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‘Banker bashing’ blamed for London losing status as world’s top financial city
Jonathan Prynn, Consumer Business Editor12 Mar 2010
London has lost its status as the world's unrivalled financial capital after demands for curbs on bonuses and tougher regulation of the City.
The capital is now only ranked equal to New York, having held on to the top position since overtaking the Big Apple in 2007, according to an influential survey published today.
In what was described as “a wake-up call” for London, the survey also showed other “secondary” European financial centres such as Frankfurt, Zurich, Paris and Geneva starting to catch up.
City leaders said the latest Global Financial Centres Index rankings justified fears that London's international image has been harmed by “banker bashing” and the Government's moves to raise taxes on high earners and beef up regulation.
Stuart Fraser, policy chairman for the City of London Corporation, said: “You can't take this route without endangering the competitiveness of London.”
Although London has held on to its world leadership for asset management and professional services such as accountants and lawyers, it has been eclipsed by New York for government and regulatory services and by Hong Kong and New York for insurance.
It is the first time the City has fallen out of the top two for any major area of financial services.
Another finding that will concern City leaders is that London is now ranked behind New York for the quality of its people, for the “business environment” and for infrastructure.
London overtook New York as the world's financial capital in 2007 in the wake of the Sarbanes-Oxley reforms in America, which imposed far greater personal responsibility for corporate wrongdoing on senior executives. This resulted in a surge of listings of companies on the London Stock Exchange before the credit crunch.
However, the increase in personal taxes on high earners to 50 per cent and a one-off payroll tax on bonuses over £25,000 has raised fears of a financial “brain drain” out of London.
The survey of 75 leading financial centres around the world was taken between July and December when discussion of tougher regulation and higher taxes in the UK was at its height.
Mr Fraser said: “Damage has been done to the Square Mile's perceived competitiveness relative to New York but this is not irreversible provided the new incoming government — regardless of political persuasion — makes a clear, positive statement on their direction of travel' on tax and regulation.”
Reader views (21)
It is frustrating to read some commentary on this subject – and extremely concerning how apparently ill informed vast swathes of the population seem to be. Who should I blame.....What a facile question. To answer it honestly it has to be all of us. At least those who borrowed above their ability to repay after the normal cycle swings down again. And the government – those rats that took everything they could during the upside and squandered it – and then blamed everyone except themselves.
To quote Beannie Self, a community leader from the Faryser area of Memphis “The American Dream is home ownership, and one of the things t5hat concerns me is – while the dream is wonderful – we are not really prepared for it. People don’t realise you have a real estate industry, an appraisal industry, a mortgage industry that can really push people into houses that a lot of times they really can’t afford”. As a business model subprime lending worked beautifully as long as interest rates stayed low, as long as people kept their jobs and as long as property prices kept rising. Brown must have understood this and did nothing – the government was doing just fine raking in huge taxes from all aspects of the financial services industry... and then squandering it all on stupid policies and social experiments
- John Davie, St Albans, 15/03/2010 19:03
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I used to pay the government £100k per year in tax. I've now left the UK mostly because of Gordo and his idiotic policies. I now pay that tax in Australia. How is this good for the economy?
- Dave, Sydney, Australia, 15/03/2010 03:21
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To all the banker-apologists who say banker-bashing is short-sighted and inane, just what do you think should be done about this catastrophe?Is it perfectly fine for many of these institutions to still be paying ridiculous salaries and bonuses when they wouldn't even be in existence were it not for the taxpayer?Why is it not obvious that when you've been bailed out by the taxpayer you cease to be able to operate on your own terms as if nothing had happened?The arrogance simply astounds.I'm not some angry uneducated jealous leftie, I have a fair amount of knowledge of what most of these jobs involve and I can tell you that a lot of them simply don't add very much value to the system (at least not the extent implied by their levels of pay).Financial services exist to grease the wheels of normal commerce (buying and selling actual goods and services), they are not by themselves productive activity.The sooner this country redirects its human intellectual capital towards solving actual problems (rather than gambling with other people's money) the better, and if we have to endure a decade or two of relative poverty while we readjust then so be it.How can anyone still dispute this after all that has happened?Are memories so short?
