REUTERS SUMMIT – Panmure chief warns against “mad” UK regulation

November 18, 2009

By Clara Ferreira-Marques
LONDON, Nov 18 (Reuters) – Britain’s excessive regulatory zeal is hitting competitiveness and driving away top talent and innovative firms, as they flee a poorly devised tax regime and “spurious” legislation, one of Britain’s oldest brokerages said.

Panmure Gordon Chief Executive Tim Linacre on Wednesday warned Britain would be worse off after rules introduced in the wake of the financial crisis — not least a planned increase in the tax rate for high earners
to 50 percent.

“The fiscal regime for wealth creators in the UK is looking particularly shoddy — that does worry people and will be damaging. From my little parish, it will be very damaging for the City,” Linacre told the Reuters Global Finance Summit.

Despite public outrage at bonuses and huge bailouts that have hobbled government finances, top British bankers have become increasingly willing to question new rules they say will dampen profitability and damage London’s international standing.

A City veteran, Linacre said most people were willing to “take some pain” to take advantage of London’s benefits, but would eventually be driven out by a “bash-the-banker” culture and high taxes, leaving government coffers even more depleted.

“There comes a tipping point, and my worry is you can go over that tipping point before you realise it,” he said.

Mid-sized hedge funds, he added, were already in discussions about whether or not to leave London, home to 80 percent of the European industry, ahead of the tax rise.

Switzerland, meanwhile, has been positioning itself as a centre for hedge fund managers through a series of road shows in London, emphasizing its quality of life and low taxes.

“Fifty percent tax is just economic illiteracy. I can understand the politics of it, but in terms of a means of motivating, creating wealth, building a future for the UK and for London — it’s mad,” Linacre said.

“An awful lot of government policy has been driven by
headlines and the election rather than what is good for the UK.”

Linacre, whose brokerage has helped mid-market and small companies raise almost 500 million pounds ($840 million) in the first half of the year, said over-regulation of banks is occurring as the government makes changes that reach far beyond bailed-out lenders and its primary area of concern.

The Labour government, trailing in opinion polls ahead of an election next year, said in draft laws on Wednesday that it would curb bankers pay by allowing regulators to rip up excessive contracts, and allow groups of consumers to sue financial providers over misselling. [ID:nLI78228]

The UK state will own 84 percent of Royal Bank of Scotland as a result of a fresh deal earlier this month, and owns 43 percent of Lloyds Banking Group. It should, Linacre argued, use those holdings to bring change.

“When they start trying to bring about spurious legislation to apply across the broad sweep of banks… in ways that stop those businesses prospering, developing and growing, then they mustn’t be surprised if at the end of it they end up taking less tax from it… and less jobs are being created,” he said.

Linacre said regulation should instead focus on encouraging competition and protecting the sector against the unfair competition by the state-backed banks — something he said EU Competition Commissioner Neelie Kroes, widely criticised in UK media, was doing a better job of than Europe’s governments.

Linacre, along with the chief executive of Numis, and the chairman of Evolution, wrote to the government last week to complain taxpayer-funded banks were strong-arming clients into using their investment banking services.

He declined to comment on the response, which batted away their worries.

Linacre said a Conservative government was unlikely to bring short-term change to the sector, but added London would eventually do better than under the current administration.

“There is not the same hostility towards anyone who works in anything to do with the financial community,” he said. “Labour has gone too far.”

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(Additional reporting by Laurence Fletcher; Editing by Hans Peters) ($1=.5946 Pound) ((; +44 207 542 3214; Reuters Messaging:


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