and derivatives world, it still has a big edge over almost everywhere, except , arguably, New York.
But what is increasingly dead is a hope that was briefly fashionable earlier this decade: namely, that London could be the top global financial centre for the foreseeable future. Instead, my guess is that in the next decade we will see leadership in the capital markets more evenly spread round the world. London will be just part of a pack.
Earlier this week, Fitness First, a British company owned by a UK-based private equity firm, announced that it is planning a stock market floatation – in Asia. The reason? That’s where the money is and that’s where most of the company’s growth will come from.
The clichés come thick and fast – prescient warning, shape of things to come, canary in the mine, thin end of the wedge…..
The London-New York axis, which has been a feature of global finance for a century, is losing its grip. Time was when anybody who was anybody listed in London or New York. Not so now. The fashionable crowd is drifting off to different venues.
As Gillian Tett says, it won’t be the end of London it’s just that there will be a lot of other financial centres of equal stature. It is surely time, though, to stop going on about preserving London’s position as the pre-eminent global financial centre. Trying to do so would be as futile as trying to shore up the British Empire in the 1950s.