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Guest comment: The City must not drive away its skilled staff

4 June 2008

Stuart Fraser

There are four all-important factors in the City of London’s business success. A sensible tax regime, appropriate regulation, strong infrastructure and last, but by no means least, a very deep pool of top skills.

Our latest Global Financial Centres Index suggests London is still the leading financial centre globally. However, we cannot rest on our laurels: between September 2007 and March 2008, our lead over New York halved.

London’s diminishing lead was primarily down to Northern Rock and the resulting loss of confidence in the British banking system. However, the tax treatment of non-doms also put off some high skilled people from coming, and was raised as a significant concern by many people.

The importance of having a deep pool of skilled financial services staff is difficult to underestimate. It’s no coincidence, for example, that London and New York together have nearly 50% more top global executive MBA programmes than the other eight centres in the top 10 combined.

London and New York also rank in first and second place respectively for ‘people factors’ on our index, a category that covers flexibility of the labour market, business education and the development of human capital.

What must be done to maintain London’s lead? Some of it is down to quality of life, the visa regime, and immigration policies – 30% of City of London jobs are filled by people from overseas. We need to compete with the rest of world for the right people to fill our jobs and to allow the very best to study and work here.

It’s also down to nurturing homegrown talent in our own universities. Our index shows that centres which invest in financial skills at university level benefit from higher scores.

The skills required must track the needs of the marketplace. Right now, perhaps the skills we should be encouraging are those of the ‘globalist’– the individual who is comfortable in many languages and cultures and capable of managing business across continents. The threats posed by competition for such talent and the business it generates are real.

While most politicians at least pay lip service to the City’s role in the current and future prosperity and competitiveness of the nation, what worries me is that some have still to grasp the full significance of the financial sector to London and to the UK.

Moves like the tax on non-domiciled residents offer a direct disincentive to international business in London, as well as an opportunity for London’s competitors.

London is Europe’s global financial centre. When European politicians intervene in business decisions, or press for increased regulation and a more aggressive tax system, they may not be aware of the impact on a global city such as ours.

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Stuart Fraser is chairman of the policy and resources committee, City of London Corporation.

Comments (7)

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• People will move to where they can get work if they are laid off in London. The cycle dictates that London's lost a tiny bit of its sheen and there seems to be more 'bodies' out there looking for work.

  John 04 Jun 2008

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• As a headhunter, I do not perceive a shortage ot training in financial services. I do perceive that many British students are poorly served by their universities. In particular the mathematical ability of British students is pitiful compared to the competition. We get some people from tragically broken countries in Africa and even the Palestinian Authority who exhibit a better grasp than the victims of British universities.
  We see detritus who have no qualification beyond "media studies", some environmental nonsense, French, or computer science degrees that leave them unable to program a computer.
  
  London remains a leader because we can import good people, when Daily Mail readers finally stop this, it will head the same way as the British car industry.

  DominiConnor 04 Jun 2008

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• What do you expect from British students?
  They are drunk most of the time or pretend they are CEOs when they are MBA students ...

  Todd 04 Jun 2008

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• There are six, not four, factors in London's success. In order of importance:
  
  1. A convenient timezone;
  2. A convenient language;
  3. Appropriate regulation and law;
  4. Sensible, stable tax;
  5. A deep pool of skills;
  6. Strong offline and online infrastructure.

  MBA & CFA Grad 04 Jun 2008

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• Stuart raises a very good point. The depth and indeed the length of this downturn will be determined in part by the City's ability to attract back the staff it has so ruthlessly discarded. It is obvious that most large Banks are not hiring at the moment ( despite the Phantom job ads) and they are therefore losing ground to their competitors, especially the smaller banks, who can afford to hire. The real pain will be in the recovery stage when the industry has to replace the talent that has left the industry ( many IT enablers are employable in industries other than banking and the pay differentials are not as great as they used to be). It will be expensive and perhaps a repeat of the problems od the dotcom bust.

  Wizard of EC1 05 Jun 2008

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• I agree with Wizard, as a headhunter I know that if banks managed their portfolio of staff as well as they'd expect a junior fund manager to optimise their holdings of equities, I'd have to get a real job.
  So I feel secure in my given profession :)
  
  I feel however, that I live on a different planet to "MBA Grad", possibly she lives on one of the newly discovered world around distant stars ?
  
  1: true.
  2: Everyone with a decent education anywhere on the planet speaks English.
  3: She has not read any recent legislation. She should be aware that Gallifrey is not a real planet.
  4: I take (4) back, The Time Lords occasionally visit Earth, especially Cardiff and London. Dr Who almost lives here, and thus has a better understanding of the random changes to tax law the Labour arts grads cause than she has
  5: Britain is the least educated of any developed nation. I can't even guess why she thinks otherwise.
  6: I was wrong 3/4. She lives on the USS Enterprise. She has never travelled on the tube, or tried to get her kids into a decent school. It is also clear she has never tried to get BT to do telecoms.

  DominiConnor 06 Jun 2008

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• London's success is mainly a consequence of the failure of competitors. Consider the stiffling regulatory and unwelcoming immigration regimes in the US, the visceral reaction to investment banking pay in Europe, and the failure of Asia to be a destination of choice for the vast majority of foreign talent. London really just needs to avoid shooting itself in the foot to come out fine.

  Observer 08 Jun 2008

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