by Tonto Papadopoulos
A grave and present threat looms on the horizon: one that could wilt the economic life of The City, London, the entire UK – maybe the World.
You’ve heard it again and again, and you’ve been warned, “If banks don’t hand out billions in bonuses, talent will migrate!”… leaving tumbleweeds blowing down Moorgate, and the rest of Britain.
Ladies and gentlemen, this is what’s known as ‘talking your own book’. Do groups like Goldman Sachs gee the market with purple commentary to try to make themselves and their product seem more attractive, and more valuable? Do they talk their own book?
You bet they do – and so what.
Talking your own book has been part of human behaviour since the first enterprising caveman collected an inventory of rocks. The financial markets are a poker game not a tea dance. If other speculators, fund managers, government, the media, etc. are dumb enough to believe slick table talk from Goldman et alia, tough beans on them.
Banking “talent” threatening to leave London sounds more like the hollow demands of a not-very-attractive gold-digging spouse, “You wanna keep getting some of this, Frank?… You know what to do.” As long as the rewards are consented to and mutual who am I to argue with arrangements between two adults, but in the case of the banks one has to wonder exactly what value shareholders are receiving in exchange for the huge sums lavished on human resources.
We’ll have a look at what all of this “talent” we might lose constitutes in a second article, right now the obvious question is, if they left London, where would all these financial rainmakers go?
Let’s imagine a worst case scenario. Let’s suppose for a mad cow second that The City and Wall Street suddenly became the bastions of prudence and responsibility they’re meant to be. What if bankers didn’t hand themselves thousands of multi-million bonuses this year. Or next? Or ever again? What then? I know that nowadays this sounds like a crazy nightmare or some whacked out LSD trip, but please bear with me.
If bonuses were pared back in London and New York there are several choices open to the bank employee looking for the supra-valuation of his own merit to which he’s become so accustomed. Let’s not forget these are mostly the same clever individuals who weren’t clever enough to see the well-telegraphed crunch in 2008, the very same people who helped to create the financial crisis. Well, any one of these brainiacs could go to Tokyo, Singapore, Shanghai, or Hong Kong; or closer to home, Paris, Frankfurt, and Milan beckon; or staying in the Anglosphere let’s not forget Dublin, or knocking on doors for surreal and over-the-top lucre in Sydney or Johannesburg. Assuming there’s the money and the will. That’s a big assumption.
Most of all London should be scared of Milan. Milan could easily lure tomorrow’s grabby financial cat, for the following good reasons (besides the fabulous shopping on Via Montenapoleone, one of the few temples of conspicuous spending that can actually compete with London financial districts): For one thing, in Italy you have a very supportive government. No one knows how to sweep Blunders & Corruption of Historic Proportion under the rug with flair, style, and perseverance – no one knows how to “take a lickin’ and keep on tickin’!” – quite like the Berlusconi administration does.
Second, Italians’ appetite for flamboyant excess is legendary.
Third, if by any chance said legendary flamboyant excess were begrudged, in Italy banks can always fall back on a solid organised crime infrastructure staffed by individuals who fully appreciate the buccaneering self-interest displayed by opportunists and careerists. I mean this in the best possible way.
Come to think of it what stops the entire City from uprooting itself to an offshore oil platform like a Bond movie villain might do? Most of the big banks have already extirpated themselves from The City to Canary Wharf. Decamping a few more miles away, or 6,000 miles away, is therefore not inconceivable.
But please, let’s THINK.
For all the whooping and hollering the fact is that regardless of big bonuses there is no substitute for London as the major international financial centre. There are many reasons, but the most obvious one (doh!) is the Time Zone between Tokyo and New York. The main reason London is a global hub today – just as it’s been since Roman times – is geographic.
The other lock London has on its role is that the language of the markets, just like the language of, say, international air traffic control – is English.
Oops, I forgot: having a large concentration of English-speakers means maybe also we see threats to London’s pre-eminence from canny Bangalore, East Timor, the wily Kingdom of Bhutan, and many parts of Sri Lanka? Maybe even Newcastle-upon-Tyne?
No. It takes more than just speaking English to create a financial centre. Apart from the geographic high ground that London has, it takes money, and it requires relationships.
Where is money concentrated in this world? The biggest user and abuser of capital is the US, a nation that requires at least $2 billion of inflows per day just to sustain the American Dream (and a couple of long distance wars). And with whom does the US have its closest relationship?
Britain serves as America’s aircraft carrier. This is a role that evolved during WWI, developed during WWII, flowered after Big Bang and the Thatcher/Reagan lovefest, and came into full, heartsick bloom with Tony Blair, “cementing our special relationship”.
Yes, the Continent is also between Tokyo and New York, but London’s time zone puts it one hour closer to US time, and there is no price on 60 minutes in modern financial markets. Paris and Frankfurt don’t ignore these facts about London’s hold as a global focus point for capital transactions, which is why they don’t bother playing the bonus game to the extent we do in the UK. They could offer the sky and the moon. Dubai has, and what has it achieved? Dubai… who?
Try as they may, no one can change geography, and altering the bonds of history can take centuries. Bonuses or not, no prima donna will be saying arrivederi, Londra in a hurry. Anyway, based on the appalling failures that came to a head in 2008 we should all be wishing they would leave!