That Exodus from the City to Europe

As we tremble in our boots at the prospect of all those City firms upping and offing, the runners and riders for the Wannabe European 'Capital' City stakes are bimbling around somewhere near the starting line, bumping into each other, in the mud.  It looks like heavy going.

And here is what the tip-sheet says:

From Paris to Vilnius, Milan to Madrid and Frankfurt to Valletta, regulators, local authorities and sometimes national governments are clearing a path for the exodus many feel is coming ... or even Amsterdam ... Dublin is a serious contender ... Appealingly low-tax Luxembourg ... Milan is also making a pitch, particularly for technology and financial firms, with ambitious if probably unrealistic plans to turn the Expo 2015 space into a global tech hub.  Small, user-friendly Valletta, in Malta, fancies some insurance business, while Lithuania’s Vilnius and Riga in Latvia, want a share of fintech and support activities.  “We have the talent and we have the infrastructure,” said Latvia’s finance minister, Dana Reizniece-Ozola. “Everyone wants to put themselves on the map.”

Jolly good stuff, chaps.  Nice to see a united front.  And we all certainly fancy a bit of business.  By the way, I've been to Latvia, and Riga is very nice.  If you like little old Hanseatic League towns.  A bit like Lübeck.  Or King's Lynn.

Already on the map, really - for a nice bit of tourism.  Good luck with the global finance.

ND

PS, to be fair, that Grauniad article also gives a list of good reasons why it ain't gonna happen.  And they didn't even mention Civil Code and FTT.

PPS, the other day I watched Luxembourg's promotional video clip.  You know the way that in TV ads for BUPA private hospitals, the word CLEAN swims in and out of the picture, subliminal-message-wise?  Well for Luxembourg, the subliminal onscreen message-word was SAFE ...

An Eye-opening Factoid on Economic Migrants

Here at C@W towers we get sent all manner of press releases and very very few of them make it beyond the inbox.  But here are some data from www.emolument.com which get onto the blog-page forthwith.  According to their survey of front-office staff in the City, (that's the City of London), of the top 20 universities providing graduates for these jobs, 7 are French !  (and all the others UK). 

The top French school for sending its alumni onto our trading desks, coming in at no.6 (providing 4% of total sample), is EDHEC Business School.  Top 5 (all UK) are LSE (by a head, 9%), Cambridge 5%, Oxford 5%, LBS 5% and Imperial 4%.

Over to you, M. Hollande (currently riding unaccustomedly high in the polls following the dreadful affaire Charlie Hebdo).  What's happening to your brightest and best, eh?  Fact is, for all the socialist indoctrination, they know where le pain really meets le beurre.

I have just returned from Paris where the phrase 'crawling with police' scarcely does justice to the situation.  And troops, tens of thousands of 'em.  They won't be able to keep up that degree of patrolling for long.

ND

The end of investment Banking in London?

In the 'Great Harrumph' that our politicians so enjoy about Banking - with the the Left wing ones desperate to blame banks rather than its own governance for the 2008 crisis, a story is being missed.

The City was a great centre for Investment banking, bigger than New York and far above the weight of any other European city.

Of course, we had our key supporting areas such as law, currency trading and accountancy which provided a good net to support the industry, but nonetheless the rise was large from the 1980's - US Bulge Bracket banks has often bigger offices in London than in New York.

Arguably, the height came in 2009, when Barclays bought the investment banking unit of Lehman Brothers in New York.

How the tables have turned, not just on the British banks, but on Investment Banking in general and particularly in London. Barclays is in a mess, today it announced more disappointing profits at its investment bank. The US CEo, Skip McGee has left and there is talk of a culture war within the Bank. I don't pretend to understand the details, but as an outside it would seem sensible to sell the unit rather than close it down, with all the associated costs, piecemeal.

This after all, is what RBS has done, slowly closing its investment bank. It would have been better to sell it for a £1  a few year ago.

Lloyds Bank has long ago relieved itself of any Equity Capital Market business.

Only HSBC remains in the market of the UK banks. Even in the City, the news is worse. Credit Suisse and UBS have both massively scaled down their Investment banking to focus on their Private Client business.

The US banks too, mindful of the London Whale scandal and also US Regulation, have scaled down in the UK.

So, in effect I would guesstimate that something approaching 50% of frontline roles are no more. many have been replaced with people in compliance or legal, but in terms of generating business this is not the same thing at all.

Of course, many people will just assume this is a good thing - less 'Casino' Banking. They are wrong for the most part. The Casino lives, in Bermuda funds, in direct advice to foreign sovereign entities, in boutiques. The sad news is that this is fine for the generation of bankers who have the contacts already. There is no ladder for the next generation.

Instead the next generation will be in Singapore, Shanghai, Dubai, Hong Kong, New York and maybe London too.

This, over time, will have a big knock on to the professional services business and other UK businesses. We may have a better balanced economy, but sub-prime was not an issue for UK lending really was it? We have killed the goose that laid the eggs. It will be sometime yet before this is apparent but we have done so nonetheless.

I am not saying we will not find a new goose, but at the moment that seems to be a property bubble, as it has been many times in the past and we all know this leads to a cyclical boom and bust that does little good in the long-run and much ill.