For the Square Mile the key battle lines are being drawn as the City looks to retain its position as the world’s foremost financial centre. But what will things look like 12 months hence? Never mind competition from developing markets – will the bonus super-tax, 50p tax rate and other banker-bashing initiatives leave Britain’s financial services powerhouse in ruins?
Veteran commentator David Buik at BGC Partners believes the City won’t be adversely affected in just a year. Yet he fears that in three years “the nubile strength of the City will diminish by as much as 30 per cent”, largely because he reckons the government cannot be trusted to leave the bonus tax as a one-off and may come back for more.
Now even brokers, intermediaries and IFAs are staring the super-tax in the face having been dragged into the same bracket as the structured derivatives experts who were arguably the creators of the global credit crunch.
Whatever happens, it seems inevitable that the 2010 bonus pot will be considerably less than this year’s. That’s fuelled anecdotal evidence suggesting prime properties are already being put up for sale as bankers test the market ahead of a possible move to friendlier tax jurisdictions overseas.
Simon Denham, head of Capital Spreads, remains upbeat, however. “The City has survived greater threats than the one-off bonus hit threatened by the Chancellor and, for all of the wringing of hands over retrospective taxation, the loopholes are so vast that the really big boys will just side step the issue,” he says.
From a legal perspective Sir Nigel Knowles, joint CEO of City law firm DLA Piper, agrees that London faces a challenging 2010 when regulation and tax issues will be crucial in determining the Square Mile’s standing.
“I am confident in the City maintaining its pre-eminent position and in the continued growth of green shoots,” he explains. “Although the threats are clear, the opportunities are definitely there and it is imperative that we remain competitive in the context of a global economy.”
So for now at least it’s a time to reflect on a difficult year for financial services, but more importantly to prepare for the battle ahead to make certain this great city continues to prosper.