IN 2008/09, the UK’s banking sector required unprecedented intervention from the authorities, which believed it might otherwise collapse. Six years on, it has yet to fully recover and risks abound – from the local housing market to counterparty risk and regulation in the eurozone. Meanwhile, more cities in the emerging world, especially in Asia, are aspiring to be global financial hubs and are taking market share. This has led to unease about whether London can maintain its status as one of the world’s two most important financial hubs, but it does have a number of advantages that mean its role is likely to be secure for some time yet.
In two months’ time, I am moving to Singapore, and so the question of London’s competitiveness as a financial centre is of great interest to me right now. Like many companies, The Economist Intelligence Unit (EIU) is seeing faster growth in Asia than in our traditional markets in Europe and North America, although the latter are still much larger in scale. Moving the position of chief economist to Asia reflects our need to have more senior staff based in the region and nearer to our customers. I was lucky enough to be given the choice of where in Asia to move to. In practice, given the spread of our customers and size of our various offices, this meant Beijing, Hong Kong or Singapore, and I went for the latter.
My decision aside, is there any evidence to back up the fears that London and the UK are losing out? Let’s look at the numbers. Singapore is certainly a wealthy country. Its GDP per capita, measured in US dollars, overtook that of the UK in 2009, and this year we think it will be $54,420 per person, compared to $42,480 in the UK. It, too, was hard hit by the financial crisis, but its recovery saw GDP growth of 15.2% in 2010, while it took the UK until 2014 to creep over 2%.
Singapore’s banking sector looks in better health, with the five largest banks making profits before tax of £5.7bn in 2013, compared to £1.8bn for the UK’s five largest. However, while banking assets in Singapore were a hefty 961% of GDP in 2013, this figure was 1,595% in the UK, with the latter having a much larger GDP. And the UK’s share of global insurance premiums is 7.1%, well ahead of Singapore’s 0.4%. Singapore is growing fast, and it is a regional and, sometimes, global challenger in certain parts of finance, but the numbers suggest that it is a long way behind London in having a deep global position in all areas of finance.
So why did I choose Singapore? As a runner, the polluted skies of Beijing made that an instant no, so it became the classic Hong Kong v Singapore decision beloved of Asia expat discussion boards. Hong Kong’s pollution is comparable to London’s, but Singapore’s is lower still. Hong Kong is more vibrant. Its press is freer (but unfortunately becoming less so); it has more active NGO and community organisations; and it is more tolerant when it comes to social issues such as gay rights. Both places have good travel options. Singapore has urban greenery and a much higher standard of English (my Mandarin doesn’t extend beyond a few words), is efficient and clean, and is a bit closer to my family in Australia. In the end, Singapore won, with the lower pollution tipping it over the line.
You’ll notice that, in making my decision, I didn’t worry about the growth rate of banking assets or insurance premiums, or the tax burden. For individuals making similar choices, issues of lifestyle rank highly. In my view, this is what gives London a huge advantage, and one that will not be eroded by the Asian upstarts anytime soon. It might be dark and wet, but London’s incredible art, music, food and culture scenes, surfeit of interesting people, social tolerance and diverse employment options mean that it will continue to be the location of choice for many people for a long time to come. That’s going to keep the finance industry here too. I don’t think I’m going to spend the rest of my life in Singapore, but I can see myself coming back to London one day. ?
Simon Baptist is chief economist at The Economist Intelligence Unit