Red Ed plans to hit the high flyers: Will the big banks and FX firms retain their talent?

As Britain approaches its General Election, the major political parties are showcasing their vote-winning policies, and with the left-wing Labour party, led by Ed Miliband, attracting the attention of a sizable proportion of the electorate, what would a socialist government mean for London’s FX industry and the senior executives within the major banks?

London’s financial giants account for vast representation with regard to global interbank FX order flow, and the City is home to the lion’s share of institutional FX companies, all of which generate several billion dollars per month of FX volume each.

In a LeapRate editorial recently, it was explained how Britain operates as a two-tier economy. It is either the large financial institutions of London whose business is global, and then there is the rest of the country which is not party to the financial sector, does not operate internationally and is mired in debt, industrial decline and economic struggle following years of socialism between 1997 and 2010, and the financial crisis in 2008/2009 which resulted in unsustainable toxic debt and the collapse of several national retail banks.

London’s financial district is a global economic powerhouse, whilst the rest of the nation is jaded and faces a long, uphill struggle toward setting its financial situation on an even keel. The large cities from the Midlands northwards contain several square kilometers of dereliction where the once glorious industrial past has been replaced by state dependency and poverty.

This, among other factors, has led toward a swing toward the Labour Party for many citizens, however Ed Miliband, often referred to colloquially as ‘Red Ed’  is indeed seeking exactly that audience, and has shown his disdain for the generators of wealth for the nation – the high flying executives of London.

By contrast, in terms of technological innovation, incumbent Chancellor of the Exchequer George Osborne has plans to transform London into a center for financial technology, placing the new generation of development in infrastructure and Bitcoin technology directly next to the traditional banking sector.

Firebrand ex-trade union leader and staunch socialist John Prescott, former Deputy Prime Minister under the previous Labour government, has suggested that senior industry leaders are ‘tax dodgers, Tory donors and non-domiciles.’

Lord Prescott is an adviser to Mr. Miliband, which is troubling in itself for businesses, therefore in a highly unusual intervention just a matter of weeks from the election, 103 corporate leaders yesterday declared that the current government ‘has been good for business and has pursued policies which have supported investment and job creation’.

Throughout yesterday, 17 more added their names, including the bosses of AstraZeneca, Citi Private Bank and Pirelli.

Should a Labour victory ensue in the election, it is likely that successful leaders of London’s financial sector may be included in the ‘1%’ that the Labour Party shows such disdain for, however one thing that any Labour or trade union-orientated party has never understood about senior leaders is that these are global, internationally successful leaders who have choices.

It would be very easy for these executives to relocate to another jurisdiction which would welcome them with open arms and not see them as a cash cow for funding expensive white elephant projects which would break not only their bank but the bank that they lead. From that location, life would carry on as normal, as would their leadership of global industry, thus creating an exodus of successful people, as occurred in the 1970s.

The difference between then and now is that the electronic trading sector, whether venue based, interbank or OTC, is totally online these days, and connectivity is highly advanced, rendering location almost not relevent, thus it would be a case of business as usual, but without the permanent presence of global industry leaders in London. Surely this is not a healthy dynamic, from a talent perspective, as well as from a corporate point of view, as London’s financial institutions may become satellite service centers with presence in London but less leadership.

The corporation tax from these institutions is vast, and the commercial contribution to the economy is vast, bearing in mind that the nation has a vast public sector which is dependent on corporation tax and income taxes.

It is quite patently evident that those employed in technological industry are, by a vast margin, based in London despite other technology hubs being present in other large British cities and towns such as Bristol, Swindon and Reading. These are not on a par with London by far, and the economic statistics display it clearly.

Those who consider the nation to be a divided Britain due to what Ed Miliband’s henchmen deem to be ‘fat cats’ may consider how further divided the nation would be should the Labour Party take its proposed anti-business stance and make London unattractive for those who drive the Capital’s business forward.




Chart courtesy of CityMetric.

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