London may currently hold the top position, but solid policy and reforms are urgently required, writes Chris Hayward
Following Brexit, Covid and high-inflation woes, the UK economy is crying out for a much-needed boost.
As a contributor of more than 10 per cent of Treasury tax receipts and provider of more than 2.4m jobs, the financial and professional services sector will be a key player in any economic success the UK achieves in the next decade.
Despite the sector’s leading role as the economy’s “engine room,” there’s been countless headlines of the dearth of new listings on the London Stock Exchange and companies delisting to seek greater valuations overseas.
These challenges cannot be ignored – but there is in fact more to the story of the UK’s post-Brexit financial health. A new report commissioned by the City of London Corporation has ranked London as the top global financial centre. Using 101 external metrics including business infrastructure, financial activity, regulatory openness and talent and skills, the findings confirm that the capital has surpassed New York City.
Our strengths come down to three key areas. First, the UK’s regulatory regime is starting to send a positive signal to businesses. Post-Brexit reforms such as the Financial Services and Markets Act, the Edinburgh reforms and the Mansion House Compact all appeal to international businesses seeking to invest in the UK.
Second, London’s green finance expertise is sought after across the world, boosted last week by the announcement of the UK’s transition markets finance review of which the City Corporation is providing the joint secretariat.
Third, the London market is highly appealing to international workers creating a world-beating talent pool in the capital.
London is continuing to show resilience, but this doesn’t mean we stick our head in the sand when it comes to the ongoing challenges. To revive our competitive edge and widen the gap with our competitors as the best in class, we cannot ignore the areas in which we fall short. This means tackling our risk-averse culture. And while regulation is good, it must be appropriately balanced with innovation.
The Mansion House reforms unveiled last year is one such step towards this as more than 10 of the leading DC pension firms agreed to allocate five per cent of its funds to unlisted assets in a bid to back high-growth British businesses.
In addition, it must be simpler for companies to list on the London Stock Exchange, so they don’t choose New York or Singapore over the UK. We’re a global tech superpower – let’s harness the innovation and brain power to help firms to grow and list here.
The number of foreign companies listed in the UK is dropping, with 328 listed in 2022, down from 352 in 2021. The Financial Conduct Authority recently announced reforms to its listing legislation with the aim to boost the UK as a destination for IPOs and optimise the capital raising process for companies seeking to list on the main UK markets. These changes could come into force as early as June 2024.
Lastly, the UK’s business infrastructure must be faster and more responsive. The UK has the highest visa costs amongst global financial centres, our report on global talent published last week found, presenting a significant barrier to attracting the brightest and best.
Although we have a great talent pool in the City already, the leaders of tomorrow in AI, life sciences and tech face significant challenges.
While London may currently hold the top position, solid policy and reforms that address capital markets, digitalisation, talent and sustainable finance must be presented by both leading political parties ahead of the coming General Election to once again revive the economy’s engine room.
City of London Corporation policy chairman, Chris Hayward