City executives are split on the UK’s ability to keep its competitive edge over other global financial centres, with senior bankers most optimistic about London’s near-term future.
According to a survey by KPMG of 160 directors across financial services, almost three quarters are confident that the UK can maintain its position as a leading hub over the next three years.
Banking executives are the most bullish, with 84% having a positive outlook on the UK’s ability to attract and retain international businesses and talent; 53% of respondents from the insurance sector and 37% of those from asset management were not optimistic.
The split in opinion comes as a string of UK-listed companies — including building materials business CRH and Cambridge-based chipmaker Arm — last year announced they would abandon London in favour of New York.
Higher executive pay and the ability to achieve higher valuations in the US are among reasons often cited for companies fleeing the UK.
Respondents to KPMG’s poll cited reducing regulatory pressures, tackling inflation and overhauling the tax system as key areas that could be addressed to help the UK to maintain its competitive edge.
READ Veteran stock-picker David Cumming warns London risks losing ‘competitive advantage’
“Despite changes to listings rules, fewer international firms are choosing to list in London and some UK domiciled brands are looking to list elsewhere. This is creating some uncertainty over the City’s future position as a global financial centre,” said Karim Haji, global and UK head of financial services at KPMG.
The UK government has announced a series of reforms designed to make London a more attractive destination for international business, including the Edinburgh Reforms, which included an overhaul of the listing regime to reverse a drought in IPOs.
Following a record 2021 for IPOs, 2023 is likely to go down in history as one of the worst on record. According to data from Dealogic, only five deals worth $910m took place in 2023 on the London Stock Exchange.
“As we go into 2024, we are seeing a promising direction of travel from the Edinburgh Reforms package in the bid to boost competitiveness,” said Haji.
“While the Treasury Committee has highlighted that change is not happening quickly enough, part of the attractiveness of the UK is that our regulatory system is relatively stable. This, together with a plan for enhanced competitiveness will safeguard the UK’s future position on the global stage and boost long-term growth.”
Senior City figures last year voiced concerns about London’s future as a financial services hub, with veteran stock-pickers David Cumming and Richard Buxton among those warning that the UK risks losing its competitive edge.
Despite challenges to the City’s dominance as a financial services hub, almost 80% of respondents to KPMG’s survey are confident they can hire talent during the first three months of 2024.
The likes of OakNorth, Klarna and Starling Bank could also potentially float in the UK in 2024, offering a potential boost to London’s capital markets.
READ City divided over hiking exec pay to tackle IPO crisis
Meanwhile, ahead of a diversity and inclusion policy set to be published by the Financial Conduct Authority this year, KPMG said there was some “overconfidence” among financial services firms when it comes to progress.
More than half said they are ahead of their rivals on diversity and inclusion, while 38% said they are on par with competitors.
Investment banks and asset managers have historically been among the worst financial services firms for improving ethnic diversity, with a recent survey showing a drop in progress over the past year.
“While leaders in financial services believe their diversity and inclusion strategies are up to scratch, it’ll be interesting to see what these look like against the FCA’s new regulatory framework next year,” said Haji. “Whilst there seems to be strong support for the need for progress, there are some questions being raised by industry leaders on the need for mandatory disclosures.”
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