November 3rd, 2011
03:29 PM GMT
London (CNN) - At last we have the battle-cry from the City of London, claiming its crown as Europe’s financial center. That’s despite Frankfurt’s fabulous financial futures set-up and the growing over-the-counter derivatives clearing capability in Paris. It’s about time Britain loosened its stiff upper lip to assert its place in Europe.
British PM David Cameron, shadow finance minister Ed Balls, Xavier Rolet, CEO of the London Stock Exchange and others have taken to the airwaves recently to hail London as the center of financial services in Europe.
The UK remains outside the single currency club, but it doesn’t escape challenge from its European peers. As Hubertus Vaeth, MD of Frankfurt Main Finance, tells Marketplace Europe: “Frankfurt is the main finance center …. we clearly have Russian banks coming in, we have Eastern European banks coming in.”
He adds, “of course you also have it in London, no doubt about it, but when we look at all the trades between both countries, you see that here the relationship is closer, there is a lot of history doing business with each other.”
But has London's financial center - known as the City - really been under threat from Frankfurt, home of the European Central Bank? Not according to David Buik partner of BGC partners. He tells me: “Whatever you are told to the contrary, Frankfurt is a Mickey Mouse center in comparison to London.”
He says, “London is the center of the time zone. English is the international language of the world. London is bigger than Frankfurt, Paris, Madrid and Rome put together.”
He adds “apart from Deutsche Boerse's prowess in financial futures, there are no products that Frankfurt excel at more than London. The fact that Frankfurt is likely to be more vigorously regulated means that it will be a less attractive place for capital markets business, the financing of foreign trade or just plain vanilla trading.”
The financial crisis meant London’s leadership position wobbled a bit, which widened the door for countries like Germany and France to build and strengthen their financial service sectors.
But Europe will still look to London as the region’s financial hub. The City accounts for the bulk of trading activity and jobs in Europe. While times have changed and deals can be made at the touch of a button from anywhere around the world, that old adage still applies: Location, location, location.
Chris Cummings, CEO of CityUK tells me, “you need somebody to press the button, and that actually requires a huge amount of skill and experience.…it is the depth of talent that we have here in the UK that means the right deal can get done by the right people at the right time."
He adds, “as a nation, the UK employs a million people in financial services and as a sector, financial services pays the UK treasury £53 billion ($85 billion) in tax take. The sector contributes £36 billion in export earnings to the UK. That is 3% of GDP, which is worth fighting for. It is about time the PM was much more assertive with other leaders in Europe.”
London is fighting to retain its place in a very competitive world - through Europe and further afield. Countries like Brazil, China, India, Turkey and Russia are all looking to bolster their financial service sectors.
As the pressure builds, the UK and London will need to be as competitive as possible - whether it is in regulation, tax, skills or education. London’s open market approach allowed it to become a mighty global centre in the first place. The struggle for financial supremacy does, in the end, come down to the numbers. It’s just how markets work.
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