The waning of London as a financial centre?

bigbadwolf

bigbadwolf

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An essay by Gillian Tett in the FT:

The essential issue at stake might be dubbed – somewhat irreverently – the “widget-cheese-finance” debate. Until a year or so ago, it was widely presumed among key global financial players that the British government was operating with an unspoken deal inside the EU. Under this, Germany and France let London operate as Europe’s dominant financial centre, run with pro-market rules; the quid pro quo was that countries such as Germany or France were allowed to keep supporting (if not protecting) their industry and agriculture. Thus, the French kept control of their cheese, the Germans produced impressive widgets – and hedge funds, private equity bodies and investment bankers kept dancing in London, ring-fenced from any anti-market rhetoric emanating from Paris or Frankfurt. Or so the argument went.

But these days, financiers’ faith in this “widget-cheese-finance” pact is crumbling. It is now increasingly clear that Paris is determined to grab more eurozone financial business from London, and less willing to accept the idea that London is “naturally” pre-eminent forever. German politicians seem less willing to tolerate the vagaries of Anglo-Saxon financiers too.

Meanwhile, the UK government itself seems increasingly ambivalent about whether it wants to fight aggressively for London’s role as Europe’s dominant financial centre; and, more importantly, maintain a climate that is explicitly friendly to banks and hedge funds.
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I remember in 2006 and 2007 people were convinced that London will overcome New York as the financial capital of the world.

(They were also predicting around the same time a $2/Euro exchange rate.)

And they had "compelling" arguments ;)
 
dstefan said:
I remember in 2006 and 2007 people were convinced that London will overcome New York as the financial capital of the world.

(They were also predicting around the same time a $2/Euro exchange rate.)

And they had ``compelling" arguments ;)
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My understanding has been that London is the place for the kind of shady deals which even New York will pass up.
 
I heard things along the lines of attracting deals from Eastern Europe, Russia, and Asia (India and China). Come to think of the origin of these deals, you are making in interesting point :-k
 
dstefan said:
I heard things along the lines of attracting deals from Eastern Europe, Russia, and Asia (India and China). Come to think of the origin of these deals, you are making in interesting point :-k
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The game is fast and loose in London. It's home to a class of global financial players some of whom would possibly be locked up in the USA. And the British state -- to preserve the only area where Britain still does well -- has been turning a benign blind eye towards the City. It's an open question to whether things will change given the upsurge in public indignation.
 
You really want to tease our London friends.:)
Quoting UNC-Chapel Hill basketball T-shirt: 'Elevate and Dominate!' ;)
 
This essay in New Left Review provides a bit of perspective:

The third move was to institute what Brown and his advisors triumphantly called ‘light-touch regulation’—effectively allowing banks to regulate themselves. This brought a phenomenal expansion in the role of finance, as funds poured through the City in search of super-profits. Ramped-up flows of capital meant that Balls could boast in 2006 that London had ‘70 per cent of the secondary bond market, over 40 per cent of the derivatives market, over 30 per cent of foreign-exchange business, over 40 per cent of cross-border equities trading and 20 per cent of cross-border bank lending’. A magnet for shadow banking and opaque financial engineering, the City became ‘Wall Street’s Guantánamo’—a place where us operators could do abroad what was not allowed at home. The hypertrophy of finance on Labour’s watch facilitated an asset-bubble to rival that in the us; by some measures, Britain’s was proportionally larger.The share of finance in gdp also grew more here than elsewhere, rising from 22 to 32 per cent between 1990 and 2007, as compared with an increase from 25 to 33 per cent in the us over the same period; the oecd average rose from 24 to 28 per cent.

The long boom in finance covered up the lack of growth elsewhere in the UK economy.
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Depressing essay -- but then, Britain has become a depressing, no-hope place.
 
It will take a lot of convincing to make the case for any other city to unseat NYC as the capital. Rome is not built in one day, and Wall Street is not going to go away any time.
 
And all this time I thought London was becoming the financial and cultural capital of the world, one Guy Ritchie film at a time.

 
Andy Nguyen said:
It will take a lot of convincing to make the case for any other city to unseat NYC as the capital. Rome is not built in one day, and Wall Street is not going to go away any time.
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I think as China continues to acquire more wealth per capita, Hong Kong will see the benefits of this financial increase. Additionally, if financial markets are getting more and more quantitative, this can only help them as well.
 

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