- Richard, London, 12/03/2010 15:46
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This thread demostrates a massive victory for government spin.
We'll done people.
- Alex, London, 12/03/2010 14:55
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Don etc I think you are delusional - the bail out is a fraction of the revenues the banks have paid into UK PLC - in the gravy times when we paid salaries to the public sector backed by tax revenues and of course pensiosn that simply no one can afford. If you Don must kill the goose could you at least explain how you are going to replace the 50 billion per year tax you kill with it - perhaps by scrapping public sector pensions?
- Christian Ball, London, UK, 12/03/2010 14:51
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The City has brought this whole situation down on itself. It cannot place blame elsewhere. What it should do now is to stop wallowing in its own self pity and show the world how good they seem to think they are. Then and only then will opinion change!!!
- Pedro, Dubai UAE, 12/03/2010 14:45
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Let me get this right... We lost the status not through incompetent banking practices by fools, but because Joe Public expressed displeasure at their behavior.
Yeah right!!!
- Charles Greenwood, Clapham, London, 12/03/2010 14:38
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So Legal Immigrant of City of London, the fact that because of the 'bank bailout' the taxpayers or the BOE (owned by the taxpayers) have had to:
- nationalise (or effectively nationalise) Northern Rock, Bradford & Bingley, RBS, and Lloyds/HBOS among others
- institute an asset protection scheme to provide billions in guarantees for bad loans made by Lloyds and others
- institute a special liquidity scheme via the BOE to provide emergency cash support to almost all of the banks (this is not the £200bn of QE, which was in addition to this!)
- reduce VAT to provide an emergency fiscal stimulus (with accompanying loss of tax revenue)
- provide a variety of other taxpayer support from mortgage protection schemes, loans/guarantees & other support to individuals & businesses when banks withdrew funding or imposed impossible terms on renewal of facilities
- suffer the loss of tax and have to pay benefits when people lose jobs and businesses fold
- suffer the collapse of Corporation tax revenues from the banking sector when the banks' losses from scurrilous and reckless behaviour wiped out their profits (and no profits, no Corp Tax!)
just (apparently) had nothing to do with the country's financial woes.
Moreover, since virtually every other major country in the world from the US to Germany to Japan has a ballooning fiscal deficit, Gordo must truly be amazing to be the cause all of that.
- William, London, 12/03/2010 14:36
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Anyone smart enough to listen to the last Pre-Budget Report will have heard Darling state quite clearly that the bank cost of the Credit Crunch was revised down from £50bn to £5bn. At no point was the £700bn number being banded about by NuLabour newspapers ever handed over to anyone but it was merely used a a guarentee.
The entire crisis was used as a 'Get out of jail free' card for years of poor public spending. In short the government found themselves in a situation where the bottomless ATM (the banks) ran out of money due to international exposures. Sure enough, somebankers were idiots but nowhere near was it an industry wide an people make it out ot be.
In short some banks lended money they didn't have to people that couldn't pay it back.
- Hansel, London, 12/03/2010 14:17
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"At some point in time banker bashing crowd needs to explain why losing even one or two tax paying residents or institutions is actually a good thing for London - or UK in general."
Let me explain, the loss is not good but preferable to simply accepting being held to ransom and swindled by a tiny number of unelected chancers with power approaching that of the elected government. It's a matter of pride, when someone tries to rip people off they don't bend over and say "oh go on then".
- Dan, London, 12/03/2010 13:58
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in my opinion,..it plays right into the grubby hands of the Germans, Bundesbank & EU nutters who want Franfurt as the capital of the EU financial world
all this mess is music to their ears
certainly makes one wonder whether the 9/11 atrocities & so called "credit crisis" "recession" was purposely done to manipulate the markets
In 9/11,..many of the USA's top Jewish & USA bankers were slaughtered in the attacks.
- Britbloke, uk, 12/03/2010 13:56
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The bad practises of financials institutions is one matter (should have been better regulated by the government, FSA, etc.) and London’s position as top financial city is an entirely different matter. The service sector in London is what keeps this country afloat. It’s all well and good saying good riddance, but when the companies and jobs have gone elsewhere, then there will be little else left for Britain. Talk about biting the hand that feeds you.
