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The City Under Threat Bruges Group 26 th October

This article explores the importance of setting rules that affect the UK's national output and economic activities. It discusses the significance of the London economy, particularly in international financial services, and the potential threats it faces from EU directives and regulatory changes. The article argues for the UK's autonomy in setting rules that align with its national interests in order to maintain its prosperity and influence.

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The City Under Threat Bruges Group 26 th October

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  1. The City Under Threat Bruges Group 26th October

  2. How will Britain remain prosperous and influential in the 21st century? • The question matters because we need to be able to set the rules, insofar as they affect us. • UK’s national output is worth about £1,400b. and is roughly 3% - 4% of world output, although the number depends on statistical conventions. • UK growth of 2 ½% a year and EU growth of about 2% a year is less than global average (about 3 ½% a year) over the last decade.

  3. These are rapidly growing, high-value-added activities in which Britain is a world-beater.

  4. Where will the jobs come from?

  5. The London economy 1. • Roughly speaking, about 1.2 million people in highly-paid service industries occupy about 225m. sq. ft. of space in central London. • Of the 1.2m., perhaps 500,000 – 600,00 are in ‘banking, insurance & finance’, with – say – 400,000 – 450,000 in high-value-added international financial services. • These people produce about £50b. - £55b. of exported international financial services and another £10b. of value added for domestic financial services.

  6. The London economy 2. • The value added per person in international financial services is probably in the £100,000 - £150,000 per annum area, with pay running at about £55,000 - £60,000 per person on average. • The balance of the 1.2m. people (550,000 – 700,000 people) are in a range of service industries, helping both international and UK companies. Their output per head may be a bit lower than in financial services, but is well ahead of the UK average. They are responsible for perhaps £50b. of service exports and another £15b. or so of value added for UK companies.

  7. The London economy 3. • So office employment in central London represents about 4% of total UK employment and accounts for about 8% of UK output, with perhaps 75% - 80% of this output taking the form of “international business service” exports. • They occupy about 210m. – 240m. square feet of office space, with the exact figure depending on borough coverage, chartered surveyor estimates, etc.

  8. Two kinds of (fairly) direct threat at present • 1. Directive on alternative investment vehicles – private equity funds and hedge funds, and • 2. Pressure for increases in banks’ capital/asset ratios, which is not a specifically EU-related threat, but is to a degree outside UK control and certainly affects the City of London

  9. 1. About 60,000 of the 240,000 people in the Square Mile in 2001 were in “international banking” and related activities (FX & derivatives). 2. These are the areas vulnerable to closure of international inter-bank markets and regulatory increases in capital requirements. We know that these activities – perhaps 20% - 25% of City-type financial services employment in London – boomed from mid-2002 to late 2007, and we must expect that they are now in medium-term retreat.

  10. The UK approach to financial regulation • Key question, “what is in our national interest?”. Not “what is the global interest? or the interests of Europe?”. • We need to be able to set the rules of international business service industries. • We need to ensure that these rules are fair and liberal, easy to integrate with and accompany English law, etc.

  11. We must stop Brussels interfering in economic activities which are important to our nation’s prosperity.

  12. The City Under Threat Bruges Group 26th October

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