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London’s position as a leading global financial centre is under threat without reforms to tax and labour rules alongside other policies to strengthen international trade links and expand into new markets, one of the City’s main lobby group has warned.
TheCityUK said on Tuesday that the UK capital had declined relative to its biggest competitors such as New York and Hong Kong over the past decade, including its global share of markets such as cross-border bank lending, insurance premium-writing, pension and hedge fund assets.
The group has drawn up strategy working with 60 financial services groups that it said would help the UK “regain financial centre leadership in five years”.
Although London has remained Europe’s leading financial centre since Brexit, Miles Celic, chief executive of TheCityUK, said the government needed to do more to match the growth of rivals.
“Europe is littered with cities that were once the leading international centre of their day. The last decade has been one of growth for our industry, yet global competitors have grown faster.”
The UK government has in part focused on adapting the EU’s vast financial services rule books for the City. After wide consultation with the market, it is planning changes to standards on stock, bond and commodity trading, insurance and bank capital requirements. Over the summer, it also amended some standards to attract more blank-cheque companies to float on the London Stock Exchange.
TheCityUK said ministers must ensure these proposed changes were carried through, including allowing dual ownership share structures to draw more international initial public offerings and changing listing rules to encourage more alternative assets in UK markets.
However, it also called for more sweeping changes to rules that played a crucial role in senior executives’ decision-making, including reducing the high costs of sponsoring skilled worker visas and the long processing times.
Many City executives remain concerned about the lack of a financial services equivalence deal with the EU, as well as issues around movement of labour and recognition of professional qualifications. TheCityUK wants all new trade agreements to cover financial and professional services to improve market access.
The group wants a new flexible work system so that international staff can transfer for up to six months without a visa to their employer’s home country. It said ministers needed to secure international recognition for UK qualifications.
The group also highlighted that the UK financial services sector was taxed “considerably more than rivals in competitor financial centres” in New York, Hong Kong, Singapore and Frankfurt.
It described a government review of the bank surcharge as “encouraging”. But it also called on ministers to extend the VAT treatment on the UK management of offshore funds to the management of comparable UK vehicles.
It urged the government to work with the sector to help open new global markets in areas of future demand, such as investment in environment, social and governance areas. It pointed to the need for partnerships with other countries to create global ESG disclosure standards.
TheCityUK also raised concerns over the National Security and Investment Act, which comes into force next year and will give the government powers to block deals. It called for further clarity of its scope, given the risk that “vast numbers of transactions could be submitted for review, adding significant costs to investors and deterring future investment”.
The government said it had set out “a comprehensive road map to deliver a more open, greener and technologically advanced financial services sector and cement the UK’s position as the world’s leading financial centre.”
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