The City must have a competitive tax regime

At a time when many western economies are experiencing sluggish growth and painful fiscal readjustment, it is more important than ever that the UK strengthens ties with high growth markets to sustain and indeed accelerate our recovery.

So as I prepare to lead a business delegation to India next week, fresh from visiting Latin America earlier this month, I will be stressing London’s position as a truly international centre capable of meeting the financing needs of companies of all sizes and nationality.

This is especially true when it comes to capital raising.

Essar Energy, for example, made a premium listing onto the FTSE 100 earlier this year having raised US$1.94bn – the largest ever Indian equity issue in London. Meanwhile, despite widely reported difficulties AIM continues to provide a strong platform for growth companies – with 18 new listings in the second quarter of 2010, compared to eight last year.

Therefore I welcome a new report published by the City of London Corporation showing how a combination of infrastructure development, increasing domestic consumption, privatisation and post-crisis economic growth will fuel demand for investment capital among emerging market companies in the near term.

The London equity market is popular because it provides access to the largest pool of international equity assets in the world, and sets high standards of regulation and corporate governance. Despite the financial crisis, capital raising is performing well, with £186bn raised since 2007.

UK policymakers must ensure London’s position is supported with a clear, competitive approach to regulation, taxation and immigration.

It is in this light that the government’s publication of draft legislation outlining a levy on the banks last week should be considered.

The UK financial and professional services industry is more than ready to make a “fair contribution” to the wider economy as outlined by the Treasury Financial Secretary. City businesses, located across the UK, are already making a significant contribution towards the recovery – generating 10 per cent of GDP, 12.1 per cent of total tax revenues in 2008/09 and employing over one million people.

We will only be able to judge the effect of this proposed bank levy over a number of years but it must be remembered that – as the chancellor noted during the Comprehensive Spending Review – any taxation of the City needs to be “sustainable”. It is imperative that we have a competitive tax regime that supports the UK’s position as a global financial centre, and home to over 250 foreign banks.

Nick Anstee is Lord Mayor of the City of London