The classic characterisation of the British is the stiff upper lip that enables them to face misfortune bravely and resolutely.
The classic characterisation of the British is the stiff upper lip that enables them to face misfortune bravely and resolutely. But perhaps this stoicism keeps those in charge from waking up and smelling the coffee. For if the government does not do something about the alarming situation facing London as a financial centre, there may be a huge price to pay.
Financial services firms are already leaving town. Henderson Group, a UK asset manager, is planning to move its tax residence to Ireland, while hedge fund manager Krom River Partners plan to move from London to Switzerland. These departures are gradually intensifying – and will turn into an exodus if the UK does not respond fast.
With other financial centres becoming more competitive and with London becoming arguably less so, a steady erosion of the financial industry, which is highly mobile, could take place as asset managers and others decide to move out for personal, lifestyle or tax reasons.
While problems mount at home, a new organisation called the Professional Services Global Competitiveness group has been set up to promote London as a financial centre. Its members will be responsible for prioritising international marketing challenges facing the capital’s financial services industry. The group will report directly to the UK’s finance minister, Chancellor of the Exchequer Alistair Darling, on issues affecting the legal, financial and accounting services of which the UK is a leading provider.
But what will they market? A very busy city suffering from pollution and poor infrastructure, not to mention a perception of rising crime. On top of that the government risks making the industry feel unwelcome through tax investigations and ambiguous fiscal rules.
Changes are needed and fast. The solutions needed are drastic – and will need to focus, one way or the other, on cutting taxes, especially corporation tax. It’s either that or companies will start walking – indeed, many of them have already started doing so.
