Why London is doomed to remain a financial capital
It’s amazing how much coverage a thinly-sourced press release can elicit:
If you look at the PDF with the numbers in it, there’s no indication at all of where the numbers being cited come from, or what exactly they’re measuring. The idea, here, is that we’re trying to measure “jobs in the wholesale financial service sector”, which will include some but not most lawyers and accountants, if that helps.
In any case, Ben Walsh helpfully turned the press release into a chart:
This of course says basically nothing about which city if any is the financial capital of the world. If there were more wholesale finance jobs in Tampa than there are in London, that wouldn’t make Tampa an international financial capital.
What’s more, we can basically ignore the forecasts and extrapolations — everything in light grey. You think Hong Kong is going to add 70,000 new wholesale finance jobs in the next five years? Well, it might, I suppose, depending on a multitude of factors including what happens to money and banking regulations in mainland China.
The one thing that’s clear from this chart is that the 2008 financial crisis hit the US hardest, in terms of financial job cuts, while the European crisis which began a couple of years later was the point at which European jobs started getting shed. To be honest I’m a little surprised at how few jobs were lost in London during the 2008-9 crisis, but that might be a function of the way in which the Europeans tended to support their banks rather than encouraging them to consolidate, merge, and generally shrink.
In any case, London will be the capital of international finance for many, many years to come, regardless of how many jobs are shown on this chart. This is not necessarily a good thing. The press release features dark language on the subject of “onerous regulation and taxation in the UK”, as though we still live in a world where jurisdictions are well advised to compete on how laissez-faire their economic and regulatory policies are. (We know, now, how that works out.) If London remains a financial center — and it will — then that just means it will be much riskier than is appropriate for the capital city of a decent-sized European nation, and that Londoners will continue to suffer from having to live in an obscenely expensive city.
In a way, I wish that the scaremongering in this report were true: it’s about time that London’s center of gravity moved away from the ultra-rich. In order to do that, however, the city (and the City) would have to be much less of a magnet for international capital. And I don’t see that happening. Such magnets are cultural, and based in longstanding institutions; once the plutocrats have decided to put their roots down in London, it’s going to take a lot before they leave.
And really it’s the plutocrats which matter, along with a handful of large money-center banks. London could be an international financial capital even if it had only 50,000 people working in wholesale finance, rather than 250,000. When you’re dealing with trillions of dollars of capital flows, it’s never headcount which matters. Follow the actual money, not the paychecks.