- Xtremely Worried, Britain (No Longer Great), 12/03/2010 13:48
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Immigrant... Its the banks that got us in this mess, and the gov't had no choice but to bail the banks out unfortunately we all have to pay for the mistakes made by a relatively small number of people in the city. The banks have done nothing but generate liabilites for the gov't and the taxpayer.
- Mike, London, 12/03/2010 13:43
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If some poor management leading to an economic crisis is sufficient to write off an entire industry willingly (and with it our biggest hope of generating the revenue required to settle our colossal debts), then by the same token Brown & Co have devalued the stock of politicians.
So to all the dog-in-the-manger, short-sighted banker bashers wishing bankers 'Au Revoir', will you also kiss all our politicians goodbye? And any other industry or institution that goes off the rails?
To be fair, if you actually buy into such inane and ridiculous thinking then you probably deserve the barter economy you're heading for. You're probably enjoying a significantly cheaper mortgage as a result of the same decisions you're moaning about. But justice is going to wreak a terrible revenge on you all within the year if and when interest rates are hiked by 5% to combat inflation. LOL. Banker-bashing has the same intellectual value as the thinking of BA cabin crew wishing away their existence. Enjoy, lemmings.
- David, London, 12/03/2010 13:43
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The focus should be Labour Government and Gormless Gordon bashing. They got us into the current mess!
Anyone notice the sheer arrogance of Labour MP Diane Abbott on BBC's This Week 11th March 2010. Everyone is supposed to kneel down to her following her 'I am a politician!' remark. Let's hope her constituents reward her appropriately come election day.
- Joe, Thornton Heath, London, 12/03/2010 13:42
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Quote: Legal Immigrant, City of London. At some point in time banker bashing crowd needs to explain why losing even one or two tax paying residents or institutions is actually a good thing for London - or UK in general.
I would think that losing a few money grabbing selfish greedy bent bankers would be well worth losing etc; in exchange for a decent honest City of London that had integrity and morality restored to it etc.
You bent banker supporters may not agree with this idea; but I am sure the rest of the Nation, does agree with it.
There is such a thing as self respect, morality, and honesty; most people in the UK do have it etc; if bankers had just a little of that, the City of London would be respected all over the world, as an honest, and dependable place to trade in safety etc.
Are vast profits worth selling your reputation or soul for?
- Mickinlondon, london, 12/03/2010 13:37
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It probably has more to do with the staggering incompetence of the banking industry leaders who were probably the worst bankers ever. Just look at the household names built up over generations which were bankrupted on a wave of greed. The indusrty still has to face up to it.
- Tony, London, 12/03/2010 13:30
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I'm pretty sure that the bankers couldn't care less what anyone thinks of them. It's all about the bonuses. These are the bonuses that are paid from exhorbitant fees. Fees paid to them by companies thus reducing dividends to shareholders. Who are these shareholders? Pension Funds. We pay the massive bonuses to these jumped up estate agents and they honestly, trully believe they deserve them.
- Alex C, London, 12/03/2010 13:26
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At some point in time banker bashing crowd needs to explain why losing even one or two tax paying residents or institutions is actually a good thing for London - or UK in general. Especially when the Government leaves the country in a major financial hole, conveniently blamed on 'bankers bailout' rather than on public spending binge over the last 10 years... But then again, Labour seems to know its electorate well.
- Legal Immigrant, City of London, 12/03/2010 13:07
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Yawn. Simon Jenkins in the Guardian got in spot on today - the major banks lied to the British people when they promised they would use the trillion or so pounds we threw at them to make lending to businesses cheaper and to help people weather the recession.
Instead they kept the lot and used vast chunks of it to continue to stuff their own pockets.
If they want to go to Zurich, then auf wiedersehen and au revoir.
- Liam, London, 12/03/2010 12:58
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I think buying nothing for billions and then collasping the economy and getting the taxpayer to pay might have something to do with it. get work . do i get a bonus ?
- Don, london, 12/03/2010 12:26
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