Saturday, April 21, 2007

London Resurgent

By Uncle Cheng

Did you read the recent news item that one of a set of four penthouse flats in central London has been sold off-plan for a staggering £85 million (HK$1,300,000,000)? A few weeks earlier came the news that New Year bonuses paid out by financial institutions in the City of London topped a staggering £9 billion (HK$138,000,000,000). London, to put it mildly, is riding the crest of a wave of wealth.

Quite why London has suddenly boomed now is a bit of mystery. Experts say that New York shot itself in the foot with over-regulation after some corporate scandals and has made itself unattractive to foreigners because of excessively tough visa rules. Even the Mayor of New York is warning that New York’s very future is threatened by London. Mainland Chinese and Russian companies are choosing to issue their shares in London rather than New York.

This is all very strange because only a few years ago Britain was being warned that if it did not adopt the new European currency, the Euro, London would lose out as a financial centre and be replaced by Frankfurt. Well, Britain did not join the Euro and today by far the biggest trading centre for Euros is London, not Frankfurt. Then Germany’s biggest bank Deutsche Bank moved its investment banking headquarters from Frankfurt to London.

You might ask why what happens in London interests me so much? There are many reasons, and reasons that Hong Kong should pay attention to. First of all, I did law pupillage there and one of the reasons for London’s present pre-eminence is the city’s concentration of legal talent. Hong Kong is also home to a pool of legal talent and we must ensure it stays here. Secondly, London, and New York before it, benefited hugely by being cultural melting pots. A staggering forty percent of Londoners are foreign-born and they speak an incredible 300 languages. Of course, there is no way Hong Kong can compete with such figures but we must keep our economy open to talent from anywhere in the world, not just from the mainland.

London, like Hong Kong, does not tax rich foreigners on their overseas income and this has proved a huge magnet to the world’s new billionaires. There are said to be 23 Pound billionaire residents in London, and of those 11 are foreigners such as the Indian Lakshmi Mittal (worth £14.8 billion) and the Russian Roman Abramovich (worth £9.1 billion), owner of Chelsea football club.

Then there is London’s population, which after decades of decline, has been rising very steeply mainly due to immigration from eastern Europe. Even the UK’s Chinese population has risen fast recently and now totals about 600,000.

Perhaps I should add that I do have a selfish interest in London’s economic well-being because I own a house there which must rank as the best investment I ever made in my entire life. In not that many years it has appreciated by over 600 percent and by an extraordinary 35 percent in 2006 alone. A lot of the demand has come from foreign buyers and I have heard that native Londoners wanting to buy residential property are complaining that they can no longer compete with super-rich foreigners who think nothing of upping a bid by a million Pounds.

So for the moment at least London is again the capital of capitals. The city is abundantly confident, the restaurant bills have gone stratospheric, there is creativity and dynamism everywhere. The sceptics say even Athens and Rome fell in the end as confidence lapsed into decadence.

Yet I see no sign of London losing its grip just yet. Indeed London’s affluence and its dominance of international finance seems likely to strengthen further. Even the French, who as you will know have fought many wars with the British, have had to acknowledge London’s success. Nicolas Sarkozy, campaigning as a candidate to succeed Chirac as President of France, went to London recently to address London’s 350,000 French residents.

London, you see, has become the seventh largest French city in the world.

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