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Michael Spencer, CEO of British interdealer broker ICAP plc (LON:IAP) has stated that the company may consider relocating abroad if the Labour Party wins the forthcoming British General Election and Ed Miliband becomes Prime Minister.
The Labour Party’s anti-business stance has been instrumental to its policy since the immediate post-war era, and with the possibility of ‘Red Ed’ Miliband entering 10 Downing Street, many corporations and small businesses alike are concerned about the potential effect a socialist government may have.
Mr. Spencer is a former Conservative Party co-treasurer, and currently presides over the world’s largest broker of transactions between banks, as well as divisions of the company which handle post-trade risk as well as one of the prominent institutional ECNs, EBS.
Mr. Spencer stated yesterday to Bloomberg that “There are circumstances absolutely where if we felt it was in the long-term interest of our shareholders and employees to move our headquarters, it’s not beyond the realms of possibility. It’s not what I want to happen, it’s not what I think will happen. But any company has to contemplate those things.”
Mr. Spencer, who founded ICAP, said that moving to cities such as New York is “not easy, but doable,” adding that his firm would favour re-domiciling to North America rather than Asia. “I’m genuinely concerned,” he said in the interview. “I’m fearful that a Labour government would increase taxes and genuinely cause damages” to the Square Mile.
Currently, London is the world’s largest financial center, however the British business structure differs tremendously from that of North America in that Britain has a long history of socialism, as does mainland Europe to which Britain is inexorably tied due to its European Union membership status.
As a result of this, it is only the Square Mile, a colloquial name for the City of London, and the urbane and sophisticated global financial institutions of Canary Wharf which propel the economic powerhouse that is the UK. The majority of the nation has very little input into the financial sector or its associated technology businesses, and is largely reliant on state support.
The public sector is a vast industry in the UK, as it is in mainland Europe, its employees and students, which make up tens of thousands, largely on the left of the political spectrum, Therefore, there is a vast division between the majority of the nation and the financial sector.
In the United States, there is more commonality between regions, and much less disparity between one metropolitan city and another, plus much greater reliance on prosperity driven by business rather than social programs and large central government departments.
Mr. Spencer stated that the Labour Party’s modus operandi would cause a “material exodus of the ultra, ultra high net-worth individuals,” Spencer said. “It would without doubt cost the UK money. It might be populist, but it’d be certainly damaging to the UK.”
Mr. Miliband has made his stance clear, in that he will hit the higher earners very hard indeed should he be elected, sadly a policy which many of the British electorate outside of Central London’s financial district perhaps advocate. LeapRate recently reported that it is possible that an exodus of talent may arise in the event of a Labour victory.
The dichotomy between the two continents either side of the Atlantic has been emphasized in how they emerged from the 2008/2009 global financial crisis. America rolled up its sleeves and worked hard, pulled its industry out of the mire, is now producing and exporting motor vehicles, food products, computer software, high technology equipment, medical systems, industrial materials and many other large-scale products.
By contrast, Europe is experiencing vast youth unemployment, is deindustrialized, and more importantly, has a continual dependence on bailouts and funding, with little effort to pay this down. Indeed, the US has 99% of its GDP owing in external debt, whereas nations such as France and Italy have between 200% and 250%, a liability that Britain is party to as an EU member state.
Currently, with just a few weeks until the General Election, it is a very close race between the two major parties, thus it is inevitable that companies across the sector are considering their options, and betting has become intense, as depicted by this chart from MarketOracle.
Photographs: Top right, Labour Party leader Ed Miliband. Bottom left, Michael Spencer, CEO, ICAP (Courtesy of Reuters)